India should take cue from the US and pump more money into the hands of people to revive demand, Nobel laureate Dr Abhijit Banerjee said on Tuesday. Banerjee stressed that the country needs a bigger stimulus package on the lines of US, which has announced a that is package 10 per cent of its GDP.
The Nobel laureate made the remarks while speaking to Congress MP Rahul Gandhi as part of a series of video conversations with experts on economy and health.
“We really haven’t decided on a large enough stimulus package. We are still talking about 1% of GDP. The United States has gone for 10% of GDP,” the noted economist said.
“We have done one thing that I think is wise, which is to kind of put a moratorium on debt payments. We could do more than that. We could even say that the debt payments for this quarter will be cancelled and will be taken care of by the government,” he said.
To Gandhi’s question on whether direct cash transfer to people was the need of the hour, Benerjee said the government should target beyond the poorest.
“I would say bottom 60% of the population, we give them some money, nothing bad will happen in my view. If we gave them money, well some of them might not need it. Fine they’ll spend it. If they spend it, it would have a stimulus effect,” he said.
He said another concern looking ahead post-COVID-19 and is a chain of bankruptcies. “Maybe writing off a lot of debt is the way to go,” he suggested.
The other concern, the noted economist said, is the demand shortfall. “Getting some cash into the hands of the population is the best way to kick start the economy,” he said.
During that dialogue, Rajan had said India should be “cleverer” in lifting the lockdown and should open up its economy in a “measured way” soon to save jobs.
He had also said that Rs 65,000 crore should be spent to support the poor hit hard by the crisis.
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