India needs to be cleverer in lifting the lockdown and open up its economy in a “measured way” soon as it does not have the capacity to support people across the spectrum for too long, former RBI governor Raghuram Rajan told Congress MP Rahul Gandhi in a freewheeling video chat on Thursday.
Gandhi quizzed Rajan on a range of issues including the economic impact of the Covid-19, ramping up testing and what India needs to do going forward. Here are edited excerpts from the first video conference of its kind that was broadcast on Congress’ social media handles.
Amartya Sen, Raghuram Rajan, Abhijit Banerjee write:‘Huge numbers may be pushed into dire poverty or starvation…we need to secure them’
Rahul Gandhi: Which are the parts of the economy you think are critical to be opened up and what is the sequence of opening up?
Raghuram Rajan: It is all too easy to cover a lockdown forever, but obviously that is unsustainable for the economy. It has to be a sequencing. First, places where you can maintain distancing. It is not just distancing in the work places, but also distancing to and fro, from the workplace. Transportation structure. Do people have private modes of transport, their cycles or their scooters or even cars? Or do they depend on public transport? How do you maintain distancing in public transport?
So, a lot of work needs to be done both on creating the structures, as well as ensuring that the work place is relatively safe. As well as ensuring that if there are accidents, if there are fresh cases, how do we isolate quickly without having to go to a second or a third lockdown? Those will be devastating if we have to go there.
Rahul Gandhi: There is a sense in India that the testing capability is in itself limited…
Raghuram Rajan: Take the USA for now. It has ramped up to 150,000 tests a day. But the consensus among the experts, especially the epidemiologists is that to really be confident about opening up is that you need to triple that to about 500,000 tests per day at least and some are talking of tests in millions.
Just multiply by 4 and half for India’s population. You are talking about 2 million tests a day if you have to get the level of confidence you have in the United States. Clearly, we are nowhere near that at 25,000-30,000 tests a
But we have to be cleverer about opening up. Perhaps do mass testing. Take a mass sample, say 1000 samples and check in mass, if there is any sign of the virus in those mass samples. If you do find it, then go deeper into the sample and check who it might be. This way it would reduce the burden on our test infrastructure and can allow us to try and vet much more. In some sense less intensive, but we have to be cleverer since we simply cannot wait till we have that kind of testing.
Rahul Gandhi: How do you make the balance between fighting the virus right now and fighting the consequence of the virus 3-4 months down the line?
Raghuram Rajan: I think there has to be a prioritisation. Our capacities and resources are limited. Our fiscal resources are more limited than the West. What we need to do is to decide, how do we keep this economy together. When we reopen, is it sort of able to walk off the sick bed and not be dead at that point? Most immediately, keep people well and alive. Food is extremely important. Places where public distribution system doesn’t go. Amartya Sen, Abhijeet Bannerjee and I have talked about temporary ration cards. But you have to treat this pandemic as a situation that is unprecedented. We need to break norms to tackle what is needed. While keeping in mind that there are overall budgetary limits. There are only so many resources that we have.
Rahul Gandhi: Dr. Rajan, how much money will be required to help the poorest?
Raghuram Rajan: Approx. 65,000 crores. Our GDP is 200 lakh crores, and out of that 65,000 crore is not a huge amount. So, we can do it. If this is for the poor and to save their lives and livelihood, we must do it.
Rahul Gandhi: But after COVID pandemic, will India gain any strategic advantage? Will there be global changes which India could take advantage of?
Raghuram Rajan: If there is opportunity for India, it is in shaping that dialogue. Being more of a leader in that dialogue because it is not one of the two big warring parties. But it is a big enough country to have its voice heard in the global economy. In this situation, India can find opportunities for its industries, for its supply chains. But most importantly, we can try and mould the dialogue towards one which has greater place for more countries in the global order, a multi polar global order rather than a single or a bipolar global order.
Rahul Gandhi: How would you think about going forward, dealing with this inequality. you know it is visible in Covid also. I mean, the way India is treating its poor people, the way we are treating our poor people, migrants versus the way the elite is being treated, two completely different ideas, two completely different ‘Indias’. So, how do you merge these two ‘Indias’ into one?
Raghuram Rajan: Well, I think that, you know at the bottom of the pyramid, so to speak, we have some ways of making their lives a little better, but we need to think more carefully about reaching everybody there and I think successive Governments have worked on food, on healthcare, on education and no doubt we can do a better job there. But in terms of challenges, it seems to me that there is certainly an administratie challenge in reaching everywhere and making sure that the level of living is enhanced. But the greater challenge to me lies in the range between the lower middle class and the middle class, which is where we need, in a huge way, jobs, good quality jobs, so that people are not dependent on a sarkari job and the comforts that come with it.
So this is something that I think we need to work on and this is where I think a tremendous expansion in the economy is absolutely necessary. We’ve seen over the last so many years, a progressive decline in our rate of economic growth when in fact we have so many young people entering the labour force.
So I would say, let us not pick amongst possibilities, but create the opportunity for any kind of area to flourish. If there is mistake we made in the past, we said, this is the only way to go; and think of one of the most successful area we’ve grown in, so_ware and outsourcing services. Who would have thought that would be India’s strength? And it just emerged, and some people even argue that it emerged only because the Government didn’t pay attention to it. I’m not in that camp, but we need to allow for any possibility and let the enterprise of our people take its course.