India needs a bigger stimulus package and money should be put in the hands of people to revive demand, Nobel Laureate Abhijit Banerjee said in a video interaction with Rahul Gandhi on the economic fallout of the coronavirus crisis. This is the second instalment of the Congress leader's discussion series that began with renowned economist Raghuram Rajan last week.
Abhijit Banerjee said in the interaction that cash transfers must go beyond the poorest of the poor.
Mr Gandhi noted that many small and medium businesses hit by the COVID-19 lockdown could "go bankrupt" because of the shock. This, he said, would cost jobs.
"That's the reason a lot of us have been saying that we need a stimulus package," the renowned economist agreed.
"That's what the US is doing, Japan is doing, Europe is doing. We really haven't decided on a large enough stimulus package. We are still talking about 1% of GDP. United States has gone for 10% of GDP."
India should take a cue from the US by pumping in more money in the hands of the people to revive demand, Dr Banerjee said, while suggesting that one should try to be optimistic about overall economic revival in India post-lockdown.
"Giving money in the hands of everybody, so that they can buy in stores or they buy consumer goods."
As Mr Gandhi suggested he was talking about some form of direct cash transfer to people, Dr Banerjee said the beneficiaries must be among the poorest, but it was important to decide what criteria to target.
"I would say bottom 60% of the population, we give them some money, nothing bad will happen in my view," said the economist.
Dr Banerjee said he believed while it was important to come out of the lockdown, one needed to be aware of disease's path.
"The sooner you come out of the lockdown of course depends on the disease. You don't want to take down the lockdown when a lot of people are getting sick. We have to kind of be aware of the time path of the disease," he said.
The Congress MP raised the scale of the food problem and how it was not reaching people because of ration cards.
Dr Banerjee referred to his Op-Ed piece with Raghuram Rajan and Amartya Sen suggesting that temporary ration cards should be handed out to anybody who wants one.
"In fact, put other ration cards in abeyance, just put temporary ration cards. Anybody who wants one, get a temporary ration card. Lasts for three months for now and maybe renewed for another 3 months if necessary, and honour that. Give everyone a ration card, anyone who walks in give them one. And use that as a basis for making transfers. I think we have enough stocks," he said.
On the crisis of migrants stranded by the lockdown and desperate to reach home with no jobs, shelter or food, the two discussed the need for a decentralised system where the movement of migrant labour should have been handled by the centre.
Mr Gandhi held the first such talk with Raghuram Rajan, former Reserve Bank of India (RBI) Governor. Dr Rajan said Rs 65,000 crore was required to help the poor affected by the coronavirus-induced lockdown.