Spending Easiest Way to Revive Economy: Abhijit Banerjee to Rahul

Congress leader Rahul Gandhi on Tuesday, 5 May, was in conversation with Nobel Laureate Abhijit Banerjee about the economic impact of the COVID-19 pandemic in India.

Here are the key highlights from their interaction:

The Economic Impact

“It’s a bit surreal, and frightening,” said Abhijit Banerjee on the pandemic.

When Rahul asked him about the economic impact of the virus, Banerjee said the real problem in the short run is that the policies may not cover everyone.

“Would have been wonderful to have the Aadhaar card to be linked to the Public Distribution System. A person in Mumbai can have access to it even if his family resides elsewhere. They’re not eligible for NREGA in a place like Mumbai,” Banerjee said.

‘Demand Needs to Be Stimulated’

Rahul asked him about the dent on small businesses to which Banerjee said, “We need a stimulus package, we have not dedicated on a large enough financial package yet. We have a demand problem, people are not buying anything because they don’t have the money.”

Rahul mentioned that one way to help the poor would be a direct cash transfer. “Give some money to bottom 60 percent of population. So they spend some money and create demand, because now we’ll have a bigger demand problem," Banerjee replied.

Banerjee also added that everyone should be handed out ‘temporary ration cards’. “Use those for transferring money, wheat, and rice to them,” he said.

“We should try to be optimistic about overall economic revival in India post-lockdown,” he added. Rahul added that India must take a cue from the US by pumping in more money in the hands of people so that demand is revived.

Lockdown Decision Should Be Left to the States

Rahul said that states should be given autonomy with respect to the lockdown. “States should be given options and should be allowed to decide themselves on lockdown,” he said.

Banerjee said that it was important to look at the graph of the disease. He said, “We need to be aware of the disease's path before taking a decision on lifting lockdown.”

He added, “If anyone wanted to believe in strongman theory, this is the time to disabuse themselves.”

In India, there have been a total of 42,836 COVID-19 cases, including, 29,685 active cases, 11,762 cured/discharged/migrated patients, and 1,389 deaths, according to the Health Ministry.

India is currently under the third phase of the lockdown to curb the spread of the virus, with certain relaxations granted to areas falling under green and orange zones, while most restrictions continue in the red zones.