Rahul and Rajan discuss Corona’s economic impact, something that the Modi government should do
Former RBI governor Raghuram Rajan pointed out that COVID-19 has left 50 million people unemployed and forced another 60 million out of the workforce. As the big unemployment wave hits India, Rajan told Rahul Gandhi why the Central Government needs to roll out a Rs 65,000 crore package to help the poor.
The COVID-19 pandemic has triggered a massive economic upheaval. The Economist’s Intelligence Unit has already predicted its cascading impact on almost all G-20 economies and India is no exception. There is an urgent need not only to contain the spread of the coronavirus but also to reboot the economy which has come to a standstill due to the nationwide lockdown.
Former Reserve Bank of India (RBI) governor Raghuram Rajan believes that a country like India needs to have a strategic lockdown exit plan as “we don’t have the capacity to support people across the spectrum for too long”.
He said that due to COVID-19, people “have lost out on both their incomes and safety net”. Speaking of the relief package required to help the poor, Rajan said India needs to spend Rs 65,000 crore.
On Thursday, the former RBI governor and former Congress president Rahul Gandhi held a public conversation about the economy during and after the lockdown, putting the Narendra Modi government in an uncomfortable position.
Gandhi and Rajan discussed the economic impact of the COVID-19 crisis, and how India needs to spend at this moment. Rajan also responded to the larger problem looming over the country – the wave of unemployment triggered by the global pandemic.
“It is all too easy to cover a lockdown forever, but obviously that is unsustainable for the economy,” Rajan said. He said that India needs to come out of the COVID-19 lockdown in a sequenced manner. To start with, he suggested opening up workplaces which can not only facilitate social distancing but also have a transportation structure.
The pressure on the Narendra Modi government to roll out stimulus packages is fast increasing. Industries, big corporate houses, and sectors such as hospitality are expecting the government’s assistance to battle the economic crisis triggered by the pandemic. While a relief package of Rs 1.70 lakh crores was announced by finance minister Nirmala Sitharaman, it has failed to impress the business community.
Opposition parties such as the Congress have been demanding the immediate release of economic relief packages for the poor and migrant workers. Rahul Gandhi himself has pressed the urgent need of transferring Rs 7,500 into the bank accounts of the poorer population, along the lines of the Congress’ NYAY scheme.
Gandhi quizzed Rajan about the money required to provide a relief package to the poor.
The former RBI governor quickly responded saying, “approximately Rs 65,000 crores”.
“Our GDP is 200 lakh crores, and out of that RS 65,000 crores 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,” Rajan said.
Moreover, the discussion around the massive unemployment triggered by the coronavirus has started churning. Gandhi asked the former RBI governor about unemployment going forward, two to three months from now.
“The numbers are really worrying. If you look at CMIE [Centre for Monitoring of Indian Economy] data, virtually another 100 million people have been put out of work as a result of COVID. Fifty million through unemployment and 60 million through leaving the labour force,” Rajan said.
He added that India needs to start creating jobs soon, as we don’t have the capacity to support people across the spectrum for too long, and the approach needs to be both providing monetary relief and food distribution through the Public Distribution System (PDS).
The former Congress president and the renowned economist also discussed what has gone wrong with the global economy and why “it is not working”.
Rajan said, “It is not working for a lot of people. The growing inequality of wealth and income in developed countries is certainly a source of concern.” He added that this pandemic has made us realise that many of those hit by the crisis do not have any support. “They have lost out on both their incomes and safety net,” he said.
India’s COVID testing rate a concern
Are we testing enough is the question India has been asking for far too long. According to the Union Health Ministry, we are improving our testing rate with every passing day. As per the ICMR data, 8,30,201 samples have been tested until April 30th. As of now, India has nearly 24,000 active COVID cases and we have lost 1074 lives to the global pandemic. The doubling rate of coronavirus cases has improved during the lockdown to 9-10 days and the recovery rate has reached nearly 23 per cent.
The nationwide lockdown is expected to end on May 3rd. Signals indicate that the country might open up with fewer restrictions in place. For instance, the Airport Authority of India (AAI) asked airports to prepare for the recommencement of operations post-COVID-19 lockdown. It indicated that initially, the country could begin with 30 per cent passenger capacity of domestic and international flights. So are we to believe that the country is confident enough that the situation is under control? If not, what could boost it?
Rajan, former RBI governor, said that India has to conduct more COVID tests and that too in a strategic manner, in order to boost confidence. He said, as per the projections, we need to conduct 20 lakh 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 day.”
He also said that at a time of crisis like this “we cannot afford to be a house divided”.