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Home / India News / In video conversation with Rahul, Rajan suggests Rs 65k-crore aid for poor

In video conversation with Rahul, Rajan suggests Rs 65k-crore aid for poor

The money is small given that India’s gross domestic product is to the tune of about Rs 200 lakh crore, Rajan said in a video conversation with Congress leader Rahul Gandhi on how to deal with the crisis caused by the disease.

india Updated: May 02, 2020, 05:53 IST
Aurangzeb Naqshbandi & Rajeev Jayaswal
Aurangzeb Naqshbandi & Rajeev Jayaswal
Hindustan Times, New Delhi
India’s economic growth had already been slowing because of a decline in private investment and household consumption when Covid-19 hit.
India’s economic growth had already been slowing because of a decline in private investment and household consumption when Covid-19 hit. (AFP)

Former Reserve Bank of India governor Raghuram Rajan has suggested that the government transfer cash directly to the poor and supply food through the public distribution system (PDS) to as many people as possible to help them tide over the impact of the coronavirus disease (Covid-19) outbreak and the consequent 40-day lockdown,estimating the effort will cost Rs.,65,000 crore.

The money is small given that India’s gross domestic product is to the tune of about Rs 200 lakh crore, Rajan said in a video conversation with Congress leader Rahul Gandhi on how to deal with the crisis caused by the disease.

Copies of the video were released to the media by the opposition party. Rajan’s suggestions do not go far enough to address the need to revive and reboot the economy, which has been battered by the public health crisis, economists and industry representatives said. Industry bodies have called for a Rs.16 lakh stimulus package.

“We need to find ways of getting both money as well as food through PDS to as many of these people as we can,” said Rajan, whose sint as RBI governor between September 4,2013 and September 4,2016, was spread across the terms in power of both the Congress-led United Progressive Alliance and the Bharatitya Janata Party (BJP)-led National Democratic Alliance (NDA)

Rajan said the poor must get food, and if they don’t have ration cards entitling them to subsidized grains,a temporary solution should be put in place.

“Most immediately, keep people well and alive. Food is extremely important. Places where the public distribution system doesn’t go. (Economists) Amartya Sen, Abhijeet Banerjee and I have talked about temporary ration cards,” the former RBI chief told Gandhi in the first of the video conversations the latter plans to hold with public intellectuals.

Rajan has effectively endorsed the NDA government’s response to the pandemic in the form of the Rs 1.7 lakh crore welfare package unveiled in March, two officials at economic ministries said. The package, announced by finance minister Nirmala Sitharman, provided food items such as rice, wheat and pulses; three free cooking gas cylinders till June this year and direct cash transfers to the accounts of the poor.

“Although Dr Rajan did not mention whether the Rs 65,000 crore should be over and above Rs 1.7 lakh crore already announced on March 26, it is assumed that he must be aware about the package. The package was an initial response and more funds will be released to protect lives and livelihood of the poor,” one of the officials said, requesting anonymity.

Spokesperson of the two economic ministries declined to comment on the conversation between Gandhi and Rajan.

Ram Singh, a professor at the Delhi School of Economics ,said Rajan’s suggestions seemed to be aimed at the 130 million extremely poor households of India.

“If Rs 5,000 direct cash is transferred to each family, it will come to around Rs 65,000 crore. This seems to be the maths. It will certainly help. But it is not enough to stimulate the economy as a whole.”

The PHD Chamber of Commerce and Industry wants the government to provide a stimulus package of Rs 16 lakh crore, around 7% of GDP, sooner than later to mitigate the impact of the pandemic on the economy “through various relief measures and benefits,” said DK Aggarwal, president of the industry association.

Such a package will help the economy grow around 5% in the current financial year and rejuvenate businesses , he said.

India’s economic growth had already been slowing because of a decline in private investment and household consumption when Covid-19 hit. The International Monetary Fund has estimated India’s economic growth at 1.9% in the current fiscal year, the slowest pace in three decades.

Rajan said India should be lifting the lockdown, which is due to end on May 3, and open up its economy in a “measured way;” a prolonged lockdown can lead to social distress, he warned.

“We have to be cleverer about opening up...We need to open up in a measured way but as fast as possible so that people start having jobs. We don’t have the capacity to support people across the spectrum for too long,” he said.

“It is all too easy to have a lockdown forever, but obviously that is unsustainable for the economy,” he said.

India is has been in lockdown since March 25, confining residents indoors, shutting industrial production, halting flights and passenger railway services and taking public transport off the roads in an attempt to enforce social distancing and break the chain of infections.

“I don’t think we have to aim for 100% success and have zero cases when we open up... What we have to do is to manage the reopening so that when there are cases, we isolate them,” said Rajan, according to whom aggressive testing should be at the core of efforts for the management of Covid19 .

Rajan evaded a direct response to a question from Gandhi on “centralisation of power” and the “authoritarian way of governance” in India.

“I do believe that decentralisation is important both for bringing more local information to work but also about giving empowerment to the people. What you see across the world is a great sense of disempowerment. Decisions are being made elsewhere, but not by me (was the feeling among the people),” he said.

Taking a swipe at Gandhi, BJP national spokesperson Sambit Patra tweeted, “RahulG complains to Raghuram Rajan of an ‘Authoritarian Model’ But of course those who had put in place an ‘Accidental Model’ for them any other model that has ‘Decisiveness’ & ‘Determination’ as it’s basic ingredients will be passed off as ‘authoritarian’!!”

In the conversation with Gandhi, Rajan stressed the need for social harmony, saying India cannot afford to be a house divided in challenging times. “Social harmony is a public good. Having everyone believe that they are a part of this system, an equal part of the system is essential,” he said.

Rajan was cautious when Gandhi asked him if India could take advantage of the situation thrown up by the pandemic. “These kinds of incidents rarely have positive effects for any country, in general. There are ways countries can take advantage of (it). What I think we can say is that there will have to be a rethinking of everything in the global economy once we are out of this,” he said.

“India can find opportunity for its industry and supply chain in the world. It can also help make its voice heard in the global order,” he said.

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