India should come out with a large enough stimulus package to revive demand, Nobel laureate Abhijit Banerjee said on Tuesday, while favouring putting cash in the hands of the bottom 60 per cent population to help boost the economy post-lockdown.
Banerjee, while talking to Congress leader Rahul Gandhi through video conferencing from the US, suggested several measures like increasing people's spending by giving money to help revive demand, temporary ration cards for providing grains to the poor and cancelling the debt for this quarter.
He was deliberating on the economic impact of the COVID-19 pandemic with Gandhi as part of a series of dialogues broadcast on Congress' social media handles.
The Nobel laureate debunked the theory that only a strongman could take the right decision during a crisis, saying it has proved disastrous in the US and Brazil.
"The US and Brazil are two countries that are messing up right and left. These are two 'strongmen' behaving like... pretending like they understand anything... but even what they say every day is kind of laughable. If anyone wanted to believe in the strongman theory, this is the time to disabuse themselves," he said.
Noting that the real concern is if the economy will revive, Banerjee said, "I think we should try to be optimistic about the survival of the overall economic well-being of the country. Just take the right actions.
Asked whether India should soon come out of the lockdown, he said it depends on the disease as you do not want to take down the lockdown when a lot of people are getting sick.
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"We have to kind of be aware of the time path of the disease, he said.
Gandhi suggested that states should be given options and allowed to decide themselves on the lockdown, to which Banerjee agreed.
The Economics Nobel Prize winner said it was important for India to announce a large enough stimulus package to deal with the crisis on the lines of what the United States, Japan and the Europe are doing.
"A lot of us have been saying that we need a stimulus package. That is what the US is doing, Japan is doing, Europe is doing. We really have not decided on a large enough stimulus package. We are still talking about 1 per cent of GDP. The United States has gone for 10 per cent of GDP," he said.
Banerjee said the country put a moratorium on debt payments, but "we could do more than that. We could even say that the debt payments for this quarter will be cancelled and will be taken care of by the government".
Instead of just rescheduling it, we could just permanently cancel it, he added.
On the demand for giving a financial package for the MSME sector, Banerjee said, "It is not clear that targeting the MSME sector is the right channel. It is more reviving demand. Give money in the hands of everybody, so that they can buy in stores or they buy consumer goods."