In an interview to CNBC-TV18 in Davos, Gita Gopinath said the two big challenges for the Indian economy would be agricultural reforms and job creation.

Farm loan waivers dont solve the problem cash transfers better IMFs Gita Gopinath
Money Economy Tuesday, January 22, 2019 - 15:28

The International Monetary Fund’s Chief Economist Gita Gopinath has said that farm loan waivers are not a permanent solution to the agrarian crisis in India and has vouched for cash transfers as a better alternative instead.

Speaking to CNBC-TV18 in Davos on the sidelines of the World Economic Forum, Gita said, “There is tremendous amount of distress in the agricultural sector and I believe that farm loan waivers don't solve the problem on any kind of permanent basis. We certainly need to ensure our farmers against very volatile food prices and we also need to work with giving them better technology, better seeds. A cash transfer would be absolutely better than loan waivers. It would be more broad based and would keep the incentives aligned.”

Commenting on India’s economic growth, Gita said that the country’s growth continues to be high and is the highest for any major economy in the world. She added that the forecast for 2019 suggests that India’s growth is expected to rise further because of two factors i.e. lower commodity factors and as a spin-off of that, there would be weaker impact on inflation and a more accommodative monetary policy.

However, Gita cautioned that job creation and reforms in the agricultural sector would be the big challenges for the Indian economy going forward.

Expressing her views on the concept of a Universal Basic Income (UBI) which was mooted by former Chief Economic Advisor Arvind Subramanian, she said that UBI in its original form is unlikely to be implemented by any developing country because that would mean putting money in the hands of every citizen of the country including the richest. She said the aim is to reach the most vulnerable sections of society and there are already many schemes in place and they need to be made more effective.

On the standoff between the RBI and the government, Gita said that they strongly support the operational independence of not just the RBI but all central banks, as it is needed to maintain macroeconomic stability.