The bottom 60% of the population of India should be directly given money to boost demand and kickstart the economy, Nobel laureate Abhijeet Banerjee said in a conversation with Congress leader Rahul Gandhi, as part of Rahul’s series of interactions with economic leaders.
Whether the direct cash benefit is for the poorest people, that is more debatable, Banerjee said, arguing that it is better to look at a broader spectrum than targeting only a certain group of people. “I would say the bottom 60% of the population, we give them some money, nothing bad will happen in my view. If we gave them money, well some of them might not need it. Fine, they will spend it. If they spend it, it will have a stimulus effect… I would go beyond the poorest people,” he said.
Speaking about migrant workers, Banerjee said that the government needs to think about what happens to a substantial part of the population that does not have access to Jan Dhan accounts, suggesting that state governments should be given the money. “And probably the right answer is that we should give a bunch of money available to the state governments to try out their own schemes, to be creative in reaching people who are excluded using NGOs. I think we have to be willing to take some amount of mistargeting, malfeasance. Some money will be stolen. But if we sit on our hands and say that we don’t want to do anything that could go possibly wrong, then we’ll make sure it goes wrong,” he added.
Like Raghuram Rajan, Banerjee also reiterated the need for temporary ration cards. This was first suggested in an OpEd by Banerjee, Raghuram Rajan and Amartya Sen. Banerjee said that the government should hand out temporary ration cards (that last for 3 months) to anybody who wants one.
“Give everyone a ration card, anyone who walks in, give them one. And use that as a basis for making transfers. I think we have enough stocks. I think we can keep going for a while. The Rabi crop has been good this time, so we are going to have tonnes of wheat and rice. So at least wheat and rice we can keep giving out,” Banerjee said.
Speaking about the issue of cash flow being faced by small and medium businesses, which also employ many people, especially migrant workers, Banerjee said that there is a need for a stimulus package, and one that is large, taking a cue from countries such as the United States, which has offered a package that is 10% of the GDP.
He also suggested that the Medium, Small and Micro Enterprises should be targeted, by going beyond the moratorium on debt payments. He suggested that debt payments for the quarter could be cancelled and be taken care of by the government. “It’s not just a matter of rescheduling it, just permanently cancel it. We could do that. But beyond that, it is not clear that targeting the MSME sector is the right channel. It is more reviving demand,” he added.
He also said that to avoid a chain of bankruptcies, writing off a lot of debt could be a way to go.
Further, Banerjee also suggested that India take a cue from what the United States is doing to tackle the shortfall in demand and revive the economy.
“The USA is very aggressively doing that. This is a Republican administration run by a bunch of financiers. If they are willing to do it, we should be willing to do it. This is not run by a bunch of socially minded liberals, but by people who used to work in the financial sector. But they have decided that just for economic survival we need to pump money into people’s hands. I think we should take a cue from that,” he added.