India Should Roll Out Larger Stimulus Package To Revive Demand: Abhijit Banerjee Tells Rahul Gandhi 
Abhijit Banerjee, winner of the Nobel Prize for economics, stands for a photograph in New Delhi. (Photographer: T. Narayan/Bloomberg)

India Should Roll Out Larger Stimulus Package To Revive Demand: Abhijit Banerjee Tells Rahul Gandhi 

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India should put in a large enough stimulus package to revive demand, Nobel laureate Abhijit Banerjee said on Tuesday, asserting that putting cash in the hands of people would be the best way to boost the economy post the lockdown.

Banerjee, while talking to Congress leader Rahul Gandhi through video-conferencing, suggested putting money into the hands of the bottom 60 percent population to help revive demand.

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.

Banerjee said it was important for India to announce a large enough stimulus package to deal with the crisis on the lines of what the U.S., Japan and the Europe are doing.

"We really haven't decided on a large enough stimulus package. We are still talking about 1 percent of GDP. The United States has gone for 10 percent of GDP," the noted economist said.

We have done one thing that I think is wise, which is to kind of put a moratorium on debt payments. 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.
Abhijit Banerjee, Nobel Prize Winning Economist 

Also read: India Needs To Be Cleverer In Lifting Lockdown, Raghuram Rajan Tells Rahul Gandhi

The Case For Direct Cash Transfers

To Gandhi's question as to whether some form of the Congress-proposed NYAY scheme or direct cash transfer to people was the need of the hour, Banerjee answered in the affirmative saying it should not be limited just to the poorest.

“I would say bottom 60 percent 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’ll spend it. If they spend it, it would have a stimulus effect,” he said.

Banerjee also suggested that the government should hand out temporary ration cards to people to deal with the problem of food distribution.

The Bankruptcy Threat

He said another concern looking ahead post-coronavirus and is a chain of bankruptcies.

"Maybe writing off a lot of debt is the way to go," he suggested.

The other concern, the noted economist said, is the demand shortfall.

Getting some cash into the hands of the population is the best way to kick start the economy.
Abhijit Banerjee, Nobel Prize Winning Economist 
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