New Delhi: Manmohan Singh has suggested three steps through which India’s economy, ravaged by the COVID-19 pandemic, can be revived.
The Former Prime Minister and Finance Minister, who is widely acknowledged to be the architect of India’s economic reforms programme, suggested direct cash assistance to protect livelihoods and retain spending power, government-backed credit guarantee schemes to make capital available for businesses and institutional autonomy to fix the financial sector.
“I do not want to use words like ‘depression’ in a cavalier fashion,” Singh said in an interview with the BBC.
Acknowledging that a deep and prolonged economic slowdown was inevitable, he said: “This economic slowdown is caused by a humanitarian crisis. It is important to view this from the prism of sentiments in our society than mere economic numbers and methods.”
With COVID-19 cases in India rising sharply, economists have predicted that the country’s GDP for the financial year 2020-21 is likely to contract sharply, possibly leading to the worst recession in 50 years.
“Higher borrowing is inevitable… Even if we have to spend an additional 10% of the Gross Domestic Product (GDP) to cater to the military, health and economic challenges, it must be done.” Singh advocated.
The high debt-to-GDP ratio is a worry, but Singh said the country must be prudent. “If borrowing can save lives, borders, restore livelihoods and boost economic growth, then it’s worth it,” he observed.
“We have an economic crisis caused by an epidemic which has induced fear and uncertainty in society, and monetary policy as an economic tool to counter this crisis is proving to be blunt,” he added.
“I am aware that the traditional fear of high inflation due to excess money supply is perhaps no longer valid in developed nations,” he said. “But for countries such as India, other than costs of institutional autonomy of the central bank, unbridled printing of money can have attendant impacts on currency, trade and imported inflation.”
