Raghuram Rajan tells Rahul Gandhi: Rs 65,000 crore needed to help poor, reopen economy in measured way
Former Reserve Bank of India (RBI) Governor Raghuram Rajan said that Rs 65,000 crore is required to help the poor affected by the coronavirus-induced lockdown. He also laid stress on the need to restart the economy while taking precautions.
Rajan's remarks came during his interaction with Congress leader Rahul Gandhi, via video conference, on the economic crisis looming over India.
Responding to Rahul Gandhi's question about how much money is needed to help the poor, Rajan said: "Approximately 65,000 crores. Our GDP is 200 lakh crores, and out of that 65,000 crore is not a huge amount. So, we can do it. If this is for the poor and to save their lives and livelihood, we must do it."
Speaking on opening up the economy, Rajan said: "We have to start thinking about restarting people's livelihood. It has to be sequencing, first at places where you can maintain distancing at workplace and the transportation. A lot of work needs to be done both on creating the structure as ensuring that workplace is relatively safe as well. If there are fresh cases, how do you isolate quickly without having to go to a second lockdown or third lockdown those will be devastating if we have to go there."
"I don't think we have to move for a 100 per cent, i.e., zero cases when we open up. That's unachievable. What we have to do is manage the reopening. So, when there are cases we isolate them," he said.
"We need to open up in a measured way but as fast as possible so that people start having jobs. We don't have the capacity to support people across the spectrum for too long. Being a relatively poor country, people start out with significantly lower reserves," Rajan said.
The Congress leader said that there is a sense that testing capability is limited in India.
Rajan suggested that India should do mass testing to detect COVID-19 infected people.
"US is ramped up to do 150,000 tests per day. But the consensus among experts is that to be really confident about opening up, we have to triple that. They have to do 500,000 tests per day at least... If you want to get the level of confidence in India, you have to do at least 2 million tests per day. We are no way near that; we are at somewhere around 30,000 tests per day," Rajan said.
"We have to be cleverer about opening up which means perhaps mass testing. Take a thousand samples of mass, check whether there is any virus samples. If you do find it, then go deeper into the sample and check who it might be. This way it would reduce the burden on our test infrastructure and can allow us to try and vet much more. In some sense less intensive, but we have to be cleverer since we simply cannot wait till we have that kind of testing," he said.
Posing a question on the impact of coronavirus on the economy, Rahul Gandhi asked: "How do you make the balance between fighting virus now and fighting consequences four months later?"
Rajan said that there has to be prioritization as India's capacity and resources are limited.
"Our fiscal resources are more limited than the West. We need to decide how we keep the economy together so that when we re-open it's itself able to walk off the sick bed and not be impaired at that point. Most immediately, I think keep people well and alive. Food is extremely important. Amartya Sen, Abhijit Banerjee and I talked about temporary ration cards for people who don't have access. You have to treat this pandemic as a situation that is unprecedented. We have to break norms in order to tackle what is needed," he said.
Rajan said that pandemics like COVID-19 rarely have positive effects for any country but there are ways countries like India can take advantage of the situation.
"This kind of incident rarely have a positive effect for any country. But there are ways, countries can take advantage. There has to be a re-thinking of everything in the global economy once we are out of this. If there is an opportunity for India, it is in shaping the dialogue in being more of a leader in that dialogue. It is a big enough country to hear its voice heard in the global economy," he said.
"In this situation, India can find opportunities for its industries, supply chains...But most importantly, it can try and mould the dialogue towards one which has a greater place for more countries in the multipolar global order rather than a single or bipolar order," he added.
Rajan said that decentralisation is important both for bringing more local
information to work but also about giving empowerment to the people.
"What you see across the world is a great sense of disempowerment. Decisions are being made elsewhere, but not by me. I have a vote but that elects somebody in a far-off place. My local panchayat, State government has less power. They don't feel they can have a voice in anything. So they become prey to different set of forces," he said.
When Rajan asked Rahul to comment on this, the former Congress chief said: "If you look at southern states, they are doing a better job because they are more decentralised. And the northern states are centralising power and they are taking away power from Panchayat and grass roots level organisations."
Rahul Gandhi said that a lot of social change is required in India and many of these problems are different in different states.
"Politics, culture and language of Tamil Nadu is different than that of UP. One blanket solution for the whole of India won't work. The level of inequality you see in India is nowhere to be seen. You cannot compare the measures taken in the US to that in India. Our societies are very different. Caste is such a factor," he said.