Covid-19: Need to move ahead now to protect vulnerable sections: Kaushik Basu

MUMBAI: Former World Bank economist Kaushik Basu said that the financial package announced by the prime minister is necessary but not sufficient given the dark clouds of recession and unemployment. Basu said that while government spending would create inflationary pressures within six months, there was a need to move ahead now to protect the vulnerable sections and take corrective measures later.
“If this Rs 20 lakh crore were an additional amount this should be enough. People who are scraping through the details are saying that it is not additional and it includes what RBI has done. If the additional amount is half (of what is announced) it is not enough,” said Basu.
Basu who is professor of economics and Carl Marks Professor of International Studies, Cornell University was addressing a global online conference organized by Bennett University which was a part of the Covid-19 Jaan Bhi Jahan Bhi series.
Pointing out that the Covid-19 mortality rate of two deaths per million population was among the lowest, he said that now measures need to be taken to protect the vulnerable. “Immediate concern should be the hundreds of thousands who are walking hundreds of miles only to go home, those who are walking in large groups but are all alone,” said Basu.
To fund the stimulus, Basu said that he was in favour of providing some space for monetization of the deficit or printing more money, but the RBI has to be careful as inflation could fly and it had many other responsibilities.
“In the March the RBI was injecting its dollar reserves to stabilize the rupee. A small amount of printing is worth it, but RBI has to use an intelligent method of raising the fiscal deficit,” he said. He also pointed out that the savings rate in India has dipped from 38% to 30% and this has a lot to do with banking. “If you keep knocking at the door of the central bank, the investment which has come down will go down further,” said Basu.