homeeconomy NewsCOVID 19 impact: QE is the name of the game everywhere; we need to be even more expansionary, says Nobel Laureate, Abhijit Banerjee
COVID-19 impact: QE is the name of the game everywhere; we need to be even more expansionary, says Nobel Laureate, Abhijit Banerjee
Quantitative easing (QE) is the name of the game everywhere, why should we be special. We have been in a fairly flat economy already and now we are getting hit with this. I have been in favour of being expansionary in the last six months or a year and now I feel even more strongly that we should be expansionary, said Nobel Laureate, Abhijit Banerjee.
Amid the coronavirus pandemic, the government has announced a Rs 1.7 lakh crore program, which was largely humanitarian and the main item of it was Rs 500 for every woman in Jan-Dhan account holder. Among other things extra grain and gas cylinders, would come free.
Nobel Laureate, Abhijit Banerjee spoke with CNBC-TV18 on how things need to be done in an unprecedented and unexpected crisis.
With regards to the package, he said, “It is a package that assumes that the crisis will be over in a couple of weeks. Even for very poor Indians Rs 500 isn’t anything. If the crisis lasts two weeks then that is fine. Some of the media coverage suggests that it is only gathering strength and therefore if there will be much longer and bigger shutdown, then bigger number will be needed.”
In terms of his assessment on how the government has handled the issue of migrants, he added, “It is hard to double-guess whether the administrative preparations could have been better. The one thing that the government could have done better is just send less mixed signals. This idea that shops will be open but no one can go out, the police got confused and there were reports of police shutting down shops by force. There was a lack of clarity in some of the announcements and that could have been avoided."
"If they had anticipated how the migrants would react, they could have been made announcements that we will take care of you, we are building shelters, we are going to provide transportation – those solutions were needed to preannounced at a scale that was credible,” he said.
“Lockdown itself is probably the step that most governments have been adopting given that we didn’t start testing, we didn’t import test, we didn’t develop testing earlier. We didn’t somehow take it seriously enough before. So at that point, yes, maybe that is the only thing you could have done," he said adding that we need to be sensitive to what is going to be extremely difficult to enforce. We could have moved earlier. It was very clear that it was coming. We somehow assumed that we were special and maybe that is our experience from severe acute respiratory syndrome (SARS) that we didn’t get it so we thought this one too we will not get.
“Right now, if I had to announce one package, I would have focused on keeping the migrants from running around and going crazy. That has been tried but maybe more resources there first because the transmission channel needs to be cut off if possible and that is a very dangerous thing,” he stated.
“Quantitative easing (QE) is the name of the game everywhere, why should we be special. We have been in a fairly flat economy already and now we are getting hit with this. I have been in favour of being expansionary in the last six months or a year and now I feel even more strongly that we should be expansionary. There is no reason to be tight-fisted. This is the time to boost demand as much as possible. That is why the US is putting USD 2 trillion in and substantial proportion out of that is coming from QE or printing money,” he further mentioned.
“Jan-Dhan is the best conduit we have. There is not much other than sending cash to people,” he said.
In terms of world economy, he said, “It depends very much on how quick the recovery is in the west because people are losing income, they are also not spending money, which means that in-principle if this recovery is fast then you will have a bunch of people who are reasonably optimistic, saying things have been okay and we have some savings at home and they will start spending it."
However, If the recovery is slower, then they are going to be more frightened by what has happened to them. So this expansionary spending is going to be critical. If it has a big demand boost and people are optimistic about the future then they will start spending money. They are not spending money right now, so they have some money at home but incomes are also falling, he said.
First Published: Apr 1, 2020 3:16 PM IST
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