The economy could be out of its present rut: Former Prime Minister Dr. Manmohan Singh suggests three steps

File photo of former Prime Minister of India Dr. Manmohan Singh

The Fact News Service, August 10

Former Prime Minister of India, Dr. Manmohan Singh has suggested three steps which India should immediately follow to stem the damage of coronavirus pandemic. The senior leader of the Congress Party recently spoke to BBC and talked about the three steps.

He reportedly said,

First, the government should “ensure people’s livelihoods are protected and they have spending power through a significant direct cash assistance.”

Second, it should make adequate capital available for businesses through “government-backed credit guarantee programmes”.

Third, it should fix the financial sector through “institutional autonomy and processes”.

The reports suggest that the GDP of India was already in a poor state before the lockdown. In 2019-20, it grew at 4.2 percent, which was its slowest pace in nearly a decade. Also, India have become the third country with 2 million covid cases.

“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,” Dr. Manmohan Singh told BBC.

Many also believed that the lockdown was imposed in India in a hurry. But Dr. Singh said that India did what other nations were doing, and “perhaps a lockdown at that stage was an inevitable choice.”

However, he said, “But the government’s shock and awe approach to the lockdown has caused tremendous pain to people. The suddenness of the announcement and the stringency of the lockdown were thoughtless and insensitive.”

BJP led government had introduced a $266 billion stimulus in April to kickstart the economy. Also, the Reserve Bank of India introduced moratoriums on loans.

Economists have debated how a cash-strapped government would be able to get the money to fund direct transfers and provide more capital to ailing banks and credit to businesses.

Dr. Singh told BBC that the key was borrowing. “Higher borrowing is inevitable,” he said. “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. “We must not be shy of borrowing but we must be prudent on how we use that borrowing,” he added.

According to the reports, India is Asia’s third-largest economy. When asked whether this would help India to recover strongly after the pandemic, Dr. Manmohan Singh said, “India is much more integrated with the rest of the world now. Hence, what happens in the global economy will have a significant impact on India’s economy. In this pandemic, the global economy is severely dented and that will be a big cause of concern for India.”

(With inputs from agencies)