Centre should take steps to undo economic disruption: Manmohan Singh
Protecting people’s livelihood, making adequate capital available for businesses and ensuring the autonomy of the financial sector are the three steps the government should take “immediately” to undo the economic disruption caused by the Covid-19 pandemic, former Prime Minister Manmohan Singh said in an interview to BBC, urging the government to consider significant amounts of direct cash transfers to the public.
The former PM and the senior Congress leader warned that the disruptions due to the lockdown to prevent infections would lead to a prolonged slowdown and that it was important to strategise the response, including by measures such as offering credit guarantees to businesses and making financial institutions more robust.
The interview was done over email, the BBC reported in a story published on Monday based on the exchange.
Speaking about the economic slowdown, he said it was caused by a humanitarian crisis and a “deep and prolonged economic slowdown” was “inevitable”. India’s gross domestic product (GDP) slowed to 4.2% in fiscal 2019-20, the lowest in 11 years.
It followed precipitous growth contractions reported by the US and European countries after the pandemic closed shops, factories and restaurants, signalling a period of recession. The US economy posted a second-quarter contraction of 9.5%, the worst figure on record.
India is expected to report its April-June GDP numbers by the end of this month. Economists expect its economy to contract by at least 5% this year (2020-21) especially because the country had seen a hard lockdown for two full months of the quarter (April and May).
The BBC report quoting Singh said India followed what other nations were doing and “perhaps a lockdown at that stage was an inevitable choice”. “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,” the report quoting Singh said.
“Public health emergencies such as this are best dealt with locally by local administrators and public health officials, with broad guidelines from the Centre. Perhaps, we should have devolved the Covid-19 battle to the state and local administrations much sooner,” Singh told BBC.
Singh said higher borrowing was inevitable and that “we must not be shy of borrowing, but we must be prudent on how we use that borrowing”.