Kaushik Basu, a professor of economics at Cornell University, also said that for many current problems associated with COVID-19, India has to use the extra fiscal spending and space, even though the deficit is going to grow.
India needs to urgently reach out to the poor and migrant labourers who are walking hundreds of miles to reach their homes, otherwise this will be a “failure for us”, former chief economic advisor Kaushik Basu said on Thursday.
Basu, a professor of economics at Cornell University, also said that for many current problems associated with COVID-19, India has to use the extra fiscal spending and space, even though the deficit is going to grow. This will happen and one has to realise that this will create some challenges in the future, he said.
The former CEA said the immediate concern should be those hundreds and thousands of people who are feeling the pangs of hunger and extreme poverty. “Those who are walking hundreds of miles for nothing else but to reach their homes. Who are walking in large groups but are alone…whose minds are clouded by worries whether they will see their children and families again. If we do not reach out to these people urgently, this will be a failure for us…Our focus now has to be on the poor, the migrants and the workers who are losing hope,” Basu said at a webinar organised by Bennett University.
The success and failure of the policy steps taken by India, he said, will depend on the details as in how this money is spent. “We have to move very very quickly in the weeks ahead” and bulk of the responsibility has to be shouldered by the fiscal policy, he added. Basu said that India saw foreign capital outflow of USD 16 billion in March, which was huge, as global investors were showing nervousness that India may lurch towards closed and controlled economy.
“We have to dispel such fears and the RBI has to stand ready to stabilise fluctuations in the Indian rupee,” Basu said.
He also said that India significantly improved its ease of doing business ranking from 130th to 63rd, but “we must not make the mistake of recreating a controlled society in the name of controlling the pandemic”.
Talking about prices, he predicted that inflation will pick up in the coming months but this is likely to happen all over the world. On labour laws, Basu said he did not not approve the way Uttar Pardesh led these reforms as extension of working hours to 12 in a day is not right.
When asked about the role of the RBI in the current pandemic, he said if the government will keep going and knocking the doors of the central bank for every fiscal problem, “you are going to weaken that”. “But I feel that in the middle of the pandemic, there should be a little bit of room created, we should also exceed the limits of FRBM Act 2003 in the middle of this but within six months, you have to begin corrections at all these fronts,” Basu said. He added that whether the financial package will be enough to get India out of this pandemic, will depend on the details of how the government designs those support measures.
India is in a better place now and it is beginning to understand the situation better. “We are in a better position than many countries in the world…This could be because of a long run immunity in this region. COVID deaths that are taking place are relatively small in these countries (India, China and Bangladesh. “As for the future, as an Indian citizen I am very ambitious for India but my ambition is not to make India a wealthiest or a richest or the most powerful country in the world. I want India to be the most important moral force in the world. My hope is that we can teach world to be a little less selfish, who has empathy for all human beings, irrespective of their race, religion and caste. I feel sad that few people have stocked hatred based on race and religion” he said.