Former finance minister P Chidambaram has suggested some measures to boost demand as COVID-19 pandemic hits India's economy hard. The senior Congress leader, in a series of tweets on Sunday, advised the Centre should first transfer some cash to the poorest 50 per cent families of the country. He said the Centre should also provide free food grain to all families who need it.
He said the government should also increase spending on infrastructural projects. According to Chidambaram, the government needs to start massive public works in order to boost economic activity and should pay wages in terms of food grains.
To enhance the lending capacity of banks, the Centre must re-capitalise them, he said, adding that the Centre should also pay the pending GST compensation to states. "All of the above will need money. Borrow. Don't hesitate," he said.
Here are some concrete steps to stimulate demand/consumption and revive the economy:— P. Chidambaram (@PChidambaram_IN) September 6, 2020
1. Transfer some cash to the poorest 50 per cent of families
2. Offer food grain to all families, those who need will take it
3.Increase spending on infrastructure projects
The former Union minister said the government must relax the Fiscal Responsibility and Budget Management norms to borrow more this year.
The divestment plan should also be expedited, he said, adding that the government must utilise the offer from international organisations like International Monetary Fund, World Bank and Asian Development Bank.
Here are are some concrete steps to raise money:— P. Chidambaram (@PChidambaram_IN) September 6, 2020
1. Relax the FRBM norm and borrow more this year
2. Accelerate disinvestment
3. Use the offer of USD 6.5 billion by IMF, WB, ADB etc
4. As last resort, monetise part of the deficit
The Rajya Sabha MP also said that as a last resort, the Centre must monetise part of the deficit.
Notably, the Centre had already extended the free ration scheme, Pradhan Mantri Garib kalyan Yojana, till November as coronavirus cases in India continue to rise at a faster pace.
India's GDP shrank 23.9 per cent in the April-June quarter of the financial year and all major sectors, except agriculture, showed significant decline in performance.
The Centre has also acknowledged the fact that the unprecedented contraction in India's Gross Domestic Product (GDP) growth is higher than its peers, attributing the economic crisis to "stringent lockdown that India enforced in the April-June quarter".
In the latest Economic Review report, the Finance Ministry has said that agriculture has led economic revival in the country, with industrial production showing signs of recovery with eight core industries picking up pace in July.