Indian economy can rebound fast if govt spends more to create demand, says Abhijit Banerjee

The ongoing coronavirus outbreak is 'probably bigger' concern for the Indian economy as against the balance of payments crisis in 1991, said Nobel laureate Abhijit Banerjee. The GDP growth may fall by 10-15 per cent as a result of pandemic and subsequent lockdowns, Banerjee told HuffPost India. The government should focus on spending money on anti-poverty programmes and look towards printing money in view of a limited fiscal room, said noted economist who last year shared the Nobel Prize in Economic Sciences with Esther Duflo and Michael Kremer. He also called for an increased spending through fiscal easing amid the current scenario. On the probability of economic recovery by next year, Banerjee said that a quick rebound is possible if the government takes the right steps to make sure there is no demand shortfall in the economy. The government should focus on reviving demand and therefore, spend more, he stated.

On enough coronavirus testing in India, Banerjee said since there is a huge uncertainty, increased testing is the solution to the problem. Intensive testing would help to identify areas where lockdown should be imposed, he added. So, testing on a very large scale is a way out, the Ford Foundation International Professor of Economics at the Massachusetts Institute of Technology (MIT), said.

India announced a Rs 1.7 lakh crore economic stimulus plan in March providing direct cash transfers and food security measures to give relief to millions of poor hit by coronavirus lockdown. India may soon announce a second stimulus package of nearly Rs 1 lakh crore and focus on help for small and medium businesses weathering the coronavirus outbreak, according to global news agency Reuters.

Meanwhile, India's coronavirus tally has touched 42,836, including 29,685 active cases, 1,389 deaths, 11,761 cured or discharged, and 1 migrated patient.

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