Nobel laureate Abhijit Banerjee has said the nationwide lockdown imposed by the Indian government last year to curtail the spread of COVID-19 infections, and the resultant migration of poor people from cities to their villages by walking hundreds of kilometres on foot was a "pure plumbing failure".
Banerjee and Esther Duflo, Nobel winner economist and Banerjee's wife, have often compared the economic systems across the countries with plumbing systems.
"There might be as many as 50 million of...low-income migrants who temporarily live in cities. They can't connect to the welfare system. That's why there were pictures in the first lockdown of people walking 1,000 kilometres...there was no way for them to survive. They just had to go home. That is pure plumbing failure," Banerjee said on India's lockdown in an interview to the Financial Times.
Citing the migrants in cities who cannot take advantage of government's welfare scheme there, Banejee said India is an example of a country where they had not thought through their plumbing.
The MIT professor said loan default will be a big issue for the countries to deal with after the pandemic, and praised measures taken by India on this front.
"Where the countries are clearly going to hurt is in dealing with loan default. India - the one thing it did do - is it basically allowed some amount of restructuring of loans, which was publicly subsidised. Other countries didn't have even that resource," he said.
He also backed the International Monetary Fund's decision to reallocate special drawing rights (SDRs), helping poor countries raise money to fight the pandemic and deal with its effects. Banerjee said this can prove to be a very useful tool to put liquidity into the economy.
"I would like to reinforce the point about the drawing rights because that is a very important discussion. It would allow the world to do what the rich countries were able to do for themselves, which is basically to print some liquidity to finance not their long-term development but the short-term handling of this crisis," Duflo said.
SDRs can also be used to finance emergency cash transfer, she added.
On the impact of COVID-19 pandemic and lockdowns, Duflo said while its economic impact cannot be predicted, some of the issues like pause in child immunistation programmes across countries, lack of schooling for children for over a year and families again pushed back to below poverty line can have a long-lasting damage.
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