Manmohan Singh offers three remedies to help the crumbling economy pull itself together
Amid a rampaging pandemic laying waste to India's economy, former prime minister Manmohan Singh has proffered three steps to restore the country’s financial health.
Singh, a long-time Congress stalwart who is often credited as the architect of India's economic reforms programme, suggested direct cash assistance to protect livelihoods and retain spending power, government-backed credit guarantee schemes to make capital available for businesses, and institutional autonomy to fix the financial sector.
"I do not want to use words like 'depression' in a cavalier fashion," said Singh in a conversation with the BBC, adding that a deep and prolonged economic slowdown was inevitable.
"This economic slowdown is caused by a humanitarian crisis. It is important to view this from the prism of sentiments in our society than mere economic numbers and methods," he explained.
Singh's warnings came amid Covid continuing its sharp rise in India, and economists predicting that the country's GDP for FY2020-21 may sharply contract, leading to the worst technical recession in almost 50 years.
Singh says borrowing is the answer to fund direct cash transfers to help businesses with capital and credit. "Higher borrowing is inevitable... Even if we have to spend an additional 10% of the Gross Domestic Product (GDP) to cater to the military, health and economic challenges, it must be done."
Talking about the fear around India’s high debt-to-GDP ratio, Singh said the country must not shy away from borrowing, but rather be prudent. If borrowing "can save lives, borders, restore livelihoods and boost economic growth, then it’s worth it," he expounded.
Global economies in the past have gone through crises with proven economic tools, Singh pointed out. "Now we have an economic crisis caused by an epidemic which has induced fear and uncertainty in society, and monetary policy as an economic tool to counter this crisis is proving to be blunt," Singh said.
Prominent economists, including Nobel-prize wng academic Abhijit Banerjee, believe that India should not be afraid to print money to fund welfare benefits. Many countries have already decided to print money to fund government spending. Singh too is not ruling out the need for it, but is of the opinion that it be used as a last resort.
"I am aware that the traditional fear of high inflation due to excess money supply is perhaps no longer valid in developed nations," he said. "But for countries such as India, other than costs of institutional autonomy of the central bank, unbridled printing of money can have attendant impacts on currency, trade and imported inflation."
According to Singh, the deep interlinkages that India now has with the world are a cause for concern. "What happens in the global economy will have a significant impact on India's economy,” Singh said. "In this pandemic, the global economy is severely dented and that will be a big cause of concern for India."
The primary cause of the recessionary situation is that RBI thru it's policies has reined in credit growth to way below deposit growth and in fact had starved high employment sectors of credit like real estate at juncture when the economy needs the support most.
Jag Mohan Manchanda
resume Metro, aviation services and restart social & economic activities. Create demand since pandemic has disrupted it. Govt is only spending on defence these days, which is an issue of security but doesn't help economic recovery. As workers trickle back into cities, construction activity must resume. Wearing of masks and social distancing may be desirable for some more time but pandemic cannot be an excuse for total disruption of economic activity.
RBI Governor manmohan singh, a high credible name. FM manmohan initially good. PM manmohan singh , nobody can digest because of the control by the dynasty.
I had commented weeks back that Govt should not shy away from monetising deficit. There is no danger of inflation right now. Hence stagnated job must be boosted by increasing infra investment, health care and MSMEs.
Intelligent people have facts, bhakts have knowledge imbibed from WhatsApp University.
MS is well past his age.
What matters now is the views of new congress party economist and who has unique talent and highest IQ, the greatest of all Shri Rahul Gandhi.
Dr Manmohan Singh's adviced two steps, the direct cash transfers and govt backed credit guarantees for loans which have already been implemented by the government, thus needed no mention.
harsha vardhan k
He doesn't have any right to suggest to the great nation. When he was in power, what he did was being a puppet and let scams roar.
govt must consider his suggestions this govt is failure in economics still manmohonsingh is best fm till now
NO DOUBT HE IS NOT ONE OF BEST P. M BUT AS ECONOMIST HE IS BEST.. MUST CONSIDER HIS WORDS
person who couldn't do as PM is now advising.
get your facts right. his 10 year realm had highest GDP growth. Some years over 10%
Former PM Mr.M M Singh's suggestions are by and large fair.Mr. Singh's comments that are in alignment with broader consensus about the recovery measures. The Govt needs to allocate scarce resources towards sustainable projects optimally, with strict action against corruption.
India has many talents like Dr Manmohan Singh PhD Economics - (1) Dr Abhijeet Banerjee (2) Dr Dr Amartya Sen - Nobel Prize Winners in Economics . MODI - Matric should STEP DOWN to FIX Indias Crumbling Economy by Experts.
Manmohan Singh had been astute economist which could sustain the 2008 economic crisis.
good advise from any quarter should be listened and carefully analysed for economy development
The man who messed up the economy in 10 years of misrule is least qualified to talk
Well said.MMS is no more an economist,he only keeps saying what Sonia permits him to say and nothing else.