India has unveiled both fiscal and monetary policy stimulus measures to minimise the negative impact of the coronavirus on economic activities and address the needs of the poor, NITI Aayog vice-chairman Rajiv Kumar told FE’s Prasanta Sahu in an interview. He said the Thursday’s economic package was rightly targeted at the most vulnerable segments of the society. Edited excerpts.
What is your view on the relief package announced by the finance minister on Thursday?
The package announced by the finance minister is rightly targeted, ensuring that the most vulnerable segments of the society do not bear an unbearable burden of the pandemic. This has to the top-most priority of the government. For MSMEs, the finance minister has given the relief by offering to pick up the tab for their EPFO contributions. This will help mitigate wage costs. The hefty Rs 50-lakh insurence cover announced for all corona warriors is a worthy recognition of their heroic contribution to the nation’s fight against the virus.
Tourism, hotel and other services sector have been badly affected in India. These sectors need urgent help…
The services sector has been badly affected. The government is conscious of this and is seized of the situation. A lot of deliberations are going on so that the package that is being designed could be announced sooner than later. It is premature to talk about sector-specific measures. The package will provide sufficient relief to try and minimize the negative impact both on the people and the corporate.
It is said that the cost of COVID-19 test at Rs 4,500 is hindering many people from going for the test?
I think, the government is seized of the matter. It may request Ayushman Bharat to develop a package for the test.
Advanced economies have announced massive measures to tackle coronavirus impact, which the IMF has warned could be worse than the world financial crisis. How do you see India tackle this crisis?
Essentially, the financial crisis of 2008 and 2009 affected only North America and Europe. In India, the growth went down in one quarter before it recovered. That is because our financial centres were not interwoven with the West. The coronavirus has already spread to 176 countries. Every economy is going to have its own repercussions due to domestic lockdowns, contractions of economic activity, impact on trade and demand. So, the impact will be much bigger. If this trend continues… the nearest example that you can think of about is the Spanish Flu of 1918, which took 50 million lives in the world and lasted for one-and-a-half years. It also impacted India as we lost 18 million people or almost 6% of population. That was the start of the Great Depression in some sense.
Today, the situation is very different for two-three reasons – medical services are much better developed, consciousness is very high, every economy has taken major steps to counter the spread and also address the economic impact. We will see a much quicker recovery than in the previous instances.
What is your outlook on Indian economy?
It is a very complex situation. We don’t know how long this situation will last. We don’t know what the impact will be on the domestic economy, global economy and global demand. It is not wise to make a forecast.
The lockdown announced by the Prime Minister is a very important step. Any criticism of this is misplaced. First and foremost, we have to stop the spread within our country, which has much less resources than the advanced economies to fight it. We have seen in some advanced economies that if proper care is not taken, it can become a major issue. Majority of people have lauded PM. This is the best way to minimise the impact of this virus.