Raghuram Rajan’s purview on how to diminish the impact of Covid-19 on Indian economy
The former governor Raghuram Rajan has suggested some measures to be adopted by central bank to soften the impact of coronavirus on the Indian economy. He had spoken exclusively with Rahul Kanwal, the director of India Today News about his learnings on the post-coronavirus economic situation and also on how can India deal with this global pandemic.
Raghuram Rajan made a statement that the need of the hour is to offer credit facilities to the weak and ailing businesses by RBI. But currently, RBI is not in a position to provide credit to businesses since it is experiencing an existing lag in the Indian economy. It is because the financial system of the country is impaired. He also added that he has always maintained to clean it up, so that it will be able to function as necessary.
The advice Rajan has to give in the form of solution for the problem is that, the government has to provide partial guarantees in order to ensure that banks keep on lending to the SMEs as well as large firms. Also, the banks have to be provided with incentives, so that they are willing to take the risk of credit.
Rajan also suggested that, at this particular point, RBI has to take a cue from the central banks across the world who are currently contributing by easing liquidity. He said that liquidity should not be viewed as a constraint and caution has to be taken since it has large amount of NPAs.
A temporary income transfer scheme was also advocated by Raghuram Rajan with a view to aid the poor people during this chronic situation. He also clarified that; universal basic income program is not to be thought at presently.
When Raghuram Rajan was enquired about the inadequate global supply of medical resources, he said that the Centre will have to be proficient enough to utilize all the tricks in the book to grab what is there in the international market.