File image of IMF Chief Economist Gita Gopinath | Photo: Andrew Harrer | Bloomberg
File image of IMF Chief Economist Gita Gopinath | Photo: Andrew Harrer | Bloomberg
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New Delhi: The scale of spending by India to combat the impact of the Covid-19 pandemic can be much higher than current levels, according to Gita Gopinath, chief economist, International Monetary Fund (IMF).

In a digital Off the Cuff conversation with ThePrint’s Editor-in-Chief Shekhar Gupta Thursday, Gopinath said the measures announced by India so far amount to only 1 per cent of its gross domestic product (GDP).

While the government has announced cash transfers and free food grains, the Reserve Bank of India has announced a three-month moratorium for loans, as well as measures to ensure adequate working capital for firms, support to non-banking finance companies and mutual funds.

“This is a crisis where we are advising all members to do what is needed. The scale of the crisis is so big and the policy response has to be commensurate to that. Now, India has taken many important steps. The early lockdown was a very good step. They have also announced targeted support measures in the form of cash and food transfers and in terms of support to firms,” she said.

“Our view is that the scale of this could be much larger. If you look at the incremental measures that have been taken, (the spending) is around 1 per cent of GDP… On an average, emerging markets are spending 2.5 per cent of their GDP to combat the crisis. So, we do think that more can be done, and the scale of the spending could be much higher than what it is now,” she added.


Also read: Raghuram Rajan bats for quick reopening of economy, says India can’t support poor for long


Targeted spending

Gopinath stressed the need for targeted spending to use the available resources to best handle the crisis.

“This is a crisis that calls for very targeted measures. You don’t want to do helicopter drops all across the economy,” she said, pointing out that the health sector, households, workers and firms will require government support.

She said firms should not be bankrupt before the end of the crisis, adding that besides loan forbearance, wage subsidies are also required, but with conditionalities, to ensure that the fund support is used to preserve employment of the workers, and not to make the shareholders richer.

If one doesn’t want workers to be fired, then firms have to be supported to pay wages, Gopinath said.

Forecasts will be revised

The IMF had forecast that the Indian economy will grow at 1.9 per cent in 2020-21. But the forecast was made before India announced the extension of the lockdown until 3 May.

Gopinath said there is a lot of uncertainty around forecasts, and they will be revised based on ground realities.

“This is a crisis like no other. We haven’t seen anything like this in our lifetimes. We are seeing a truly global crisis. This is not about advanced economies or emerging economies,” she said.

“Everybody is getting hit and getting hit hard. Our forecast for this year is probably the worst since the great depression. There is so much uncertainty and it could get worse. We might not have reached the bottom of this,” she added.

Gopinath said India has taken many steps to improve the ease of doing business, but more needs to be done to bring in land and labour reforms, to encourage manufacturing in the country.


Also read: Modi govt is being sensible by not announcing a large fiscal package to help revive economy


 

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2 Comments Share Your Views

2 COMMENTS

  1. The Financial Measures announced by GOI, as per this article, is being 1% GDP of Indian Economy. It is to be focused on many freebies to the downtrodden people who are really facing enormous difficulties facing ever. Paying attention to the Doctor profession for all upto the bottom most level of Government services men and material, since they can only divert their action at the time of crisis, need to be taken care of with announcement of various payment packages ensuring at present along with future allocation. The people who are misusing at this time should punish to the extent possible with rhe reality in focus. The Encouragement of Labour and Land reforms at the bottom most level to the top level people for growth is to be the real developmental economies for generating employment opportunities at this point of time at least.

  2. India has become a Republic of Beggars.
    Everyone is totally dependent on government like beggars for freebies and freeloading. Labourers, migrants, poor, Muslims, industrialists, media houses etc all wants packages, money, house rent and tution fee waving, free food, free ration, free medical facilities and what not. Total perversion. No body is paying any attention to the doctors, medical facilities, medical research, medical staff security, medical equipment and supplies, farmers and villagers etc. The China Corona Virus has also brought with him the sick mentality of freebies and freeloading, moral perversion and corruption. People have lost all shame even in free loading and free packages. This is not a fight against China Corona Virus or Covid-19 but this fight has taken U- Turn for freebies, free loading and free and non-refundable packages. Even the pension and salaries of the government employees are been cut and wasted on these freebies and freeloading. For example, the UP government asked landlords, not to charge rent from tenents. But behind this order, rich and affluent tenents who even owns cars are not paying rents. This is very wrong and will bring a bad name to the government. DMs should be asked to book such rogue and lawless tenents.

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