NEW DELHI—The special economic package being designed by the Narendra Modi government to address the impact of the coronavirus on the Indian economy will incorporate a combination of fiscal and monetary policy measures, said NITI Aayog Vice Chairman Dr Rajeev Kumar, but declined to outline any specific measures that may be announced.
“Both the fiscal and monetary policies will have to play a role in tandem in order to address the significant impact of the coronavirus on the economy,” Dr Kumar told HuffPost India in an interview, underlining that only fiscal policy measures will not be sufficient but combining them with monetary policy measures could go some way in addressing the damage.
Prime Minister Narendra Modi has addressed the nation twice so far about the dangers of coronavirus and the importance of social distancing, but he hasn’t outlined any economic relief package that is on the cards, especially for the poor. On Tuesday, finance minister Nirmala Sitharaman, who is heading the Modi government’s economic task force to look into the impact of COVID-19, announced a slew of measures for extension of statutory and regulatory compliances.
“Both the fiscal and monetary policies will have to play a role in tandem in order to address the significant impact of the coronavirus on the economy,Rajiv Kumar, Vice Chairman, NITI Aayog
Kumar said over the phone that “the government and all its relevant departments and agencies are focused” on the importance of addressing the economic impact.
“They are well cognisant of this, seized of the matter and focusing on it to design and deliver a comprehensive package as soon as possible...as the finance minister has said yesterday in her speech, this will be delivered sooner rather than later. I think we should go by her assurance and feel confident that the government being seized of the matter will bring it out as soon as possible,” said Kumar.
When asked what kind of specific measures the government could be looking at, the economist leading the Modi government’s top think-tank declined comment, saying: “I think we should not preempt what the government is about to announce.”
A Reuters report quoting two anonymous government officials on Wednesday claimed that an economic stimulus package worth at least Rs 1.5 trillion may be announced by the end of this week.
Many economists have, in the recent past, spoken about the need for a fiscal stimulus, especially after Modi on 19 March announced the formation of the task force. But they have mostly emphasised measures on the fiscal side with relatively less emphasis on monetary policy measures.
On his part, Dr Kumar of the NITI Aayog emphasised why it has to be a combination of fiscal policy and monetary policy measures while speaking with HuffPost India.
“The first thing that you must note is that in many cases in the world as well, there is not just a fiscal package but it’s a combination of fiscal and monetary policy package because the central banks have also intervened in several ways, so therefore just to call it a fiscal package will be a misnomer. I think that should be clearly stated,” he said. “Taking cues from the global response, we also need to have a coordinated effort from the monetary and fiscal authorities,” he said.
When asked whether the NITI Aayog has been consulted during the ongoing discussions between the Prime Minister’s Office, Finance Ministry and Reserve Bank of India about the economic stimulus, Dr Kumar said, “All the concerned departments and agencies have given inputs.” He added that this included the NITI Aayog but refused to get into the specifics of recommendations or suggestions that the think-tank may have given to the Modi government.
In a recent interview, Dr Rathin Roy, Director of the National Institute of Public Finance and Policy, told HuffPost India that coronavirus could knock off over one percent of India’s Gross Domestic Product.
When asked for his view about the extent of impact on the Indian economy by coronavirus, Dr Kumar said, “It will depend upon the length of how long this lasts and it will depend upon how the global economy fares. There’s so many variables here and so many unknowns that it’s a very brave person who can make that assessment and I’m not so brave.”
Speaking a day before the G20 meeting, which has been organised virtually to discuss the economic impact of coronavirus, where Prime Minister Narendra Modi will also be a participant, the NITI Aayog VC noted its importance in the current context. “I think the world community has seen that this is a global phenomena, a global problem and will require concerted efforts on everybody’s part to try and prevent the global economy from going into a deep recession that could be the bigger impact. A pandemic like this does cause severe disruption and luckily because we have a platform like the G20 that enables the global leaders to come together, discuss, design and, you know, implement a concerted strategy to help the global economy not go into recession and come back on track as soon as possible,” he said.