Rajan spoke about how India should end its national lockdown and what should be the focus while tackling its economic consequences.
Here’s what we learnt from the conversation:
1. India needs to open its economy ASAP
“It is all too easy to have a lockdown forever, but obviously that is unsustainable for the economy,” Rajan said.
The opening up of the economy should begin with places where you can maintain social distancing, he said. “And it’s not just distancing in the workplace. It’s also distancing to and fro from the workplace— the transportation structure. Do people have private means of transport or do they depend on public transport? If it’s public transport, how do you maintain distance in public transport? There is a lot of work to be done in creating the structures and ensuring that the workplace is relatively safe, as well as if there are fresh cases, how do you isolate quickly without having to go into a second lockdown or a third lockdown.”
2. Another lockdown would be “devastating” for the economy
“Even a second lockdown would suggest you haven’t been completely successful in reopening. And that raises the question: if you re-open again, will you go into a third lockdown? So it does diminish credibility. That said, I don’t think we have to aim for 100% success, that there are zero cases when we open up. That’s unachievable,” he said.
“What we have to do is manage the re-opening, so when there are cases, we isolate them quickly.”
Rajan suggested conducting mass-testing by taking a thousand samples and checking for signs of the virus and isolating infections quickly.
“It’s less intensive but cleverer.”
Rajan said India can’t wait until it has the kind of testing facilities Western countries had before it opens up the economy.
3. Assure food and money for the poor and migrant workers
“Keep people well and alive” is one of the ways India should tackle the consequences of the pandemic, Rajan said.
“Food is extremely important, reach it to every place, even places where the public distribution system does not go. Amartya Sen, Abhijit Banerjee and I have talked about temporary ration cards for people who don’t have access,” he said.
Rajan said efforts made for direct benefit transfer need to be realised and that India must find ways of getting money and food through PDS to as many people as it can. This way, the country could ensure people are not out on the streets to protest or look for jobs, he said.
When asked how much money it would take to the help the poor right now, Rajan said, “Approximately Rs 65,000 crore, and that’s not a lot. Our GDP is Rs 200 lakh crore. So it’s possible. And if it’s for the poor and to save their lives, we should do it.”
4. Staggering unemployment
“The numbers are really worrying. If you look at CMIE, virtually a 100 million more people have been put out of work as a result of Covid-19. Fifty million through employment, 60 million through leaving the labour force. You can dispute the numbers of the survey, but this is the only data we have. Again, I think this says that we need to open up (the economy), in a measured way, but as fast as possible, so that people start having jobs. Because we don’t have the capacity to support people across the spectrum for too long. Being a relatively poor country, people start out with significantly lower reserves.”
On tackling the steep economic inequality in the country, Rajan said the greater challenge lies in the gap between the lower middle class and the middle class. “This is where we need, in a huge way, good-quality jobs. This is where tremendous expansion in the economy is absolutely necessary.”
5. How India can take advantage of the global economic situation created by the pandemic
“There are ways. There will have to be rethinking of everything in the global economy. If there is an opportunity for India, it is in shaping that dialogue. In being more of leader in that dialogue because it is not one of the two big warring parties but it is a big enough country to make its voice heard in the global economy.
In this situation, India can find opportunity for its industry and supply chains but most importantly, it can try and mould the dialogue to one which has greater place for more countries in global order — a multi-polar global order, rather than a single or bipolar global order,” Rajan said.