“GIVE CREDIT, WORKING CAPITAL, EXPORT SOPS, FISCAL INCENTIVES. NOT SEQUENTIALLY, BUT SIMULTANEOUSLY”

The minimum amount required immediately is ` 5- 6 lakh crore. We may need more P. Chidambaram, former finance minister

What can be done to restart the economy? What should be the first steps post-lockdown?

The first step will be to ensure that the poor are adequately remonetised, i.e., they have enough cash in their hands to sustain themselves until they resume their jobs or selfemployment. Secondly, provide enough support, including loan waivers, to micro and small enterprises to resume production and supply. Thirdly, address the needs of medium and large enterprises (organised sector) in terms of credit, working capital, export incentives, fiscal incentives, etc., to quickly ramp up production and supply. These steps have to be taken, not sequentially, but simultaneously.

What should be the ideal stimulus? How do we raise resources? Is re-allocation of ministry resources an option?

The minimum amount of money that will be required immediately is ` 5- 6 lakh crore or about $ 80 billion. This is about 3 per cent of nominal GDP. We may need more. Resources are available within the country — through reallocation, ruthlessly cutting wasteful and vanity expenditure, higher borrowing, and monetisation of part of the deficit. The IMF has given $1 billion.

How severe will be the lockdown’s impact on India's GDP? Are we staring at a recession?

It is too early to conclude whether there will be a recession. (Technically, a recession is when the GDP records two successive quarters of negative growth.) The growth in

Q1 (April-June) will be very low, maybe even close to zero.

Q2 growth will depend on when the lockdown is lifted and when economic activity resumes and gains momentum. It will also depend upon the fiscal steps the government will take — so far, there are none. The worst case scenario is zero growth in the first half (Q1+Q2) of FY21. The best case scenario will be that we see green shoots from July onwards. In either scenario, FY21 will record one of the lowest growth rates in recent years.

How do you see the government's and the RBI's responses so far? Are they enough to manage the health and the economic crises?

The RBI can only play a supporting role and, in my view, the measures taken by it are satisfactory. As far as the government is concerned, the record is mixed. On the health front, after some false starts, they seem to be getting their act together in containment and testing. On the economic front, they have failed miserably. They have been timid and hesitant. The situation calls for bold and decisive action, especially on (1) livelihood support to the poor and vulnerable; (2) protecting current levels of employment and wages; ( 3) providing financial support to MSMEs; (4) maintaining supply chains of goods and services, especially essential household goods and services; ( 5) allowing states to borrow more in order to be able to spend more; and (6) designing a package of measures and incentives to re-start the engines of economic growth. The heavy lifting must be done by the central government but they are, inexplicably, loath to do so.