Rajan suggests ₹65k-crore aid for poor

NEWDELHI: Former Reserve Bank of India governor Raghuram Rajan has suggested that the government transfer cash directly to the poor and supply food through the public distribution system (PDS) to as many people as possible to help them tide over the impact of the Covid-19 outbreak and the consequent 40-day lockdown, estimating the effort will cost ~65,000 crore.

The money is small given that India’s GDP is to the tune of about ~200 lakh crore, Rajan said in a video conversation with Congress leader Rahul Gandhi on how to deal with the crisis caused by the disease. Copies of the video were released to the media by the opposition party. Rajan’s suggestions do not go far enough to address the need to revive and reboot the economy, which has been battered by the public health crisis, economists and industry representatives said. Industry bodies have called for a ~16 lakh stimulus package.

“We need to find ways of getting both money as well as food through PDS to as many of these people as we can,” said Rajan, whose stint as RBI governor between September 4, 2013 and September 4, 2016, was spread across the terms in power of both the Congress-led United Progressive Alliance and the Bharatitya Janata Party (BJP)-led National Democratic Alliance (NDA) Rajan said the poor must get food, and if they don’t have ration cards entitling them to subsidized grains, a temporary solution should be put in place.

Rajan has effectively endorsed the NDA government’s response to the pandemic in the form of the ~1.7 lakh crore welfare package unveiled in March, two officials at economic ministries said. The package, announced by finance minister Nirmala Sitharman, provided food items such as rice, wheat and pulses; three free cooking gas cylinders till June this year and direct cash transfers to the accounts of the poor.

“Although Dr Rajan did not mention whether ~65,000 crore should be over and above ~1.7 lakh crore already announced on March 26, it is assumed that he must be aware about the package,” one of the officials said, requesting anonymity.

Spokesperson of the two economic ministries declined to comment on the conversation between Gandhi and Rajan.

Ram Singh, a professor at the Delhi School of Economics ,said Rajan’s suggestions seemed to be aimed at the 130 million extremely poor households of India.

“If ~5,000 direct cash is transferred to each family, it will come to around ~65,000 crore. This seems to be the maths. It will certainly help. But it is not enough to stimulate economy.”