~65,000-CRORE PACKAGE NEEDED FOR POOR: RAJAN

India would need a ~65,000crore package to support its poorest during the Covid-19 pandemic and the resulting nationwide lockdown, which has robbed them of their livelihoods, said former Reserve Bank of India governor Raghuram Rajan on Thursday.

“Approximately ~65,000 crore (is needed). Our GDP is ~200 trillion, and out of that ~65,000 crore is not a huge amount,” Rajan said in response to a question by Congress’ former president Rahul Gandhi on the quantum of funds India needs to support its most economically deprived sections.

“So, we can do it. If this is for the poor and to save their lives and livelihood, we must do it,” Rajan said.

Rajan and Gandhi were interacting via webcast on Covid-19 and its economic impact on India.

Finance Minister Nirmala Sitharaman had, in late March, announced a ~1.7-trillion package dubbed the Pradhan Mantri Garib Kalyan Yojana. However, a big part of that package was not new spending but rather front-loading of existing outlay on schemes such as Pm-kisan.

The ~31,000-crore construction workers welfare cess fund — where the corpus comes from employers and is maintained by states, with no contribution by the Centre — was also included as part of this scheme, and so was allowing Employees’ Provident Fund Organisation (EPFO) withdrawals by employees. None of these can be considered expenditure items.

Speaking with Gandhi early on Thursday, Rajan said India needs to have a calibrated plan on exiting the lockdown. “A lot of work needs to be done both on creating the structures and ensuring the workplace is relatively safe… Also need to figure out that if there are accidents, if there are fresh cases, how do we isolate quickly without having to go for a second or a third lockdown? It will be devastating if we have to go there,” he said.

“That said, I don’t think we have to aim for a 100 per cent success — i.e., 0 cases. That is unachievable. What we have to do is manage the reopening, and when there are cases, we isolate them,” Rajan said.

The former governor said India will need to massively ramp up testing. “You are talking about two million tests a day if you have to get the level of confidence you have in the United States. Clearly, with 25,000-30,000 tests a day, we are nowhere near that. But we have to be clever about opening up,” he said.

Rajan said India can find opportunities for its industries, supply chains and can try to mould the dialogue in the postCovid global order. “There is a sense that if markets globalise, market participants want to see the same rules everywhere. They want to see the same coordinating structure everywhere,” he said.

A big lesson during this pandemic, according to Rajan, has been that many of the poor do not have any support. They have lost out on both their incomes and safety net. “We can’t dispense with markets; we do need growth. We also have a problem of stuck or inadequate distribution. People aren’t getting the fruits of that growth in the same way. Many people are being left out. So we need to think about both sides,” he said.

“YOU ARE TALKING ABOUT TWO MILLION TESTS A DAY IF YOU HAVE TO GET THE LEVEL OF CONFIDENCE YOU HAVE IN THE UNITED STATES. CLEARLY, WITH 25,000-30,000 TESTS A DAY, WE ARE NOWHERE NEAR THAT. BUT WE HAVE TO BE CLEVER ABOUT OPENING UP”

RAGHURAM RAJAN, Former governor, Reserve Bank of India