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Govt has no option but to print money and spend it to mitigate Covid-19 hit: Arundhati Bhattacharya

Govt has no option but to print money and spend it to mitigate Covid-19 hit, Arundhati Bhattacharya said.

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Last Updated: Mar 31, 2020, 09.34 PM IST
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Arundhati Bhattacharya-1200
Nobody knows how long this pandemic is going to last. Hopefully, in India, the lockdown should help plateau the number of infected. But in terms of the economy and the banking sector, how badly could we be pegged back?
We are all keeping our fingers crossed that India does not go the way of Europe and America. This is something that has never been witnessed before in our lifetimes and it would be foolish to say what the outcome will be! At this point, it is a question of taking one day at a time ensuring that there is no panic. We have to keep providing confidence so that markets think that we are capable of withstanding the storm, no matter how severe it is and that we will come out well on the other side of it.

While the main point of focus today is health and how to ensure that people stay well, we also need to have planning on what happens on the other side of this. We have to understand that this is another situation like 1991 when you will need very strong radical reforms to put the economy back on track. We already had a number of soft spots in the economy when the Coronavirus storm broke. Now instead of soft spots, the whole economy is going to be impacted.

We have not been able to keep the workers at their places of work so that the moment the pandemic eases, they can get restart operations. Most sites have got demobilized and remobilization will take some time. So even in the best case scenario, even if you say that the whole thing abates in say 60 days, even then remobilization will take a bit of time. The policymakers will have to keep tweaking whatever measures they have given to make sure that the near term is taken care of and then look at the medium and the long term to put the economy back on a firm growth path.

But every challenge comes with its opportunities. It depends on how well we identify those opportunities and use them so that we are marked out as a nation. We have a strong leadership, a lot of talent in the country. All of that should now be focused on finding ways of what we should be doing as soon as this pandemic is over.

As the government has very narrow elbow room right now, in terms of policy tweaks, what can they do to try and mitigate an economic hit?
If you are looking at immediate mitigation, I do not think the government has any option but to print money and spend it. It has to do that. People are calling it borrowing from the future but we should not continue that beyond a particular point of time. The success of that depends on how quickly we can turn that off and get people back to productive employment. You have to use that only as long as it is absolutely necessary. After that, people must get back into productive employment.

There are several sectors that are impacted and the government needs to take action on those sectors and find out what is impacting them. In the power sector, the dues are piling up. We cannot allow the discom dues to pile up in this manner. Now to leave it all to the states government and say that that is the state matter is no longer going to help.

The states know that in times of a pandemic, they need to cooperate and collaborate and they have done it earlier as well in matters like the GST. The states need to come together and resolve the power payment issue. We cannot allow it to go on forever. So, tough decisions have to be taken but they have to be taken jointly, collaboratively in a federal structure in order to benefit all of India.

Similarly, if you look at the real estate issues, let us get down to what is bothering it and try and ease those conditions. The biggest problem with the ease of doing business is the fear factor of what will happen, who will question, why should I take this decision? Those are things that have to be put aside and we have to do things in the best interest of the public and the nation. Fault finding should not be the main pursuit of the hour. Solution finding is what we need to do. It needs will. It needs the ability to get people on the same platform and collaborate. It can be done.

Typically when you say crisis, the bad news is that credit culture also takes a backseat. Some of them could have genuine problems but others may use this situation to their advantage to not follow a disciplined credit culture. Is that the biggest risk that this kind of a crisis will push the credit culture back?
As is said, the main key is to know when to stop the relaxations. Relaxations will be needed because at this point of time you really cannot separate wheat from the chaff. So yes there will be some amount of misuse, you cannot stop it. But you should start tightening the screws again when the time is right and therein lies the wisdom of our people.

Once we have crossed that, then things can stabilize. Many times what happens is that when we start allowing these relaxations, we just go on and on with them because they are populist in nature. We have got to avoid the temptation of getting into that. As long as people really need to get back on their feet, it should be rolled out. But then roll it back again and go back to what you really wanted to do which is to clean up the credit culture, to ensure that we have better governance standards. All those will have to be re-imposed.

Today it is actually a war that we are fighting. The enemy might be microscopic but it is a war. In war times you have to make relaxations and you cannot start looking at who is deserving and who is not. For instance, with this EMI deferment, the State Bank has taken a call to do it from the back end. There might be at least 20-30% people who will not want their EMIs to be deferred. They can always make their payments and that will be treated as an advance payment. We have to call upon the basic nature of people now that we are going to go for relaxations. But let us not sabotage our country by misusing it.

Let us take what is really required and ensure that there is leftover for others who also may need it and those who do not require it should come forward instead and volunteer that we do not require it, you do not have to give it to us. That is the way people come together in times of crisis and we need to appeal to the best nature of people to do that.

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