INSUBCONTINENT EXCLUSIVE:
Former RBI governor Raghuram Rajan says India may well have dodged the second Covid-19 wave.In an interview with TheIndianSubcontinent's
Sreenivasan Jain, former Reserve Bank of India governor Raghuram Rajan, currently professor of finance at University of Chicago's Booth
School of Business, says India hopefully has escaped the second wave of the Covid-19 pandemic and that it should spend money on the poor,
infrastructure development and start opening schools so that children do not fall back on years of education
Edited excerpts from the interview:Sreenivasan Jain: How was it to wake up in a Trump-free America? Raghuram Rajan: Well it certainly felt
like Groundhog Day if you were sitting at home when everything looks the same
Bu it was a serous relief that we would be moving from a haphazard policy to a more, at least reasoned policy
You may disagree with some of the policies but there was lot of thought and expertise that goes into it
It's a big change, a big change for the world
My children were very happy.Sreenivasan Jain: How do we make sure the country is not sliding beyond a certain point and we are getting the
mix right? How would you look at where we stand as an economy? On one hand, we have some numbers that do suggest an uptick but on the other
hand, things are not that great either.Raghuram Rajan: Let me mention the US, which has not handled the second wave right
Cases are falling but we are not yet at a point where we see that it's a strong trend
The US has flooded the market with $3 trillion last year and $3 trillion this year, which is 15 per cent of the GDP, and when you add those
up, forecasters are predicting a very strong second half of the year as the virus gets controlled and as vaccines get rolled out, there
would be tremendous growth in production.India on the other hand, has been able to control the virus, mobility is increasing, the middle
class is spending, so growth is coming back
The question is how damaged or scarred the economy is
What about the rest? Unemployment is 18 million-plus relative to the pre-pandemic period
But still, there are people who are still hurting and their demand will be limited when we come back.Sreenivasan Jain: We need to put money
in the hands of people who are at the lower edge of the economic spectrum.Raghuram Rajan: We need to put money in the hands of people who
need the most, so that they can put food on the table
We need to continue the free food grains program, the Garib Kalyan Yojana
We need to open the schools so that the children do not lose years of education and provide remedial education
That's going to be very important
Infrastructure spending will also need to be increased especially to states to buy cement, steel, copper
The states are much more strong in infrastructure spending.You have to recapitalise the banks and improve governance.Sreenivasan Jain: While
the headline numbers are big, the government is only spending 1-2 per cent of the GDP
Is that a problem?Raghuram Rajan: Well, if we had the money, it would be great
The government is obviously trying to do what it can as they see its resource envelope
The question is can the government expand its resource envelope? There are two possibilities
With where the stock market is at, it's sad reflection on the establishment that we are not doing more
Secondly, can we create resources by committing to stronger consolidation.
