Covid-19: India must do more for poor, says Nobel laureate economist

A Nobel-prize winning economist has said India needs to be "much more generous" in providing relief to the millions of people who have been direly hit by the ongoing lockdown.

"We haven't done anything close to enough," Indian-American academic Abhijit Vinayak Banerjee, told the BBC.

After imposing the lockdown on 24 March, India announced a 23 billion US dollar (18 billion euro) relief package.

Much of it involves cash transfers and food security for the poor.

"We don't want anyone to remain hungry, and we don't want anyone to remain without money in their hands," Finance Minister Nirmala Sitharaman said at the time.

Professor Banerjee, who won the Nobel Prize in economics in 2019 with co-researchers Esther Dufflo and Michael Kremer, said the "government was right in its thinking to throw a shock in the system" to contain the spread of the Covid-19 infection.

"But the lockdown is not the end of the story. This disease is going to be with us for a long time until a vaccine arrives, which is not anytime soon," the Bengali economist who teaches at Massachusetts Institute of Technology (MIT) said.

"India needs to think of a clear, well-articulated plan on what should be done next. The economy was already facing a demand slump. The [coronavirus] outbreak is a double whammy and many people have lost their earning capacity. There's an additional demand slump now."

Prof Banerjee added that India's government should be more liberal about spending money to bail out people who could be facing poverty because of loss of earnings.

"I know there's a concern that what is the use of giving money to people when the markets are closed. But, to begin with, you can tell people that money is coming and create a mood for demand," he said.

"People need reassurance. And the government has to be proactive in reassuring people."

People should be having the money in their hands when the supply of goods and services eases and resumes so that they can go out and begin spending, Prof Banerjee said.

Hundreds of millions of households who are already listed as recipients for India's many federal welfare schemes would be eligible for such direct cash benefits, he said.

/teb