AMN
Indian economy is going through a turbulent phase due to COVID-19 pandemic. The extended nationwide lockdown has dampened economic activity.
Speaking to CNN-News18’s Executive Editor, Zakka Jacob, Montek Singh Ahluwalia, Ex Deputy Chief of the Planning Commission, stated that this is an unprecedented pandemic and the government should take necessary steps to tackle the economic crisis in the country. We must have a holistic strategy for this situation, he added. Ahluwalia mentioned that the government needs to reassure people that this year is exceptional.
Talking about the current financial situation, he said, “We have to monetise the deficit for the next six months. No disinvestments are going to take place this year. I think it’d be wrong if we contain the fiscal deficit by cutting all the expenditures. The Central government should allow its fiscal deficit to expand for this year.”
The economist further commented on how this is not just a liquidity problem but it is a solvency issue as well. “The normal situation is that the RBI gives money to banks and then they expect banks to lend. The banks do not know how long this crisis will last. The government is probably in a better position to judge that it will recover. We need to take this decision away from the banks and bring the government in for some risk-sharing,” Ahluwalia said. The economist further suggested suspension of the Fiscal Responsibility and Budget Management Act (FRBM) for the current year.