“So far, India has walked the tight rope as well as it could have, given its resources and management capabilities,” Panagariya said.
Elaborating on the path ahead for India as it navigates health and economic concerns in the wake of the COVID-19 pandemic, Panagariya said there have been calls for mega relief and stimulus packages from various quarters.
“The scale of some of these packages is so large as to give some sections living standards that exceed what they enjoyed prior to the advent of the coronavirus on Indian soil.
“These packages also pitch for such generous availability of credit that businesses that would be unviable in normal times would get a long lifeline in the post-corona world,” said the professor of economics at Columbia University and Director, Raj Center at Columbia’s School of International and Public Affairs.
Need to limit interventions
He emphasised that the Indian government “needs to resist those calls and take a more measured approach” by limiting interventions to the provision of food, shelter and basic necessities of life for all; forbearance on payments of outstanding loans; and extra provision of working capital, including what will be necessary to cover outstanding wages from lockdown period to enterprises.”
Panagariya noted that future taxpayers would have to pay for the expenditures the government incurs today by either borrowing or printing money.
“Printing vast volumes of money may not lead to high inflation immediately because many items of expenditure are simply not available. But we shall not escape such fate once the situation normalises and trillions of rupees worth of extra money in the hands of public converts into effective demand,” he said.
Fresh relief measures soon
Finance Minister Nirmala Sitharaman on Friday said India would soon announce fresh relief measures and economic stimulus to help the poor and industry fight the impact of the COVID-19 pandemic.
Participating in the 101st meeting of the Development Committee Plenary of the World Bank through video conference, Sitharaman assured the global community that India would continue to supply critical medicines to needy countries for the treatment of COVID-19 patients.
Sharing details of welfare measures announced by the government last month, the finance minister said support measures worth $23 billion were provided, comprising free health insurance to health workers; cash transfers, free food and gas distribution; and social security measures for affected workers.
According to estimates by the Ministry of Health and Family Welfare, there are 12,289 active coronavirus cases in the country as of April 18 and 488 people have died due to the virus.
Keeping the coronavirus curve flat
Panagariya said that it would be a “miracle” if a vaccine could be discovered, licensed, manufactured and made available to 65 percent or more of India’s population in less than one and a half years, underlining the absolute necessity of ensuring that the infection curve remains flat till the time a vaccine is available.
“The economy cannot be kept in lockdown for that long. At the same time, left to itself, the virus has an ability to spread at lightning speed and a high kill rate,” he said, adding that the novel coronavirus could quickly overwhelm the health system.
“Therefore, until a vaccine is available, the coronavirus curve must be kept sufficiently flat that the health system can handle the additional emergencies without being crippled. That requires restricting economic activity,” he said, adding that such a scenario presents the “dilemma and tightrope walk for the government”.
The former NITI Aayog Vice Chairman said in the world’s largest and most diverse country “some hiccups” such as coming out of hordes of migrants at a few spots were “inevitable” as India tried to manage the COVID19 crisis.
“Moreover, these are amply balanced by numerous unexpected positive surprises such as ability of local administrations to do contact tracing and enforcing strict lockdown such as those observed in Bhilwara in Rajasthan and Sangli in Maharashtra,” he said.
Globally, 160,721 people have died and over 2.3 million people have been infected by the coronavirus, according to data maintained by Johns Hopkins University.