AGENCIES, Kolkata: Former Reserve Bank of India (RBI) governor Raghuram Rajan on his blog says that the coronavirus pandemic is the greatest challenge that the country has to cope with since Independence. Rajan has advised the Centre that non-performing assets (NPA) could increase due to the outbreak and urged Prime Minister Narendra Modi to prioritise spending on the poor.
Spending on the underprivileged at this time is a high priority use of resources, the right thing to do as a humane nation, as well as a contributor to the fight against the virus, Rajan said in his blog posted on LinkedIn.
Noting that the government has so far announced a fiscal support package of Rs 1.7 lakh crore, equivalent to 0.8 percent of GDP. “Our limited fiscal resources are certainly a worry. At the same time, India cannot lose sight of its financial constraints, unlike developed economies such as the US or Europe, which can spend the 10 per cent of its GDP without fear of a downgrade in ratings, India has entered this crisis with a huge fiscal deficit and will have to spend even more, the former RBI Governor said.
For the poor and the non-salaried lower middle class, whose livelihoods have been impacted, the ex-RBI Governor has suggested a combination of state intervention, private participation and direct transfers.
Rajan also feels that the government should reach out to members of the opposition who have had experience in previous times of great stress like the global financial crisis.