‘If need be, monetise part of the fiscal deficit, print money. There is a sovereign right’
The economy was in a bad shape even without corona, even without the lockdown; it was on the decline, says former Finance Minister.
Do not you think the fiscal concerns are real? You have been a Finance Minister, you have dealt with a crisis at one point, especially when the risk of a sovereign downgrade was hanging on your head. Perhaps this government is also bound by the kind of problems they are facing right now, especially with the rating agencies coming down heavily on them?
Who created these problems in the first place? The government’s incompetence in economic management over the past two years created this pre-corona situation. Everybody seems to think the current economic situation is only due to corona, and only due to the lockdown. You are completely wrong. We were in a bad shape even without corona, even without the pandemic, even without the lockdown. This economy was on the decline. Who created it? The government, not the opposition, not the people of India. The government created the situation. The situation is worst with corona and the government is hiding behind the pandemic to say we are doing everything we can. You are not doing everything you can.
This downgrading is an exaggerated fear. Every major economy is going to go into a recession — Germany, Britain, France. We will also go into a recession. Will they downgrade only us? They would not downgrade the other countries? A grading and a rating is a relative. I do not think any rating agency is going to downgrade hundred countries of the world. It is a thoroughly meaningless exercise, because the relative rating will remain the same. This is an exaggerated fear. You cannot allow rating agencies to decide policy. What the people of India need is to be decided by India’s government and India’s Parliament. Now you have kept Parliament outside, you have sidelined Parliament. You are the only authority. So do what needs to be done. Do not give these lame excuses and do not put forward these misplaced exaggerated fears.
Having said that, if you were the Finance Minister during a condition like this, how much headroom does the government really have? What do you think would be the red line or the Laxman Rekha for you? How much fiscal deficit slippage can we really afford in times like this?
The sovereign has ample headroom. States do not have headroom. Individuals like you and me do not have too much headroom. Companies do not have headroom. But a sovereign has headroom. Now any number of economists — Dr Raghuram Rajan to the Dr Abhijit Banerjee, Dr Prabhat Patnaik to Dr Thomas Issac, Dr Rangarajan – and leading businessman Mr Azim Premji, Mr Venu Srinivasan all have said borrow, Do not worry about the fiscal deficit. If the fiscal deficit reaches a level where you think there are downsides and it becomes a little uncomfortable, monetise the fiscal deficit. Let me tell you, the most respected and most conservative central banker Dr Rangarajan supports monetising the fiscal deficit. Now why are you hesitating.
Other countries did it in 2008. Some countries did it in 2013. We have not had a need to monetise any part of the fiscal deficit in the last 10 or 15 years. But if need be, monetise part of the fiscal deficit, print money. There is a sovereign right. If that weapon is there in your hands, you have never used it, why have that weapon at all?
May be the government is saving the best for the last, and they do not want to completely do away with all their fire power at one go. Because one really does not know whether we are at the beginning or the middle of this coronavirus crisis. But one thing is for certain that we are definitely not at the end?
Who is digging this hole? Who has been digging this whole for the last two years? This government. Go back to the record and see the declining growth in the eight quarters pre-corona. You dug a hole, you are digging a deeper hole, and if you do nothing, the hole will just become deeper and deeper. Do something now, and if the future requires some drastic measure, we will take those drastic measures. The sovereign has ample power. The sovereign here is a prisoner of its ignorance or fear or both.
Let me shift from the government’s economic pill to the issue of migrant crisis. The government says it has no data to identify the migrants, mostly due to a lack of system creation due to the previous government. Now after 2014 there is a DBT in place, the Pradhan Mantri Jan-Dhan Yojana is in place. They at least know who the beneficiaries are and the money is being put into the accounts of these people and they can be identified. Is not that the responsibility of states to provide adequate data so that the government is able to deal with the migrant crisis completely?
False argument. The problem is, you guys simply accept any argument the government shouts out without asking questions. Migrants have run back to the states. One crore, two crore, nobody knows. The bulk of them have brought back, sent back, put on trucks. Somehow they are brought back. Now every migrant entering every state is being screened, tested, quarantined. After the mandatory quarantine, he is allowed to go back to his home in his village or small town. So you know the migrants, the states know the migrants, they have a record of all those who are in the quarantine. They tested them, screened them, quarantined them, they have set them for 14 days, and when they leave the quarantine, they put Rs 5000 in an envelope and give it to them and take their Aadhaar number and record it. Where is the difficulty in identifying a migrant? In fact the simple solution, as Sherlock Holmes said, states are the most learned people. This is the simplest solution, everybody knows who the migrant is after they have returned to their home states. The ones that you have taken by trains, you know them because you have booked the tickets for them. You know their names, you know their Adhaar numbers, you even ensured they have Aarogya Setu in their smart phones. That record of 10 lakh people. Why you people do not ask these questions to the government? You may not get the answers, but are not you duty-bound on behalf of the people to ask the right questions? We do not have an opportunity to ask questions, because Parliament is not in session, the Parliament Committee is not in session. Please ask the question on behalf of the people of India.
As a journalist I would say we are asking these questions from the government as well, but the reason I asked you was mostly on account of the fact that the government has announced a set of measures for the migrant population as well, and this was the argument they were giving which is why I asked you. You know where are the follies in this argument. Having said that, you also said this morning that the Finance Minister should reconsider the package. And the Finance Minister says there is nothing that will be enough at a time like this because of the sheer nature and size of the pandemic. Is that a fair argument?
No, it is not a fair argument. Just because nothing will be enough, you leave nothing on the table. Is that an argument? Leave whatever is possible on the table. And certainly India’s GDP, India’s economy, India’s capacity to borrow allow him to borrow anything up to Rs 10-12 lakh crore. I concluded my statement by saying, ‘well they have to spend more than Rs 30 lakh crore in the Budget and that Rs 30 lakh crore was not enough to stimulate the economy. So let us assume you will spend the Rs 30 lakh crore, you have to spend another Rs 10 lakh crore. If you spend Rs 40 lakh crore, that may stimulate the demand side of the economy, and then obviously the supply side will follow.