India needs to print cash to support the economy that has been damaged by the protracted COVID-19 crisis, one of the country’s top bankers Uday Kotak has told NDTV. This expansion, said the chief executive of Kotak Mahindra Bank, needs to be done in two parts – one for those at the bottom of the resources pyramid, and the other for protection of jobs for sectors affected by the pandemic.
“In my view, this is the time to expand the balance sheet of the government, duly supported by the RBI (Reserve Bank of India)… for monetary expansion or printing of money. Time has come for us to be doing some of that… If not now, when?” Mr Kotak said.
For direct cash transfers to the poor, Mr Kotak recommended a government expenditure of up to 1 per cent of the gross domestic product, or between Rs 1 lakh crore and Rs 2 lakh crore. This will also in effect strengthen consumption at the bottom of the pyramid, the banker said.
“Medical benefits to the poorest of the poor need to be given,” Mr Kotak said.
The deadly second wave of the pandemic has hit the almost recovering economy badly. The country had started easing restrictions in phases by January. But a surge in Covid cases in almost every state led to a new round of restrictions, which put brakes on businesses again.
Mr Kotak said two categories of businesses are apparent because of the pandemic – the first are those going through a transitory period because of Covid and are likely to survive the pandemic, and the second are those that are structurally challenged because Covid has changed the business model to an extent that they are no longer viable.
“Do whatever you can to support the first one so that they survive this and come out. For the second one, it’s a much more difficult one. If we believe they can’t sustain in this new world, we have to find appropriate solutions that take care of human sufferings, but you cannot make unsustainable business drag down the economy in the long term,” Mr Kotak said.
“The government last year announced a very successful lending scheme by banks for the stressed sectors. I’d recommend that the scheme be expanded from the current Rs 3 lakh crore to Rs 5 lakh crore and more sectors be included so that greater support to the economy can be given as soon as possible,” Mr Kotak told NDTV.
Some 230 million Indians fell into poverty due to the pandemic last year with young people and women the hardest hit, and the second wave threatens to make matters even worse, a study by the Bengaluru-based Azim Premji University said earlier this month. The months-long lockdown from last March put around 100 million people out of work, with around 15 per cent unable to find jobs even by the end of the year, the study said.
The report’s authors had also asked the centre to expand its fiscal stimulus by providing free groceries and cash transfers to the most vulnerable households as well as launch an employment programme in the worst-hit districts.