Raghuram Rajan bats for help to efficient MSMEs, cash transfer to poor, in the war against Coronavirus
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Former RBI governor Raghuram Rajan strongly advocated targeted hassle-free help to efficient MSMEs that generate employment and keep the wheel of economy oiled and churning. The quantum of direct assistance, as a form of future equity from the government, could on the basis of income tax paid last year. This would be a measure of their efficiency as well.
Since inefficient MSMEs may not survive even if given assistance, it would be more prudent for the government to work out a system to help the efficient ones. The tiny ones can be allowed to shut down and open after the pandemic is over and the big industry can take care of itself, comparatively speaking, Dr Rajan said addressing a webinar on “Economy, Education and Excellence” organised by the Southern India Chamber of Commerce and Industry on Thursday.
“We need to have an economy to tend to after the pandemic is gone,” Dr Rajan said making out a case for “spending our way out of trouble” by launching big infrastructure projects.
But even more important, at this stage, is to give cash transfers to people to ensure they stay alive. First the country must combat corona like a war effort – the central government must come out with clear cut guidelines and work with states. Use the army if you must, and public sector and the private sector in this national war effort, he said reiterating his assertion that people need to be protected against the virus.
The government – centre and states – must know the state of households and work out transfers to those needing help critically. It is not enough to give them grains, they need oils, pulses and vegetables to cook, eat and stay alive.
The Covid 19 battle could last into first or second quarter of next year till a vaccine can realistically come into the market, Dr Rajan said. But till then, the economy needs to be carefully calibrated with government assistance where needed the most.
The pandemic has the potential to damage the economy enough that its impact could be as harsh as thar of the 2008 financial crisis, Dr Rajan said. But we in India must first deal with the pandemic, or else we cannot handle the economy, he said adding the given state of health infrastructure in India is a matter of concern.
Turning to education in general, he said, One thing that is increasingly clear is that level of education is what differentiates economies.
If China or Vietnam have gotten onto become manufacturing majors it is because of the highly skilled and educated workforce they have. So our education system needs major overhaul and our higher education too needs a bigger leap.
The opening remarks at the webinar were made by SICCI president Ramachandran Ganapathi.