The present central government is very much afraid of inflation, but this is not the time to worry about inflation. Due to the rise in inflation, money also comes into the pockets of the people. To overcome the shortfall in demand at this time, the government should increase liquidity in the economy by printing new notes. The countries of America, Europe are doing this work. Abhijit Banerjee, who won the Nobel Prize in Economics and Professor of MIT University of America, expressed this opinion in a special conversation with Media.
The biggest challenge is to bring the epidemic under control because there is not much we can do for the economy. If there is a fear of lockdown in people's mind, then they automatically get scared and start taking some defensive action. I think nothing can be done about it. What should be done now is that such poor people who do not have food to eat and whose daily needs are not being met, their care should be ensured. If there is a guarantee that everyone will get something, then people will be less afraid. If people are less afraid then they will spend the money they have. I suggest that the MNREGA guarantee be increased from 100 days to 150 days at least for this year. This will increase the confidence in the livelihood of the rural population.
I named Tamil Nadu, similarly West Bengal has given priority to vendors in vaccination. With this, they will start work sooner and the risk of infection from them will be less. My experience is that more good work is being done in the states.
Of course, I myself have given this advice to the government many times. The demand in the country has been declining since 2016. If the demand is to increase, then new notes will have to be printed. There seem to be two reasons for the Government of India not to do so – firstly, the government is very afraid of inflation. Politically, inflation is very unpopular, but from an economic point of view, a little inflation is beneficial for a country like India. Governments in the countries of America and Europe are openly printing new currency notes. There hasn't been any major crisis there so far.
Second reason – we are very scared of the bond rating agency, but this time Standard & Poor's also said that we should spend more. Most banks are very concerned about inflation. They are harmed by a decrease in bond yields due to inflation. This puts the credit rating down at risk.
I think GST is kind of a good idea. This is new now. There were many complications in sales tax or VAT, which were not good for business. The problem that is coming in this is how to distribute it. Now when the central government made some cuts, the states protested. There was a clash. This debate is on, but according to me, this step was necessary. The way it was implemented, probably could have been improved. This caused problems for small businessmen, which continues even now. The money that the states get through the Finance Commission is more than the GST. When it can run well without any discrimination, then I think GST can also be run well.
I am in favour of wealth tax, but introducing wealth tax in India is not easy. For this, the fiscal system has to be cleaned first. Legal data related to wealth is not available in the country yet. Forbes' wealth statement will not work in wealth tax.
I will get scared and hide (laughs). The first thing I would do is clean the data. Bring transparency in data. Without correct data how will you know what is the condition of the country? Without it, how would a proper plan be made? Second thing, I will move the monetary policy forward. That is, printing new notes to increase demand. Third, I will try to reform the tax system. India's tax system has improved a lot in the last 20 years. Nevertheless, it has room for improvement.
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