Greatest emergency since Independence: Former RBI Governor Raghuram Rajan over COVID-19 situation

In his personal blog in LinkedIn, Rajan said, "Economically speaking, India is faced today with perhaps its greatest emergency since Independence. The global financial crisis in 2008-09 was a massive demand shock, but our workers could still go to work, our firms were coming off years of strong growth, our financial service was largely sound, and our government finances were healthy.

None of this is true today as we fight the coronavirus pandemic."

Though Rajan considered the suppression of the pandemic virus as the immediate priority, he through his blog advised the government to take some measures to control post-Coronavirus situation.

"We should now plan for what happens next after the lockdown, if the virus is not defeated. It will be hard to lockdown the country entirely for much longer periods, so we should also be thinking of how we can restart certain activities in certain low infection regions with adequate precautions," Rajan said.

Prior to the outbreak of the deadly virus, the Indian economy was disarrayed with the Gross Domestic Product (GDP) falling in consecutive quarters to settle below 5 per cent.  

Rajan, who is a professor of Finance at The University of Chicago Booth School of Business, also feels post-lockdown the government must ensure that the poor and non-salaried lower middle class who are prevented from working for longer period can survive".

"Unlike the United States or Europe, which can spend 10% more of GDP without fear of a ratings downgrade, we already entered this crisis with a huge fiscal deficit, and will have to spend yet more," he added.

Amid the 21-day nationwide lockdown called on Mar 24 by Prime Minister Narendra Modi to stem the spread of Coronavirus, the Centre has reached out to poor supporting them with a stimulus package of Rs, 1,70,000 crore.

Under the package, which has a special focus on India's poor, all health workers fighting against COVID-19 will get an insurance of Rs. 50 lakh for the next three months.  

Rajan, who has also served as the chief economist of International Monetary Fund (IMF), said the government should talk to experts or even may reach out to opposition political leaders "who have had experience in previous times of great stress like the global financial crisis".

He added, "It is said that India reforms only in crisis. Hopefully, this otherwise unmitigated tragedy will help us see how weakened we have become as a society, and will focus our politics on the critical economic and healthcare reforms we sorely need." 

Announcing the mega stimulus package late last month, Union Finance Minister Nirmala Sitharaman, who faced a barrage of criticisms over her handling of the Indian economy, said eight lakh farmers will get Rs. 2,000 to their bank accounts while a one-time ex-gratia of additional Rs. 1000 will be given to poor senior citizens who are widowed and disabled.

Besides, nearly eight crore BPL families who avail Ujjwala scheme will get free gas cylinders for the next three months.