Nobel Laureate Abhijit Banerjee critical of policies
Nobel Laureate Abhijit Banerjee on Tuesday said India is among the worst performing economies in the world and the government’s economic stimulus was inadequate to tackle the problem.
He, however, said that the country will see a revival in growth in the July-September quarter of the current fiscal.
Speaking at a virtual event, Banerjee said the country’s economic growth was slowing down even before the Covid-19 pandemic hit as real GDP growth had moderated from 7 per cent in 2017-18 to 6.1 per cent in 2018-19 and 4.2 per cent in 2019-20.
“Indian economy is among the worst performing in the world. The country’s economy will see revival in the current quarter (July-September),” the Nobel winner said.
Banerjee, a professor at Massachusetts Institute of Technology (MIT), said he does not think that India’s economic stimulus was adequate.
“India’s economic stimulus was limited. It was a bank bailout. I think we could have done more,” he said.
The stimulus measures “did not increase consumption spending of lower income people as the government was not willing to put money in the hands of the low income population”, he explained.
Talking about inflation, Banerjee said India’s growth strategy was a closed economy with the government creating lots of demand, which resulted in high growth and inflation.
“India had 20 years of high inflation and high growth. The country benefited a lot from stable high inflation in the last 20 years,” he observed.
Replying to a query on monetisation of deficit by the RBI, the eminent economist said “deficit financing is a good idea”.