At a time when all national and international institutions, brokerages and independent economists have forecast a severe contraction in India’s economy this year due to Covid-19, the National Council of Applied Economic Research (NCAER), an economic think tank, in its latest report has estimated a 1.3% growth in GDP. The co-author of the report, N R Bhanumurthy, the newly appointed Vice-Chancellor, B R Ambedkar School of Economics (BASE), Bengaluru, talks to Annapurna Singh of DH on his optimism and why IMF’s forecast may go wrong.
The Centre and RBI are discussing debt restructuring of companies? Do you fear it will lead to humongous bank NPAs in the future?
I do believe such debt restructuring is necessary if one has to revive the economy quickly, which in turn could help the balance sheets of both corporates as well as banks. But there are costs and this should not be shifted towards household balance sheets.
This needs fiscal intervention and the government needs to absorb any cost of such restructuring.
There is an urgent need for recapitalisation of banks.
We need strong and more public sector banks, not less and not weak ones. That will be crucial for economic revival.
A report co-authored by you for NCAER is probably the only one, which has forecast a GDP growth of 1.3% for the fiscal ending March 2021 whereas all others, including the IMF, have forecast contraction. What gives you that confidence?
Our forecast of 1.3% growth is based on the assumption that all the fiscal and monetary support announced since the pandemic is realised.
Now, if you look at the report, we estimated that for the year 2020-21 the fiscal support (both Centre and states) is expected to be as large as 11.7% of GDP.
Added to this, there is monetary support of over 4% of GDP. Together, we should expect positive growth in the current year. But this would also depend on any further decision on lockdown and other factors. On the assessment of IMF, my personal opinion is that they may be behind the curve and might have not taken the Atma Nirbhar package in their assessment.
NCAER is probably the only body, which has given a quarterly growth forecast. In June quarter, you say there will be a severe contraction of close to 26%. What is your estimate for the September quarter?
Our assessment is that we will not have a ‘V’ shaped recovery as some have suggested, rather it will be a ‘smoking pipe’ shape.
You have drawn policy maker’s attention to the need for a large increase in public health expenditure and provision of further humanitarian relief in the form of free food and income support to tackle the pandemic?
This is a serious issue and needs a broader discussion. While we could manage the pandemic and the lockdown reasonably well, although of late we see the infections rising, there are some serious concerns about how we managed the migration and other humanitarian issues.
In the report, we argued that the governments need to increase their focus on these issues even if it means the headline fiscal deficit increases.
There is an urgent need to recalibrate and reprioritise governments’ expenditures that address the twin challenges of lives and livelihoods. The best part is some states have already taken such initiatives and the Centre needs to be part of such efforts.
How do you plan to develop BASE University, given that it was set up as an Indian version of the London School of Economics?
BASE University needs to be developed as a serious teaching and research institution. The University is an outcome of the long-term vision of the Government of Karnataka, which felt the need to develop a University that will become an Indian-version of LSE. We aspire to develop BASE as an outstanding centre of teaching and research excellence.
Our curriculum will be designed to cater to the demands of a wide spectrum of issues and the students can pursue their interests/careers in diverse areas such as corporates, industry, academics, banking, and civil society organisations amongst others.
We also intend to explore academic exchange programmes with reputed universities abroad to bring in academic rigor.
How do you see BASE contributing to the country’s economic growth particularly at the time of a pandemic?
In the coming days, we intend to work in tandem with the governments to provide inputs through boundary-breaking research with a focus on improving the lives and livelihood of people.
Some of the most pertinent aspects will be how to revive the economy, employment, strengthening statistical and databases, ecological issues, human development, trade & development, gender, SDGs, among other themes.