Economic cost of lockdown will be huge but India won't slip into recession: P Chidambaram

Former Finance Minister P Chidambaram, who has been vociferously demanding for a country-wide complete lockdown to fight the COVID-19 pandemic, says though the economic cost of the lockdown will be enormous, the government should loosen its purse strings to fight the epidemic.

On the fiscal side, he suggested monthly payments to the poor — especially the daily workers, self-employed and agricultural workers. He also suggested outright grants be extended by employers for those in informal sectors.

There are more lockdowns in the country. Measures to fight COVID-19 apparently are getting tougher. You have been demanding the same for a long time. Are we heading in the right direction?

Yes, we are, but too slowly. I thought that by announcing a Janta Curfew on Sunday, the Prime Minister was testing the waters and preparing the people for a total lockdown. He should have announced a nationwide lockdown last night for an initial period of two weeks.

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But every such measure has an economic cost involved to it? What about those who survive on a daily income? The roadside vendors and people like that. Nothing has been announced so far for them? Sir, did you assess the impact before calling for such a lockdown in a country like India, which has a huge informal sector and no social security?

I did and I have consulted a few friends. There will be a massive economic cost. The government may have to find up to Rs 5 lakh crore. Using this money, monthly payments can be made to the poor — especially the daily workers, self-employed, agricultural workers etc. For those employed in the formal sector, wages can be guaranteed. For those employed in the informal sector, tax credits, deferred loan schedules, interest subsidy and, in some sectors, outright grants can be extended to the employers.

Do you think COVID-19 can force India to slip into recession, too? What according to you will be the impact on the economy if the current situation prevails for a fortnight and, if it goes on for a month or so?

There will be a decline in the growth rate similar to the decline in world growth rate — up to 2 per cent. It is unlikely India will slip into a recession.

Central banks across the globe are announcing more monetary measures, relaxing the policy interest rates. The US brought it to near zero. But do you think monetary steps help at all in these times?

Monetary steps will not help in directly fighting COVID-19. However, cutting the policy rates and providing liquidity, making credit more easily available and some regulatory forbearance will infuse confidence in employers to maintain current levels of employment and wages.

What kind of fiscal steps are expected from the government to help the economy fight the pandemic?

The fiscal steps that are immediately necessary include doubling PM-KISAN subsidy and including tenant farmers; deferred tax payments; cut in indirect taxes; Cash transfers to the poor; Using the excess-over-buffer norms stock of food grains and distributing 10 kg free to every family that wants the food grains; Guarantees to employers who will maintain current levels of employment and wages in their establishments.

If I may draw your attention to some political issues in your party and ask why many leaders are leaving Congress now? Jyotiraditya Scindia, Tom Vaddakkan, Priyanka Chaturvedi. Prior to that Vijay Bahuguna, S M Krishna, D Purandeshwari, Jayanthi Natarajan, Hemata Biswa Sarma… There appears to be a crisis of leadership emerging in the grand old party? Even the former chief ministers also quit?

There may have been local political compulsions. However, the switching over to the BJP, which is the opposite pole, reveals how shallow their commitment was to the core principles of the Congress.

When do you think a clarity will emerge on who will lead Congress? Sonia Gandhi is an interim arrangement.. Rahul Gandhi is not willing to come back? Can we think of other young leaders to take over?

I decline to answer these questions. I believe the leadership is seized of the matter.

A BJP MP said Parliament should function despite the lockdown and MPs should work like doctors and soldiers rendering their services to nation… Your thoughts?

I appreciate his zeal but it is misplaced. At this time, MPs should be in their constituencies urging people to abide by the directions of the government.