Hyderabad: Predicting that the growth rate in the first quarter of the current fiscal may slip into negative, former RBI governor C Rangarajan on Wednesday expressed the view that Prime Minister Narendra Modi’s lockdown extension announcement should have included plans to address the issues of migrant labourers and daily wagers.
Prediction for next three quarters
Rangarajan said though there may be negative growth in the GDP during the first quarter, if the situation recovers during the next three quarters, the growth rate may be closer to 3.5 percent.
“The most important thing is that the hardship of the lockdown is being borne very severely by the vulnerable sections.”
Because of the closure of the factories, the daily wage earner including the migrant labourer has been severely affected, he said.
“Therefore if lockdown is absolutely essential, then I think something must be done to take care of these people who have been thrown out of employment.
And therefore this announcement should have been accompanied by an announcement regarding what and how they will take care of these people…Immediately in his (Modi) speech or elsewhere we should have seen (measures for labourers and daily wage earners).
Even today in the relaxation norms, along with it perhaps some announcements on how the migrant labourer and others will be helped.
It is also necessary,” Rangarajan told PTI.
Government imposed lockdown based on medical advice
The former RBI Governor said the government has gone by medical advice to impose a lockdown and by the same advice they expanded the lockdown also which is essential to combat the coronavirus spread.
The lockdown has brought the economic activity to “halt”, he said.
“Perhaps in the first quarter of the year, the GDP growth may even be negative.But that could be made up by the growth in the next three quarters.
Some people have estimated the growth rate to be about 2 percent.But I think probably it will be closer to 3.5 per cent for the year as a whole.
But that all depends on how long this virus will continue, he said when asked about the lockdown impact on the economic growth.
Direct Cash Transfer system
He said Direct Cash Transfer system is one of the mechanisms through which the government can help the migrant labourers and at the same providing food and other relief material to them must be the first priority of the dispensation.
Replying to a query, he said the governments spendis expected to go higher than it originally was planned and finding resources to meet the expenditure will be difficult for it.
According to him, the centre needs to go for extra borrowings for which the Reserve Bank of India will have to step in to support the governments fund raise programmes.
The government itself is placed in a situation that it will have to borrow a lot more than what is planned.
In that also the RBI will have to help in some manner in a mutual agreement with the government to provide liquidity to the government, he said.