Raghuram Rajan on reimagining India's economy

The government may have parachuted a series of economic packages to deal with the fallout of the pandemic, but former RBI Governor Raghuram Rajan says these are only relief measures, not stimulus. And while such action is the need of the hour now, the time for stimulus will come too. Rajan was speaking with TNIE Editorial Director Prabhu Chawla and author and political economy analyst Shankkar Aiyer at a session of TNIE’s Express Expressions, a series of webcasts with people who matter. Excerpts: Do you think the government’s stimulus measures are good enough? We came into the pandemic with a very strained fiscal situation—years of budgetary overruns hidden away here and there. As a result, we’ve had limited room to spend. Spending during the pandemic takes two forms: One is to help households in difficulty survive, and the other is to protect MSMEs running out of cash. I see this more as relief, not so much stimulus. The time for stimulus will come, when the economy picks up more strongly. After the pent-up demand slows down there will be a need for stimulus. We are some distance away from that right now... We are enjoying a recovery partly based on pent-up demand. We have to see what is the sustainable level of demand after this falls off.