RBI ex-governor Raghuram Rajan has stressed further lockdowns after reopening could be devastating

By Amit Mittal

India’s unemployment numbers are “worrying” and the country needs to open up in a measured way as soon as possible, former Reserve Bank of India (RBI) governor Raghuram Rajan said, in a conversation with former Congress president Rahul Gandhi.

“We need to open up in a measured way and as fast as possible. We don’t have the capacity to support people for a long time as we are a relatively poor country,” Rajan said. “We have seen a progressive decline in our economic growth in the past years especially when there are so many young people.”

In a 30-minute digital conversation Rajan said further lockdowns after reopening could be “devastating”.

Rajan said managing the reopening is important so that if there are fresh cases, they can be isolated quickly.

“So a lot of work needs to be done both on creating the structures, as well as ensuring that the work place is relatively safe, as well as ensuring that if there are accidents, if there are fresh cases, how do we isolate quickly without having to go to a second or a third lockdown? Those will be devastating if we have to go there,” he said.

If you are forced to shut down again after reopening then it does diminish credibility, he said, stressing that further lockdowns will indicate reopening has not been managed successfully.

Rajan, who is now the Katherine Dusak Miller Distinguished Service Professor of Finance at the University of Chicago’s Booth School, said ensuring workplaces are safe and how to transport people are all aspects that need to be thought off. He stressed the need for a tremendous expansion in the economy to create good jobs.

Citing unemployment data from the Centre for Monitoring Indian Economy (CMIE), Rajan said 100 million people are being put out of work either through unemployment or exit from the labour force.

“The numbers are mind-boggling,” he said, pushing the need for opening up the economy quickly.

The former RBI governor stressed that while reopening, it is important that the economy is kept together so that it is ready to walk out of the sick bed. For that, it is important that people are kept well and alive, he said, stressing the need to provide food for everyone.

“We can use temporary ration cards so that everyone has access to food. These times are unprecedented and we need to break norms to tackle what is needed,” said Raghuram Rajan.

The economist said India will need to undertake two million tests a day given the size of its population, if it wants a level of comfort about opening up without risking the spread of the pandemic.

He favoured doing mass testing to reduce the burden on infrastructure while curbing the spread of the pandemic.

“We have to be clever about the reopening,” he said, pointing out that the current 25,000-30,000 tests being done are low.

Raghuram Rajan also said it is important that everyone feels a part of the system, stressing the importance of social harmony as a public good.

“We cannot afford to be house divided especially at these times when our challenges are so big,” he said.

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