A top executive at the Boston Consulting Group (BCG) has said India should print more money to fix the damage arising from the coronavirus pandemic, adding that the government should give up fiscal conservatism.
“Whether we like it or we don’t, we have to start printing money,” BCG India Chairperson Janmejaya Sinha told CNBC-TV18 on Friday.
"You can fund the fiscal deficit in three ways – through external commercial borrowing, through internal borrowing and through printing money. Whether we like it or we don’t, we have to start printing money," he said.
Sinha said the government needs to take a number of steps and address several issues to alleviate poverty and misery in the country.
"There is misery alleviation for people who are losing livelihoods, who need to get food, in countries which are hot you need to get food, medicine and then shelter and we need to start providing it," he said. "Then there are industries that need to survive and for which we need packages. Right now, India is at very low end of percentage of GDP in terms of its package and there will be a couple of packages that will come through this crisis."
Sinha said related to the question of transmission of printed money, "we have to figure out what backstop can be created by RBI for government where some government or some vehicle – a special purpose vehicle, starts buying corporate bonds of distressed sectors directly".
"So for example, can banks securitise their MSME (micro-small-medium enterprise) loans which this SPV buys? So you have to get the money out directly? When TARP (Toxic Asset Reconstruction Programme, in the US) happened people moved fast. So we have to learn to figure out how to put printed money out there," he added.
"We should not be fiscally conservative right now. There was a time for conservatism and now this is a time for expansion. The facts have changed and 5% of the GDP is the minimum we need to get out there," he said.
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