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CALL FOR CASH

Nobel laureate Esther Duflo says cash transfers to poor will only help Indian businesses

Esther Duflo-Stimulus-Cash transfers
REUTERS/Brian Snyder
  • Prathamesh Mulye
By Prathamesh Mulye

Writer, banking and economy

Cash transfers to India’s poor are the right thing to do “not just morally but also economically,” believes Nobel laureate Esther Duflo.

“Businesses should be keenly interested in this (cash transfers) and very much behind (it)…because it is the most important thing to do in their self-interest,” the Massachusetts Institute of Technology professor of economics said particularly in the context of India’s coronavirus lockdown.

India’s lockdown, in place since March 25, has badly hit the economy, forcing small and medium enterprises to shut down, throwing hundreds of thousands of jobs, and sparking a reverse migration of unemployed labourers out of cities.

Policymakers and analysts are now looking for ways to revive the country’s economy.

Domestic consumer demand will hold up if cash transfers are adopted, which in turn will benefit businesses, Duflo said during a webinar hosted by IDFC Institute and Samhita Social Ventures yesterday (May 11).

Her words echo those of other prominent Indian economists like Raghuram Rajan and her co-Nobel laureate, Abhijit Banerjee, who have urged the Indian government in recent days to put money into the hands of poor.

“India has an opportunity to avoid larger-scale collapse due to the insulated nature (of its economy from the world),” she said citing the country’s low export-to-GDP ratio.

Duflo also warned about India’s lack of preparedness to fight the pandemic. “There is a lot to be proud of, including the rather successful containment of the disease, but we can do still better since the infrastructure of delivering cash is not in place,” she said, asserting that India must tap the trilogy of bank accounts, cell phones, and e-money to help the poor.

The chorus for a stronger economic package has been rising since the government’s current stimulus is worth only 0.8% of the GDP. Other major economies like the US, China, and Japan have spent much higher.

Watch the full webinar here:

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