He has said that borrow we must, if we have to spend an additional 10% of GDP to meet the requirements of the military, health and livelihood concerns of the poorest. Dr Singh has otherwise been a votary of fiscal prudence and consolidation through a strict adherence to balancing expenses to revenues.

In facing an unprecedented crisis brought on by the corona pandemic, Dr Singh has shown he is a pragmatist above all.

He has given a three part formula for reviving the Indian economy in the wake of the corona virus pandemic, among many other suggestions. Dr Singh has been one of the longest serving economic administrators in the country. He was a finance secretary, governor of the Reserve Bank, deputy chairman of the Planning Commission and to top it all finance minister during the 1991 economic crisis, before becoming prime minister. Any single of those positions is a life-time achievement.

The repeated lock-downs and suspension of normal activity has severely hurt the Indian economy and there is a kind of consensus that the GDP will shrink substantially as a result. The estimates for contraction varies from around 4.5% at the lowest to around 10% at the most, according to estimates of agencies and economists.

Dr Singh, in an interview with the BBC, has revealed he wished that the economists’ consensus about contraction of India’s national income should not come true. Dr Singh even went out to support the early decision on imposing lock downs as he felt there was little else that could have been done and most countries were resorting to lock-downs.

But now to rejuvenate and restart the Indian economy Dr Singh has suggested widespread income support subsidies for the poorest segments of society; the government should make available adequate credit to industry and businesses through credit guarantee schemes; and, thirdly Dr Singh has emphasised the huge importance of stabilising the financial sector through reforms giving greater autonomy and processes for independent operations of banks.

He suggested that the government should not be afraid of resorting to large scale borrowing in case that was needed. Indeed, there would be no escape from this, given the steep slippages in revenues during the current year. Since the manufacturing sector has been directly hit and the services transactions have been suspended, government revenues from these sources have dropped. It is these sectors which yield the lion’s share of the overall revenues.

GST collections this year have been well short of budget estimates and the fiscal deficit is set to overshoot the target of 3.5% of GDP. On rough and ready estimates deficit is estimated to hit 7%.

Dr Singh however conveyed a sense of confidence in handling the economic crisis stemming from the pandemic closures. In fact, the Indian economy was on a far stronger wicket now than anytime before and India could be ambitious in its handling of the covid crisis.

The Indian economy is ten times larger than what it was in the early 1990s when the country faced its economic crisis. Dr Singh, as the finance minister in the Narasimha Rao government of the day, had introduced a series of reform measures which put India on a sustained path to recovery. India’s foreign exchange reserves had dropped to just a few days’ of import cover those days. The implementation of the reforms had changed all that. The rest, as they say, was history.

It may be mentioned that in its announcement of measures for stimulating the Indian economy the government has announced large scale government backed credit guarantee schemes, which Dr Singh has spoken of. The Opposition parties, including the Congress Party, criticised the move saying that these were only empty promises of government guaranteed credit offerings and no direct benefits.

The Reserve Bank has also offered to open up the credit tap for keeping the industry and services sectors moving.

As for the income support schemes, although some money has been released to the identified groups through the banks, the amounts have been minimal and far between. More emphasis was given on distribution of food grains and cooking oils in the light of the massive food grains stocks.

A controversy is currently on whether government can borrow from the Reserve Bank to carry on. This is simply monetisation of government borrowings and is believed to be highly inflationary. In normal times this is no-no in economic orthodoxy. But now, this is also on the table.

Referring to issues with government borrowing from the RBI Dr Singh felt that even this was not to be ruled out. Until the 1990s, this was the preferred mode of funding excess expenditure of the government over its revenues. His refrain is if additional borrowings could save life, protect borders, restore livelihoods and raise growth, there is no harm borrowing.

Dr Singh believed that borrowing from international agencies could also be done. Previously borrowings from international bodies used to be taken as an indication of weakness. No longer so. Today India is in a position of strength.

It is not additional borrowing that is in question, but how it is used. Borrowed money must be judiciously used. (IPA Service)