China may have some given that it’s actually control the virus and maybe that’s where we look right now what can central banks do in this context there’s one big demand that central bank should reduce interest rates and do that without waiting for the next term entre policy to come out the other is even if they did given how risk capacity and investment capacity is completely gone for a knock
No matter what the central banks do it won’t make any difference what’s your view sir how should the Reserve Bank of India be trying to intervene given all the dynamic at play well I don’t want to give advice to the Reserve Bank they know what to do let me just say this that again and again we’re coming up against the fact that we have a financial system which is impaired and of course I’ve been saying for quite some time we need to clean it up so it can function as necessary and we see the problems right now when it as you said may not be able to offer the credit support that is needed to businesses well unfortunately given that it’s not providing that support we have to try and do what we can from the government side to offer partial guarantees to make sure that banks continue lending to small and medium enterprises and to large businesses.
We have to be careful that we have limited fiscal space so there has to be some incentive for the banks also public take credit risk into a found we found just write them a blank check this has to be done very carefully very cleverly and obviously as you say it is harder when the banking system is impaired but at this point I would say take a cue from the central banks across the world which are contributing to solving the problem but easing liquidity liquidity should not be a constraint but also helping in credit then something we have to think about carefully since we already have large in tiers but certainly some help is warranted you know you all know Harare one of the world’s leading historian said the co 819 will ensure that the world as we know it changes forever we spoke to Richard Sharma he said that you know this could lead to a depression as serious as the depression of the 1930s do you believe that the world as we know it is going to change forever in what way dr. Rajan do you believe that co 819 will change everything that we know once this danger subsides well again I want to say it’s a it’s a little early to try and predict which directions it will change of course it’s a huge unprecedented event you know think about what you just said it could lead to countries being much more wary about having supply chains across borders because they don’t know they can’t rely on them in bad times that could be one outcome but the other outcome is it could bring the world together knowing that we have to deal with such huge global challenges may make us more aware of the need to deal with climate change so it could move in any which way we have to see how it works out.
Of course what matters is how long it lasts and that’s where the difference between a recession which is almost surely on the cards now because the depression if it lasts for a long time we have significant subsequent waves after first suppressing it then we may be heading for something deeper and more longer-lasting but if we can control this within a few months then perhaps we have a recession and perhaps in a rebound over over time after that and then it’s not so bad.
We will learn the lessons from it I will do things differently in the future are there any policy interventions you would like to see from the government in India one of course you spoke about you know ensuring that there’s some kind of income support that comes in but outside of that what can government do in a policy framework context to ensure that they try and alleviate the pain that people will have to feel and try and use the capacities that corporate India has to make the most of what is available.