Chief economist of the International Monetary Fund (IMF) Gita Gopinath said here on Monday that loan waiver was not a panacea for farmers in distress.
She was answering queries raised by the audience after delivering the golden jubilee endowment lecture on ‘Globalisation: Current challenges and the need for cooperation’ organised by the JSS Mahavidyapeetha.
In reply to a broader question on whether loan waiver will help the Indian economy, banks and common public in general, Ms. Gopinath said only farmers who took a loan actually benefited from it.
She argued that it was better to have cash transfer targeted at farmers who are badly affected by the events that led to distress. “If you waive loans, it will encourage everyone to opt for more as they think they can get away with it in future,” she said.
On her opinion about India going swadeshi, Ms. Gopinath said this was tried till 1991 when emphasis was on swadeshi and self-reliance, which only resulted in low production and the so-called Hindu rate of growth of 3%. But after 1991 with India’s integration with the world economy, the country’s growth has been faster, she added.
Ms. Gopinath said the growth of global economy hinges on the growth of China and India and hence India should continue to remain integrated with the rest of the world.
She said India had a lot more growth ahead of it and did not foresee the threat of the country getting stuck in the middle income trap (of countries registering rapid growth in the initial stages but stagnating at that level without evolving to be high income economies) for now. But the issue may crop up after 5 or 7 years, she added.
However, the IMF chief economist expressed concern over India’s fiscal deficit pegged at around 6.5% of the GDP and said it was the highest among the G-20 nations. But what is significant is the growing recognition of it and efforts to redress this issue, she added.
Economic meltdown
Allaying fears of a global economic meltdown as in 2008, Ms. Gopinath said things were different now than in 2008 when large banks were exposed to loans that were not going to be repaid. Ever since, countries around the world have strengthened the banking sector through regulations and monitoring to make the system more resilient and IMF was not foreseeing a 2008 kind of scenario in the near term.
