This story is from September 22, 2020

'Borrow, spend more this once to revive economy'

Tamil Nadu should spend more this year, by borrowing more, to revive the economy impacted by Covid-19, former governor of RBI C Rangarajan has recommended as part of an expert committee led by him.
'Borrow, spend more this once to revive economy'
C Rangarajan
Tamil Nadu should spend more this year, by borrowing more, to revive the economy impacted by Covid-19, former governor of RBI C Rangarajan has recommended as part of an expert committee led by him. But borrowing more to spend more cannot become a pattern, he cautions in an interview with D Govardan. Excerpts:
When burdened with debts, governments tend to cut expenditure.
But, you are asking TN to spend more.
That can happen in a situation when the economy is normal. Now, it is in an abnormal situation, when you are talking about a possible contraction in the economy. We anticipate a small decline in growth on the negative side at 0.69% due to the long period of lockdown. Then expenditure increase is recommended. The capital expenditure can be spent on construction and that is where the government should focus. These are extraordinary situations. The fall in revenue is due to a special set of circumstances. But this cannot be a pattern for every year from now on. This is a special year in which we have to borrow more and spend. We can progressively bring the debt down.
Any key sectors on which the report focused?
We have done something about every sector. On the industry side, we have done quite a bit, on manufacturing, the emerging areas and MSMEs. One key suggestion is to capitalize TIIC by 1,000 crore, so that long term finance required by the industry can be made available. Post-liberalisation, we expected banks to provide both short term and long term capital for industries. But now that banks are in difficulty, I think it is best to revive long term lending institutions like TIIC.

Can you elaborate on the emerging sectors?
We have identified pharma, medical equipment and biotechnology as key emerging sectors and suggested measures the government should take to promote them.
How can you guarantee jobs in urban areas?
There are many projects in urban areas where there is a requirement of labour. We have, in the detailed report, given the activities that can help achieve it. The government can take up these in metropolitan areas and provide around 75 days of employment or so for the needy...
How was your interaction with CM Palaniswami?
He was very receptive. They are already implementing some of the recommendations. We have recommended a decentralized healthcare system. The government has already announced about 2,000 clinics - with one doctor, one nurse and one compounder. One can see them in cities. These should be in a large number of places where people can go for smaller ailments. Why should they have to go to big hospitals, even government hospitals? Decentralized healthcare is the need of the hour.
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