The economy needs a stimulus package as much as an RBI ready to act like an asset rebuilder
The covid-19 pandemic is not just a health crisis; it is in equal measure an economic crisis, the consequences of which could potentially be catastrophic. As policymakers scramble to contain the outbreak’s economic fallout, the Reserve Bank of India (RBI) must play a critical role in financing both the government and private sector. A conventional recession typically occurs when people choose to cut their spending. It is usually dealt with by designing a broad-based stimulus package intended to stimulate economic activity. An off-the-shelf package, however, may not be very useful in a pandemic-induced slowdown where large parts of the economy cannot operate, as they are under a lockdown. The first order of business, therefore, is for the government to transfer resources to sectors impacted by social distancing measures to help them minimize the cost of the crisis.