Former Indian prime minister and veteran Congress leader Manmohan Singh. Photo: AFP

India’s former prime minister Manmohan Singh has released a three-step solution to deal with the current economic crisis in the wake of Covid-19 pandemic.

India announced a countrywide lockdown on March 25 to contain the spread of the coronavirus.

The lockdown lasted two months and it crippled economic activity in the country and also triggered a humanitarian crisis as millions of out-of-work migrant workers from cities walked towards their villages hundreds of kilometers away.

The lockdown has now been eased, but the virus continues to spread. India’s caseload has now crossed two million – the third highest in the world. Even before Covid-19, India was showing signs of an economic slowdown with its gross domestic product growing only 4.2% in 2019-20, the slowest in a decade.

In an email exchange with the BBC, Singh suggested that the government should firstly ensure that people’s livelihoods were protected and they have spending power through significant direct cash assistance.

Second, it should make adequate capital available for businesses through “government-backed credit guarantee programs,” and thirdly it should fix the financial sector through “institutional autonomy and processes.”

Singh said “higher borrowing is inevitable.” Though it will impact India’s debt to GDP ratio, he said, “(if it) can save lives, borders, restore livelihoods and boost economic growth, then it’s worth it.”

“India’s track record as a borrower from multilateral institutions is impeccable. It is not a sign of weakness to borrow from these institutions,” he added.

Various rating agencies, including the International Monetary Fund, and economists have forecast that India’s economy may contract sharply and face the worst recession since the 1970s.

Singh, however, said he did not want to use words like “depression” in a cavalier fashion, but added that a “deep and prolonged economic slowdown” was “inevitable.”

“This economic slowdown is caused by a humanitarian crisis. It is important to view this from the prism of sentiments in our society than mere economic numbers and methods,” he said.

Singh felt perhaps a lockdown was inevitable, but differed over its implementation. “The government’s shock and awe approach to the lockdown has caused tremendous pain to people. The suddenness of the announcement and the stringency of the lockdown were thoughtless and insensitive,” he said.

The former prime minister felt that public health emergencies are best dealt with locally by local administrators and public health officials, with broad guidelines from the government.