A short thread on where I see India is going wrong in mounting an effective economic response to COVID-19. I’ll start with my piece today, laying out a blueprint for what needs to happen. https://www.bloomberg.com/opinion/articles/2020-04-22/india-must-confront-coronavirus-by-openly-monetizing-public-debt

First of all, this isn’t something that the FM or the Guv will think up. Has to be done at the level of JS and CGM. They’ll make a plan their bosses can take to Modi. So what should urgently end is fingerprinting and point-scoring. Time to rise above all that.

Second, let me talk about what I didn’t address in my piece today: NBFCs. I have tackled it separately here: https://www.bloomberg.com/opinion/articles/2020-04-15/coronavirus-india-s-lending-crisis-is-another-contagion-to-stop

Nor did I address a weakness that we took with us into this crisis, and one that will get bigger: real estate. Let the likes of Blackstone and Brookfield buy out real estate form panicky owners. Let’s worry about “flow” of construction now rather than “stock” of asset ownership.

Construction will require the govt to speed up its existing infrastructure plan. Put health at the centre of the plan and go all out. Money? Raise it by selling PSU stakes to an NIIF-sponsored SPV. Think of it as SUUTI 2.0.

Also, let’s suspend “sab chor hain” chorus for some time. Give businesses subsidised credit on sovereign guarantee, but make them save jobs and pay vendors. The same large firms that are delaying vendor payments can’t complain about paltry government support for migrant workers.

Let’s not worry about “oh, more w/c for this guy when his debt/equity was already 3” rnow. Was he current on payments in February? Fine. We’ll think of deleveraging later. The JSs and the CGMs should ignore the moral recipe from some economists who’ve probably never seen a b/s.

As for RBI, show the govt today’s abysmal TLTRO participation data. Tell them, “This can only work if you guys guarantee credit losses. On our part, we’ll fund you and everyone you want funding for, including you.”

Without a risk-taking b/s swinging into action, large swamps of banking liquidity will coexist with droughts where money is needed. We don’t need to look at theories of central bank independence that were great for peactime. The role “neelkanth” Shiva played has to be reprised.