While President Donald Trump and his people are pushing the United States’ economy and schools to reopen while the pandemic reaches across the land, Das pointed out what we all should have noticed: that the pandemic itself creates the obstacle to economic recovery.
In his speech, given online in English to the Seventh Conclave of the State Bank of India, Das wisely put the pandemic foremost:
"The outbreak of COVID-19 pandemic is unambiguously the worst health and economic crisis in the last 100 years during peace time with unprecedented negative consequences for output, jobs and well-being. It has dented the existing world order, global value chains, labour and capital movements across globe and needless to say, the socio-economic conditions of large section of world population."
Although central banks usually focus on such mundane technicalities as interest rates and money supply, those arcane numbers do not give people food to eat, roofs over their heads, or healthcare for their children. Instead, real-world economic activity requires people to go to work and to produce, sell, and buy the goods and services that they desire. The pandemic, however, has blasted ordinary economic activity to pieces.
At the same time, a central banker cannot control the pandemic; all Das could do in his official role was to ensure that India’s financial system continued to work. He announced policies to increase India’s financial liquidity, cut interest rates, and to ensure that India’s banks were financially stable. Yes, those are properly his functions, but he never let the pandemic escape his audience’s notice. In fact, in his speech, which was about economics, he mentioned the word "pandemic" 12 times. For example:
"As a part of response to the pandemic the RBI has undertaken a series of measures which are already in the public domain."
"While the multipronged approach adopted by the Reserve Bank has provided a cushion from the immediate impact of the pandemic on banks, the medium-term outlook is uncertain and depends on the COVID-19 curve."
"It is . . .still uncertain when supply chains will be restored fully; how long will it take for demand conditions to normalise; and what kind of durable effects the pandemic will leave behind on our potential growth." [italics supplied]
The general public pays little attention to the economic pronouncements of the world’s central bankers. The financial community, however, listens to every word. These calm, measured speeches often convey a lot of wisdom, and Das’ calmly-delivered speech, filled as it was with technical jargon, powerfully conveyed a central message: that the key to economic recovery is to make intelligent, hard-nosed decisions to control the spread of disease. Central banks can keep money flowing through the banking system, but they cannot get people safely back to work, provide a healthful environment in schools, or preserve supply chains that break down when the workers get sick. Public health measures need to come first, while the bankers can only do what they can do. And, yes, India's huge economy matters to all of us. Despite the angry, irrational calls for isolationism and trade restrictions, the world’s economy has been globalized for centuries. Lessons from one part of the world apply everywhere.
Federal Reserve Chair Jerome Powell made similar statements in May. It’s a simple message. Are the United States' elected officials listening?
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