NEW DELHI: Nobel laureate Abhijit Banerjee has opposed further cuts in corporate taxes and advocated the need to boost demand. He said the corporate sector is sitting on cash and not investing because of the demand problem.

“I would say first no more cuts in corporate taxes…the corporate sector sitting on cash, it is not investing,” he said at an event here on Friday when asked about his advice to the finance minister for the upcoming Budget.

Finance minister Nirmala Sitharaman will present Budget 2020-21 on February 1. The government has cut base corporate tax rate for existing companies to 22% from 30%.

Stating that many people in the corporate sector say that right now there is no market for them to sell, he said: “I think you have to get the demand side going. For that you need to get money in the hands of people who will spend it now, people who need the money, get the money in hands of poorer people”.

His statement assumes significance in the wake of India’s economy expanding 4.5% in the July-September quarter, the slowest pace of expansion in over six years. The government has taken a series of steps to boost supply such as reduced corporate tax rate, released Rs 70,000 crore to state-run banks and made additional provision for lending and liquidity of Rs 5 lakh crore to increase credit flow to industries, among others.

Banerjee said studies show if people are given cash, they spend it.

“We don’t give cash to billionaires to check whether they spend it or not,” he said.

Nobel laureate Esther Duflo, who was also present at the event, said that such a policy is possible because people have bank accounts and the infrastructure for that is there- something that this government has built.

Terming farm loan waivers as klutzy instruments which are inefficient instrument, he said: “One reason they’re used is that we have underdeveloped machinery to provide support to people in distress”.

Citizenship Amendment Act
On being asked about the protests on the Citizenship Amendment Act, Banerjee said there are many things that could be worried about.

“There are all kinds of issues there. I don’t think I’m the specialist. What is my experience from field work is that when you have somebody with enormous amount of power that (person) would decide whether or not you will be on this list or that list, he has a lot of power,” he said.

“And just the fact that somebody is going to say that look I’m in charge of making this list, I could put ‘doubtful’ next to your name or I could not and can even make Rs 10,000,” Banerjee cautioned.

“Prima facie, if I would be somebody living in a border district, I would be petrified by that thought,” he said, adding that the government’s challenge there is very severe.

“And so if he is going to say, look, I’m not sure that you’re a proper citizen, forget about religion…”

The Nobel laureate said care should be taken while designing institutions to make those decisions and they should not be made by quick acts of Parliament as this relates to power to take decisions that can have “passive consequences for life”.

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