the correct analysis of why the indian economy is f***ed: Arvind Subramanian: Amongst emerging markets, India is the most macroeconomically vulnerable, with a deadly combination of high fiscal deficits, close to double-digit inflation, and high external deficits financed by short-term foreign capital inflows that may even now be starting to flow out of the country. How did we get here, though? Much of the blame must lie with the redistributional zeal of this government. The ultimate cause of macro-vulnerability is the high fiscal deficits in turn caused by the fact that government spending per capita (intrinsic to RRE [redistribution through rights and entitlements]) has increased by nearly 75 per cent by under this government (see Figure 1). This spending contributed to instability directly, because it pushed up rural wages and procurement prices, thereby stoking inflation; and indirectly, because it put aggregate demand on steroids, even as supply capacity was left to languish, weak and under-nourished.
Posted on: Wed, 10 Jul 2013 08:22:46 +0000
Trending Topics
Recently Viewed Topics
© 2015