In Subramanian’s formulation, it seems the cart must stir to life and acquire equine characteristics before the government gets into locomotive mode. Else, its effort would be wasted.
On Wednesday, chief economic adviser K.V. Subramanian said that while a countercyclical fiscal policy was important for India’s economy, further stimulus measures would work best only after uncertainty came down. It would not be prudent to expect a burst of government spending, he indicated, laying emphasis on “timing", until a vaccine relieved our covid crisis and people would be ready to spend instead of save. In other words, Keynes was right about the State’s role in reviving an economy, but wrong about when it had to be done. Or, so he seemed to suggest.
The Keynesian advice has been clear. If uncertainty makes private actors tighten expenditure, sending an economy into a downward spiral, the government must take on the task. The State must play the horse that draws the economic cart, a reversal of the free-market order that’s seen to work under normal conditions. In Subramanian’s formulation, it seems the cart must stir to life and acquire equine characteristics before the government gets into locomotive mode. Else, its effort would be wasted. If that’s the Centre’s view, maybe the best we can hope for is a cart that doesn’t slide too far back.
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