A fix for growth gain from fiscal pain
T.K.A. Nair | Principal Secretary and Adviser to former Prime Minister Manmohan Singh
Nair states that the “audacious” corporate tax cut that was put into effect last month was done to “kick-start the sagging economy.” By doing so, the government has sent a “strong and positive message” which has “cheered the stock market” and “hit the media headlines globally”.
However, he wonders if the “revival of the animal spirit” will “spur an increase in capital investment”. Nair thinks not: the prospects for this are “bleak” owing to the “lack of demand.” A high level of demand for products and services is the “of higher levels of investment” and consequent economic growth.
The government needs to address issues fundamental to the economy such as “reinvigorating” the National Rural Employment Guarantee Programme and making it “demand driven” is an immediate step to generate “greater purchasing power” and “accelerate demand.” Nair suggests that “higher levels of public spending” would generate “employment” and create “productive assets.” In conclusion, he writes that these “mundane measures” can pull the “sagging economy out of the quagmire.”
Karan Singh | Former Union Minister
There are two areas that Singh finds “particularly worrying” – climate change and the “possibility of a nuclear conflict.” He writes that pollution “threatens” the livelihood of millions of citizens and will the situation will “deteriorate” unless reversed. This will also cause “civil strife” and “sharpen” inter-state conflicts over “sharing of river waters”.
In light of Pakistan Prime Minister Imran Khan “threatening a nuclear war,” he calls on the Government of India to “seriously ponder over the situation” and see what can be done “to defuse the tension.” Singh argues that the only way to “avoid” a nuclear catastrophe is for the Pakistan government “to make absolutely sure” that there are no “major terrorist attacks” on India from Pakistani soil.
He explores two “alternative scenarios” for the future of humanity: he cites European philosopher-writerArthur Koestler who said that our race is “programmed for self-destruction,” and Indian philosopher Sri Aurobindo who said that “we are a race programmed for evolution.”
Singh concludes by saying that the “jury is out on this existential question but recent events favour Koestler’s view.”
The future of work
Jamie Dimon | Chairman and CEO of JPMorgan Chase & Co.
Dimon writes that more than 200 million people have been “lifted out of extreme poverty” in India, however, the challenges that lie ahead can’t be ignored. He cites a study by the National Council of Applied Economic Research (NCAER), which says that “75% of businesses” would be required to “develop and learn new skills” to meet evolving demands by employers.
He notes that with a $25 million commitment over the next five year, JP Morgan will “help support skills” and “education investments” that align with the “business needs” of India’s economy. Dimon writes that the private sector has “the ability and the duty” to expand opportunities for those who need it the most.
He also calls on “governments and businesses” to work together and “ensure education and training” which would “align” with the skills needed by industries. In conclusion, he writes that the opportunities would depend on the “alignment” between the “interests of private enterprises” and the communities they serve.
Get wiser about consumption to push growth up
Arindam Bhattacharya | Managing Director and Senior Partner, Boston Consulting Group
Bhattacharya dissects the economic slowdown in the country according to shifts in consumption behavior and calls for targeted policy interventions to stimulate demand, and thereby growth. The World Economic Forum’s recent Competitiveness Index placed India 10 ranks lower than last year, which suggests that much is to be done in its “productivity improvement”. So far, the Centre’s economic policies and the slew of tax rate cuts have only catered to “stimulating the supply side, and will need a longer timeline to deliver benefits”, writes Bhattacharya.
Understanding shifts in consumption patterns is the first step forward, he writes. He criticises “media headlines” for narrowly focusing on sector slowdowns, like the slide in car sales, instead of the bigger “differential slowdown of demand” across mass consumption products, premium brands and product segments. For effective policies, Bhattacharya suggests that the Centre should take a pyramid or “de-averaged view” of short-term and long-term shifts in consumption patterns. “A one-size-fits-all strategy” will not work, he adds.
The inexplicable allure of Modern Monetary Theory
Ajit Ranade | Economist and Senior Fellow at The Takshashila Institution
Ranade calls the Modern Monetary Theory (MMT) “a short-term fix” when conventional monetary policy fails to change stagnant growth. MMT recommends printing currencies as a way out from recession. According to the theory, “Fiscal stimulus and deficit spending should be supported by central banks, which should buy government bonds by printing currency if necessary.”
Though “wacky”, the theory has been backed by the likes of Larry Summers, former US treasury secretary and outgoing chief of the European Central Bank, Mario Draghi and has found support in Europe, India, Japan and even US presidential candidate Bernie Sanders, adds Ranade.
MMT is a “big fiscal binge … [of] putting cash in every consumer’s pocket” but it can work as long as fiscal expansion coexists with low inflation and interest rates, and private investment is not crowded out, he writes. Thus, if India takes it up, heavy fiscal spending will have to be paid through debt, that is through current or future taxes, explains Ranade.