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The announcement that Prof. Abhijit Banerjee and his wife have been awarded the Nobel Prize for Economics has been met with estatic glee by both the CPM and the Congress. This fact alone should alert us to the fact that Economic Policies and prescriptions are not altogether free of political and ideological biases.
Western Economic Theory has had an importnat place in Indian political discourse. Nehru adopted the Planned Economy model of Command Economy though the Planning Commission and ensured that India does not grown beyond 3.5% every year. Man Mohan Singh and the then Prime Minister Narasimha Rao opended up the economy and the growth sputtered to 9 to 10%. The Congress in its 2019 Manifesto promised a Universal Income of Rs 72,000 per family. This schem appartently was suggested by this year's Noble Prize winner, Dr Abijit Banerjee and we will turn to this particular scheme as a proverty alleviating meaure.
The sub prime lending crisis that hit the American Market and let to a Global slowdown in the Worls Economy and more recently the recession that was partly mitigated by huge infusion of funds from the Federal Reserves are all classical keynesian measures. India with its triple problem of Poverty Population and Politicians cannot be so sanguine about political theory offering a way out.
Abhijit Banerjee was afgainst the DeMonitization launcehed by the Hon ble Prime Minister. The economic theory underlying his approach is regnant with the amorality of liberal economic theory. The "Black Money" can be taxed at the consumption end and so it is not bad for the economy. The circulation of Balck Money was to the extent od 33% of the National GDP. And so when the money is spent some of it gets taxed or so the liberal theory goes. What this theory ignores is the fact that much of the politically generated Black Money was being sent abroad as the slew of procecutions now demonstrate and so was of no import as far as the Indian Economy went. Hence this precious assumption of Liberal Economic theory just does not hold any substance.
Another measure that these "poverrty economiists" advocate is untramelled Government spending. In fact the sort of Universal Income Scheme that the Congress promised would have resulted in stagfaltion and a complete melt down of the Economy. Why do I come to this conclusion. Because the whole venture was to be financed not through production of goods and services but thriough deficit financing. Hence it was poison from the word Go. Unfortunately our Left oriented economists cannot think beyond the Liberal economic theory.
What the present Governemnt has been doing is very sensible. It has tried to beep infation down while increasing public spending. The classic Macro Economic measures like interst rates, basis points reduction, lowering GST ect are all welcome measures while they do turn Liberal Economics on its heads has proved quite robust in dealing with the proble.
I would like the Union Government to invite the top economists from China for a one on one interaction to learn from the Chinses example. We must not be taken in by these entrpernuers of poverty.
