FE Editorial : Village Keynesians

A A

The Financial Express: Nov 17 2008, 22:45 IST

Everyone is again a Keynesian now and at economic policy seminars, it is again possible to talk about pump-priming without looking awfully out-of-date. But not all national fiscal pumps can be equally primed. China can spend nearly $600 billion. India neither has the fiscal room nor resources to come close. Some options should simply not be even thought of, like reversing the practice of not monetising deficits. This was stopped in 1997 and restoring status quo ante will be incredibly dangerous given the spending propensities of Indian politics. As for market borrowing, let’s recognise that the government had to suspend borrowing to help correct a liquidity crisis and that issuing a lot of extra government paper will crowd out private investment, surely not a desirable outcome. Plus, big government spending programmes are not implemented quickly, to say the least. So mega projects conceived now will not add the zing to the economy before at least a couple of years, which is no good. Fast tracking projects already cleared and budgeted will be better. An even better countercyclical option exists—this is partly budgeted for, it doesn’t cost much, it puts extra money quickly into the hands of people whose marginal propensity to consume is very high, and it’s a law—the National Rural Guarantee Employment Programme (NREG).

NREG is also crucial because there may be reverse migration as urban unskilled employment opportunities fall—the real estate sector slump, for example—and demand for rural employment goes up. What is NREG’s record? Spending has gone up

... contd.

Ads by Google

Single Page Format

1 | 2 | Next

Previous Story The home team Next Story Column : Is the crisis over?

Reader's Comments (1)| Post a Comment

Is NREG responsible for the slow demise of Agriculture also what real Rural Infrastructure does NERG create

P V Reddy | 17-Nov-2008Reply | Forward

The implemetation of NREG is a good move but an audit of the the type of work undertaken and also the infrastructure being created in the villages will have to be undertaken, because according to my obsevation from the type of work which is undertaken in and around some of the villages which I happened to visit, no work which can be called as productive and constructive has been uindertaken.Also the consequences which such a scheme may have on the farming community in the villages is not being thought about, this is because the farm labourers are not available at the time of harvesting or sowing when this scheme is in operation, also if they happen to be available the wages which they demand are way beyond the means of the farming community, as a result of this moet of the people engaged in farming are getting reluctant to carry on their profession and in turn advising their children to undertake any other activity other than farming. This may lead to a mejor problem in Agricultural output in the future years.I suggest that you undertake a survey of the villages where this scheme is being implemented to elicit the opinion of the farming community and also to know as to what is the type of infrastructure which has been created by undertaking the NREG scheme, because the Govt and the people implementing this scheme will have to be made accountable.