As the Indian economy is decelerating, government expenditure forms the major component that can aid in growth. Explain (200 Words)
Refer - Financial Express
Enrich the answer from other sources, if the question demands.
IAS Parliament 4 years
KEY POINTS
· The Covid-19 pandemic has brought global economic activity to a virtual halt. While the world was long expecting a recession, the pandemic has surely pulled the trigger.
· The International Monetary Fund estimates global economy to contract by -3% this year and expects the clout to further deepen should the virus not recede in the latter half of 2020.
· Keynesian theory suggests, for aggregate demand to increase, at least one of the components of GDP need to expand. Growth in the Indian economy, for long, has been dominated by consumption (PFCE), followed by investments (GFCF), government expenditure (GFCE) and net exports (NEX).
· A higher rate of investments is quintessential for sustainable economic growth. Deteriorating economic scenario and increasing levels of debt with rating downgrades for industries are likely to aggravate existing problems.
· Government expenditure the only exogenously determined element in a Keynesian framework. The positive push required to aid demand recovery has to come through the government, seeing as there is limited room for consumption, trade or investments to expand significantly.
· A study by S&P Global estimates 1% GDP spend on infrastructure can boost real growth by 2% while creating 1.3 million direct jobs.
· Notably, infrastructure has strong links to growth, and with both supply- and demand-side features that help generate employment and long-term assets. Front-loading key projects with greater visibility from the recently announced National Infrastructure Pipeline (NIP) could aid in a quicker growth recovery.
· Taking a cue from China, floating special infrastructure bonds through this organisation to accelerate the funding of the NIP could aid a speedier recovery. Furthermore, taking a page from the New Deal and its Reconstruction Finance Corporation, this institution’s ability for greater leverage can be used to make amends to our credit channels as well as development of state government and urban local bodies’ bond markets, providing them with greater autonomy.
· This could help businesses and bankers overcome risk-aversion and bring back trust in the system, whilst financing new avenues for growth.
Ananta Kumar Muduli 4 years
Good morning sir..
Pls review
IAS Parliament 4 years
Good answer. Keep Writing.
PRASHANT KUMAR 4 years
Pls Review Sir
IAS Parliament 4 years
Try to provide reason why government expenditure is important. Keep Writing.
aswin 4 years
please review
IAS Parliament 4 years
Good answer. Keep Writing.
Arunkrishna 4 years
kindly review
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IAS Parliament 4 years
Try to provide data to support your arguments and provide the reason why government expenditure is the need of the hour. Keep Writing.
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