In his latest piece for The New Indian Express, Shankkar Aiyar looks at the recently released GDP data, illustrating why government spending should ideally be funded by monetisation of assets and designed based on objectives. Excerpts:
"Will the twain—expenditure and revenue—balance out? Facts from history do not inspire confidence. In 2018-19, the government promised to spend `24.42 lakh crore but slashed expenditure and spent only `21.41 lakh crore as revenue collections slid from the targeted `17.25 lakh crore to `14.30 lakh crore—and mind you, growth in 2018-19 was better than it is now."
"The fact is the efficacy of government spending depends on how the spending is funded—by further borrowings or monetisation of assets—and what it is spent for. The ideal construct would be for the government to monetise its assets and declare a glide path on how the monies would be utilised. A useful mantra would be to design spending to resolve issues—fixing backward and forward linkages for farmers, set up a bad loans bank, fund apprenticeships, fill up vacant posts, finance rural infra—and thereby kick-start the virtuous cycle of jobs, income, consumption, demand and investments."
Read the full article here.