Economist Jayati Ghosh wonders why the Government of India isn't aware of undergraduate-level economics.
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00:00The government doesn't seem to have a clue.
00:02These are all economics 101.
00:04These are things that undergraduates learn.
00:07It is a shock to realize that the government is not picking up on these basic ideas.
00:30I would say that the Indian economy is in a situation where it's beyond worry.
00:44We are basically in the middle of a crisis.
00:46It's fairly evident that there's a massive, massive deceleration.
00:51And even if you don't call it a recession, because technically speaking, GDP has to decline
00:55for two quarters before you get a recession.
00:58What we've got is such a big slowdown that it is affecting demand, it is affecting employment,
01:04it's affecting living standards, and it's creating an overall crisis, which in any other
01:10country would be taken as a national emergency.
01:13People don't want to buy cars, people don't want to buy washing machines, they want to
01:16buy electronic items, less and less, because you're saving, you're insecure, or you don't
01:21have money.
01:22The government doesn't seem to have a clue.
01:25It's doing supply side measures to deal with what is really a demand problem.
01:31There's just people don't have money to spend, they don't have income, they don't have employment.
01:35So you have to do something to give them incomes and employment.
01:38You can't simply say, oh, I'll improve the conditions of, you know, of doing business
01:43and I'll provide banks, I'll tell banks to give more credit.
01:48Banks cannot give credit if investors are not willing to borrow.
01:52And why would you borrow to increase capacity if there's nobody buying the stuff you have
01:56already produced?
01:57In the last one year, what we've been seeing is that that overall lack of demand, which
02:02has been really punishing the informal sector now for three years, has actually been also
02:08impacting the formal sector.
02:10If they did recognize the problem, there are lots of things they could do.
02:13They could immediately expand, let's say, the rural employment guarantee, dramatically,
02:19two or three times, you know, increase the spending.
02:22It's only 0.2 percent of GDP.
02:25Make it 0.6 percent, for God's sake, which it was in 2010.
02:28So triple the amount you're spending on that.
02:31That puts lots of money in people's hands.
02:32They can go out there and buy biscuits and toothpaste and underwear and, you know, you
02:36name it.
02:37When they buy that, the shopkeepers will stock up more, the producers will produce more,
02:41they will employ more people, all the way up the chain.
02:44Increased social sector spending, health, education, we massively undersupply these.
02:49These are very high employment sectors that will generate many more multiplier effects.
02:54So focus your public spending in areas that will immediately revive demand and have high
02:59multiplier effects.
03:01When you've done that, then focus the new expansion of public spending into areas of
03:05public investment that are desperately needed.
03:09Basic infrastructure, amenities, roads, proper hospitals, proper, you know, care, et cetera,
03:14all of these things.
03:16All of these create the conditions whereby the economy can get back onto some kind of
03:21an even tick.