Nation going into retirement: India

I finished listening to last week’s EconTalk podcast with Jagdish Bhagwati this afternoon while mowing the lawn and was amazed at how some of the comments tied in with my previous post and made me think that India is feeling like it wants to retire.

After the 44 minute mark, Bhagwati says:

…the Food Security Bill will double the share of expenditure from about 1% to at least 2% of GDP (Gross Domestic Product). That’s a big expenditure increase.

But the point is they are doubling it now, not because there is any huge compulsion to do so except political. They think they are going to get a lot of mileage out of it. You see, this is also something that the government has been steadily doing, which is itself risky, which is as you know, basically the civil and political rights are supposed to be relatively cost-free. So, like, habeas corpus has to be provided even if you are a poor country. But the economic rights, they are expensive. So these are two separate things. So, what this government has been doing is increasingly shifting from the approach where you just have guiding principles which we call directed principles to turning each of these things into rights. Which means you’ve got to spend moneys, which of course leads to a great pressure to spend more money.

But right now because we want more and more votes, they’ve been not–I mean, we could afford to do some of this because the growth-enhancing policies had led to steadily increasing revenues. But now having slowed down all of that, the government is in a situation where they are on high speed on social spending. But, they are on low speed on raising revenues. So now they are getting exactly the problem, which is a disjunction between what you are taking in by revenue, which permits you to do these sorts of social expenditures, and the steadily expanding, politically driven social expenditures.

Too bad. They will be going into early retirement, when there is still much that could be done to lift hundreds of millions out of poverty through innovationism.


1 thought on “Nation going into retirement: India

  1. Pingback: Bad Teacher | Our Dinner Table


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