To get the engine of the economy revving, an expansionary fiscal policy that harnesses the energy of the informal sector to boost aggregate demand is the order of the day.
That India is in the midst of a serious economic slowdown is no longer in question. The debates are now mostly about what to do about it: Whether to opt for a fiscal expansion to boost demand or to carry out deep reforms to raise productivity and the growth potential of the economy. As per the recent release by the National Statistical Office (NSO), the growth rate of the GDP in real terms is now 5 per cent, the lowest in more than a decade, and that ofthe nominal GDP is 7.5 per cent — the lowest in four decades. Technically, this is being called a slowdown and not a recession, since in absolute terms GDP has not fallen.
Yet, the leaked National Sample Survey (NSS) consumer expenditure data — a report that was withheld and now has been officially withdrawn — shows that real monthly per capita expenditure has in fact fallen in absolute terms between 2011-12 and 2017-18. In rural areas, consumption expenditure decreased by 8.8 per cent, while in urban areas it increased by 2 per cent, leading to an all India decline of 3.7 per cent.
Please click here to read more.