Government Should Engage More In Free Spending Policies: Abhijit Banerjee

Nobel laureate economist Abhijit Vinayak Banerjee on Thursday said that the Union government should be more into free-spending policies like other economies of Europe and the US rather than being more concerned about balancing the deficit and the budget. Banerjee, who heads West Bengal's Global Advisory Board (GAB) and advises the state government on issues related to the pandemic, said that boosting the state's economy is directly related to the revival of the country's economy as it is under stress due to the ongoing pandemic situation.

“The (union) government has a fiscal problem, and it may have more faith in balancing the budget than free-spending policies. The government is trying to use the one instrument it has as other forms of tax collection are not necessarily keeping pace, given the economy is slow. It is using this to balance the budget,” he said when asked to react to the Centre's decision to increase cess on various items including fuel from time to time in the last year.

But this is not the direction the government should not have taken, Banerjee said. "I think the government should have been more open-handed with the spending. I have said this many, many times. I think the central government is too unwilling to do what US or European economies are doing - printing money and spending. And I think that would have been a better policy in the present context,” the economist said. Banerjee, however, praised the Centre for now moving in that direction.

“The inflation is already up due to the high fuel prices. I think there is a good case for being more open-handed. But to be fair, the central government has now moved towards that direction and have announced several relaxations. I think being less mindful of the deficit might be the right strategy,” the Nobel laureate said.