Spend Freely Instead of Trying to Balance Deficit, Budget: Abhijit Banerjee

Nobel laureate economist Abhijit Vinayak Banerjee on Thursday said the Union government should be more into free-spending policies like European economies and the US, rather than being more concerned about balancing deficit and budget.

Banerjee, who heads West Bengal’s Global Advisory Board (GAB) and advises the state government on issues related to the pandemic, said 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.

“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 have taken, Banerjee said. “I think the government should have been more open-handed with spending. I’ve 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 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 has announced several relaxations. I think being less mindful of the deficit might be the right strategy,” the Nobel laureate said.