This refers to Andy Mukherjee’s article “In 2013, bet on consumption” (December 18). Chasing high inflation, we have somewhat demonised deficits forgetting for a moment that it depends on the composition and the quality of total government spending. Deficits incurred on current spending are generally bad, because they produce no revenue and add to the national debt. Insightful spending, however, produces revenue that extinguishes debt, raises productivity, and long-term growth. Reducing deficits on current spending is justified only if it be replaced by capital-spending programmes, since it would ensure that people can buy and industries can produce. Currently, touching a low of five to six per cent of the gross domestic product (GDP), we must stand warned. Subsidies balloon deficits in stealth, under the cover of inclusiveness. To earn the right to subsidise as a state policy of re-distribution, we must aim at a level of growth beyond what is considered or targeted as achievable. It is this extra margin in GDP that comes unencumbered and available for social empowerment. In globally connected economies, growth must precede if not supercede, distributive welfare.
R Narayanan Ghaziabad
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