Demand and distribution are the usual flavours of a recessionary age. The India of stimulus packages is no different. When one asks “what about growth and supply,” a sullen silence is the usual answer.
Not always. The National Council of Applied Economic Research has cautioned that mere tax cuts and demand boosting initiatives won’t work in reviving the economy.
“The fiscal measures should not be merely focused on increasing demand...it is equally important to have supply-side interventions,” it has argued in its monthly report. The measures advocated include improved electricity supply, emphasis on creating transport networks and services that lead to cost reduction.
This is sound advice, but involves hard work of the kind that governments shy away from. Tax cuts and higher salaries for employees are not enough. The trade-off here is between short-term consumption, one that may give a temporary boost to the economy, and long-term growth and competitiveness that requires investment to remove supply constraints.