Is Indian Government Consumption Key to Growth?
The Indian central bank RBI recently said that, Indian government consumption key to growth in economy amid pandemic. Indian government spending will support the economy during the pandemic, but private consumption will be needed to drive any economic recovery once the coronavirus threat eases. Is it so? Is government spending and consumption key to growth? Is citizens’ spending and consumption key to growth? In many of my previous article s I have exposed this Keynesian fallacy of thinking that consumption can drive growth. It is a blatantly false notion. Growth means future higher income compared to today’s income. To increase any future income we need increased productivity of various factors of production like land and labor, and that is only possible when we use capital goods in combination with those factors of production. Capital goods, machine and tools, are not available in nature like land and labor and so they needed to be produced first. Capital g...
