Prabhat Patnaik’s Blog

When income growth slows down in an economy, so does the growth of tax revenue within the given tax regime. Since the government has certain expenditure obligations, to meet these obligations it has to either impose additional taxes or expand its fiscal deficit. Enlarging the fiscal deficit in such a situation, which was the typical response everywhere under post-war capitalist dirigisme, has the additional effect of ensuring that one component of demand, namely that arising from government spending, remains unchanged, even as the economy is otherwise slowing down, thereby checking this slowdown itself. This was referred to in economics text-books…

A unique feature of Jawaharlal Nehru University is its student composition. A substantial proportion of students come from socially and economically underprivileged families; and yet there is considerable social inter-mixing among students, made possible perhaps by campus politics which breaks down insularities. JNU’s having a large proportion of impecunious students is the result of major student struggles in the past. One of the first events I had encountered when I joined JNU in 1973 was a student strike over admissions policy. The students had then ensured not only that applicants got extra points for social, economic and regional deprivation, but…

“Mainstream” economics does not appear to understand the functioning of the bourgeois economic order; and nowhere is this more evident than in matters relating to fiscal policy. It holds to this day that a fiscal deficit “crowds” out private investment by reducing private borrowing. This presupposes that there is a fixed pool of savings in the economy in any period, of which if the government takes more (for meeting a fiscal deficit) then a correspondingly lesser amount is left for the private sector leading to a reduction in private investment. The fallacy in this argument is that there is no…

The National Statistical Office (NSO) has decided not to release the quinquennial survey data on consumer expenditure for 2017-18. This is because these data, leaked by The Business Standard (Nov.15) show a drop of 3.7 percent in real per capita consumer expenditure between 2011-12 and 2017-18, from Rs.1501 per month to Rs.1446 per month (at 2009-10 prices). An actual drop in per capita consumer expenditure is an extremely serious matter. Such a drop has occurred for the first time in over four decades; the previous occasion when a drop had occurred was in 1972-73, when a poor harvest had combined…

With the government being forced to withdraw from the RCEP agreement, an argument has arisen: if India is not competitive with other countries in producing a whole range of goods, which is why the producers of such goods within the country objected to the agreement in the first place, then why should it go on producing them? And a related argument states: in protecting uncompetitive producers, the country is penalizing consumers who would have otherwise accessed cheaper imported goods; is this not unfair? The immediate and obvious answer to the first question (we shall come to the second one later)…

On October 24-25, there were widespread peasant protests all over the country against the Regional Comprehensive Economic Partnership (RCEP) involving sixteen nations which India is currently negotiating. As negotiations near completion, such protests are escalating, with the All India Kisan Sabha planning to organize a nation-wide protest on November 4th, just before the RCEP agreement is due to be signed. And the Kerala government too is organizing a protest. The sixteen nations involved in the RCEP comprise the ten ASEAN countries, and six others with each of whom the ASEAN has separate Free Trade Agreements, namely Japan, China, South Korea,…

The news that India’s rank in 2019 according to the Global Hunger Index (GHI) was 102nd among the 117 countries for whom this index was calculated (it is not calculated for countries where hunger is not a problem), instead of causing consternation as it should have, has generated a rather inconsequential debate. This debate ironically has been concerned with two issues. One is whether India’s rank which was 55 in 2014 has fallen dramatically to 102 in 2019. And the second, where the Niti Ayog has been an active participant, is whether the direction of change in India with regard…

The European Central Bank last month pushed its benchmark interest rate to minus 0.5 per cent, which means that if it gives a loan of 100 euros then it would be paid back only 99.5 euros at the expiry of the loan. This has started a new trend: in countries like Germany, Spain, Italy, Czech Republic and even Greece, the yields on government bonds have been pushed into the negative region. Lenders to these governments in other words are willing to pay for holding government bonds. Longer term bonds typically have higher yields than shorter-term ones, but in Germany now…

The reduction in the corporate tax rate by the BJP government, which would entail a transfer of Rs.1.45 lakh crores from the public exchequer to the corporate sector, has been generally seen to be insufficient for overcoming the slowdown in the Indian economy. This is not just an understatement; it is actually erroneous. This measure is the very opposite of what was needed for overcoming the slowdown. It would aggravate the slowdown while imposing an increased burden on the working people, and making the income and wealth distribution in the country even more skewed that it would have been. The…