India heading towards disaster, says Nobel winner Banerjee

Washington, October 16, 2019 (PPI-OT): India is barrelling down the path to disaster with its decision to cut taxes for the rich and making unnecessary public investments that could explode government debt, economist Abhijit Banerjee said, days before being awarded the Nobel Prize in Economics.

In a lecture at the Watson Institute in Brown University, Rhode Island in the US, last week, Banerjee said the Indian economy is in a crisis, with growth slowing sharply and consumption falling for the first time in several years. The government’s response, he added, was only making matters worse.

“You cut taxes for the rich, you make public investments that are not required. All it does is hurt the income distribution and make government debt explode, often ending in a full-blown meltdown. This is what happened in Latin America. India is doing well on this time-honoured path to disaster,” he said.

India cut corporate tax rates for firms to an effective tax rate of 27 per cent, aimed at reviving investment in the economy, but many economists have argued that these measures will not help boost consumption that has been flailing.

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