Nobel laureate Abhijit Banerjee criticises Centre over fiscal policy

Kolkata: Nobel Prize winning economist Abhijit Banerjee has criticised the Central government over its fiscal policy, saying that the Centre is adopting a wrong policy of tax collection by continuously increasing cess and pushing up fuel prices.

Banerjee, who is also the chairperson of the Global Advisory Board on the Covid-19 pandemic set up by the West Bengal government, said while speaking on the continuous increase in cess for the last seven years, “The government has a fiscal problem. This is a government that has more faith in balancing the budget than realising the actual problem. I have been in favour of more free spending policies. This (increase of cess) is because of that.”

Warning that the government is moving in the wrong direction, the Nobel laureate said, “The government is trying to use this single instrument rather than working on other forms of tax collection. This is another way of balancing the budget. This is a direction that the government should not have taken. The government should have been more open handed with its spending.”

Criticising the Central government for being unaware of the economic policies adopted by the developed countries, the noted economist said, “The Indian government is too unwilling to do what the US or the European community is doing — printing money and spending them. I have said this many times that it would have been a better policy in this current situation.”

Banerjee, who is of the opinion that the Centre’s policy of balancing the budget is not yielding any positive result, said, “We are not even avoiding inflation; rather, we are getting cost-plus inflation by driving the fuel prices up. This is a good case for being more open handed.”

The economist, who is hopeful that the Central government in its recent budget has shown signs of giving more relaxations, said, “The Centre has moved in that direction. They are more relaxed about the budget than they were one year back. The Central government should be less mindful of the deficit, which is the right strategy now.”

When asked about the suggestions he has given for the development of the economy of Bengal, Banerjee said, “Though the state government is trying to help as much as possible, we should understand one thing that the economy of the state cannot develop in an isolated manner.

“In an integrated economy, when the economy of the entire country is slowing down, the state cannot make progress alone. So the solution is that there should be a holistic development of the country’s economy and the state’s economy will also progress.”