Downturns are time for spending...

The fiscal deficit, the gap between expenditure and revenue, and the cumulative borrowings or debt of the government over the years, back, has been a topic of debate between economists over the sustainability of debt that might involve risk because of overheating and bubbles in the economy. Both, spending by the government and the private sector through borrowing might lead to the tightening of the credit and trade cycles. Debt is not a problem till your financials are sound and revenues robust, and your economy is moving, but when things are not going the right way, i.e. during recessions or slowdown when there is high unemployment, low wages and demand then the Public-Debt makes more sense because the private sector is not doing fine. Higher public-spending increases employment, demand and growth during downturns through the multiplier. However, to use it on time you must have low debt to borrow more during the crisis. Too much public-debt in the Western-world made the countries to spend less during the recession when they should spend more to create employment. Therefore, we might point-out that the fiscal-policy should be used in the times or crisis or rainy days during the downturns for which it has to garner revenue during the booms to control inflation and overheating.

Under these perspectives INDIA too might draw a right framework for its fiscal-policy that downturn is a time for spending and booms are a time for revenues and consolidation to control demand and overheating. Overheating and high inflation fail to give the outcome we want higher wages, incomes, demand and growth, actually real wages, incomes, demand and real growth-rate. Inflation lowers the real GDP and lower inflation might increase it.