Professor at Dartmouth College, Vijay Govindarajan, says the government should increase public spending to ensure a healthy demand in the system and also encourage private spending
The upcoming Union Budget is a make or break Budget, that's the word coming in from Coxe distinguished professor at Dartmouth College Vijay Govindarajan. He says the government should increase public spending to ensure a healthy demand in the system and also encourage private spending.
"In my mind it is a make or break because the first Budget was a disappointment frankly and therefore we need to set the expectation," he told CNBC-TV18.
Public spending is very important because public spending what it does, it creates demand because you are putting money in people's pocket, he explains. "We have an infrastructure project. You start these big public projects, essentially you are employing a lot of people, they have got money in their pocket therefore they will start to spend the money that will give motivation for people to manufacture things. So, public spending is a must," he further adds.
Fortunately oil prices are dropping, basic mineral prices are dropping and therefore government has actually more money in their pockets to spend. So, they should continue to put money in public spending in the right sectors, I would say infrastructure got to be on top, says Govindarajan.
But private spending should also be encouraged. "Where the government should do more is to encourage private spending, private investment. We have to have a matching private investment to public spending," he says.