Letters on September 4 issue

Letters on September 4 issue
Supply-side cannot be ignored

While I enjoyed reading the article “What Would Make India’s Growth Sustainable?” (15 August 2020), it left me wondering if Maitreesh Ghatak and his co-authors were really advocating a Keynesian approach. 

The underlying argument of the article is to play around with the endowments of individuals and the market would then take care of the rest. This resembles the fundamental theorems of welfare economics rather than a Keynesian approach. 

A neglect of the supply side also leaves me worried that big businesses are the ones that will be able to reap the benefits of such a change in endowments/ increased demand. In a crisis it is vital that small businesses are supported so that they can pull through and survive. Else we as consumers may find ourselves battling monopolies and oligopolies, and we as workers may find ourselves facing monopsonistic labour markets. 

While I completely agree that we need to improve the demand side, we mustn't forget the supply side for the small businesses at least. 

A minor comment is that the authors have used only one year to estimate expenditure elasticities. This means that we are implicitly assuming that every individual is the same. It would have made the estimates more robust if they had used estimates for multiple years, instead of just the one year.

Nithin Nair
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