India – marching on the Keynesian way

Long back in the 1930’s, the world got relieved itself from the chains of classical economics and followed the Keynesian path. The unprecedented growth and progress that the world witnessed, laid the foundation of the Keynesian economics, on which the future economic structural framework had to be built upon. Barring some events like the oil crisis of 1970’s, the Keynesian remained the dominant economic principle in the world, off course, vindicated by the 2008 depression.

No doubt, the Keynes formulated the economics principles, mainly for the developed economies. But, it seems, the developing world needs Keynes, at present, the most.

India, seems, going in the same path. The recent initiative in the creation of the $14 billion bank for the infrastructure projects by the Indian a commendable job.

This will definitely assist and lift the objective of the nation to attain the investment requirement worth of Rs. 50 trillion (US$ 777.73 billion) by 2022.

And at the same time, India’s fiscal deficit is also rising, which was close to 10.75 lakh crore at the end of November last year according to the reports of CGA.

Though, the reasons are multifarious for the fiscal deficit to move northwards, but the nation is characterised by high deficit for long term now. Though, the reasons are of diverse nature. But what the important thing is, rising fiscal deficit is not a cause a concern, as Keynes has described, until it moves into an extreme side.

India’s economic growth is now functioned upon the “animal spirits” as Keynes formulated (for developed economies). The dampening of the “animal spirits” can overall make the economy to suffer.

So, the Indian economy has now, moved on a stage, where the enthusiasm, especially the economic enthusiasm, assumed a dominant space in the economy.

Indian economy has moved through the different phases of transition in the past and still lot many transitions, India has to move through in the future also. But the transition should always reciprocate the prevailing situations, and the proper consonance between the two has to be maintained. There is never a right policy and principle in absolute sense, for the economy in general, what matters is maintaining the fine balance between the two. As India has followed a Keynesian path, it is better to hope that, it will not end abruptly as the Keynesian policy faced a severe blow when the stagflation appeared on the world economic front.

About the author


My name is Vipal Bhagat, going to be doctorate in applied economics. My aim is to analyse and interpret the current economic happenings around us, according to the core and basic principles of economics.

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