Mr Jaitely, Where Will The Money For Public Investment Come From?

The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.

If the Treasury [i.e. the government] were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again … there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.

Keynes suggested, rhetorically, that if they lacked the imagination for anything more creative, governments could simply bury bottles of money under tons of trash, and that this would help get the economy going. It may sound bizarre, but it would certainly be worth someone’s while to dig up free money. To find these banknotes would require workers. Those workers would need to pay for food and shelter and everything else they needed to survive while they dug.

Public investment has been stepped up in the last year and it will continue to remain stepped up… When you fight a global slowdown, public investment has to lead the way.

I will complete the journey to a fiscal deficit of 3 percent in 3 years, rather than the two years envisaged previously. Thus, for the next three years, my targets are: 3.9 percent, for 2015-16; 3.5 percent for 2016-17; and, 3.0 percent for 2017-18.

If the government sticks to the path for fiscal consolidation, that would further detract from demand… [Fiscal] consolidation of the magnitude contemplated by the government… could weaken a softening economy.

This year, the Union government’s deficit is set at 3.9 percent, and with the states together having a deficit of about 2.2 percent, the aggregate fiscal deficit of the government works out to 6.1 percent. It is reported that 21 distribution companies are likely to join the UDAY scheme and the deficit on that account could be about 1 percent.

We need to introduce fiscal prudence that will lead to fiscal consolidation and discipline. Fiscal prudence to me is of paramount importance because of considerations of inter-generational equity. We cannot leave behind a legacy of debt for our future generations. We cannot go on spending today which would be financed by taxation at a future date.