There’s no conflict between growth and welfare: CEA

Chennai | Updated on March 27, 2021

Krishnamurthy Subramanian says growthcontributes to 85% of poverty reduction

India’s vision for economic development is akin to a tripod with its three legs focused on growth and efficient welfare, ethical wealth creation and a virtuous cycle of growth, Chief Economic Advisor Krishnamurthy Subramanian said on Saturday.

He was delivering the keynote address under the topic ‘Policy initiatives: Aspects of Privatisation, Monetisation, Decentralisation’ at the inaugural session of a webinar ‘The New Normal’ organised by Chennai-based Industrial Economist magazine.

Noting that growth and welfare go hand in hand, Subramanian said there was always this debate between growth and inequality and researchers in the advanced economies base their views on opinions instead of careful research on emerging economies like India.

“In advanced economies, there is always a conflict between inequality and growth, but in Indian context, there is no conflict but only a convergence between growth and poverty reduction,” the Chief Economic Advisor said, adding, “85% of poverty reduction comes from growth because growth generates those resources to be able to do efficient welfare.”

Subramanian also cited British economist Angus Maddison’s research on GDP contribution by major economies from 1 AD to 2008 AD to highlight India’s historical dominance in global economic growth. He said that while the US has been an economic superpower for over a half a century, India had such kind of dominance for seventeen-and-half centuries which was not due to sheer luck but by following the ethos of ethical wealth creation.

“The third leg of the tripod (virtuous cycle) is most granular. It starts from private investment, which leads to productivity improvements and job creation, putting money in the hands of people, enhancing consumption, which in turn leads to further investment,” Subramanian said.

“Structural reforms, especially on the supply side, and capital expenditure by the fisc will be the triggers for this virtuous cycle either at the start of the cycle or accelerating it,” he added.

Published on March 27, 2021

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