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Behavioral Economics may be the Option for Growth Strategy: Myths and Reality Check on Indian Economy

Uttam Bhattacharyya, Associate Professor, Department of Economics (Rtd), Former Faculty, Institute of Development Studies, Kolkata 700064, West Bengal, India. , Kamal Kumar Datta , Uttam Bhattacharyya

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Indian Journal of Agriculture Business 8(2):p 77-87, . | DOI: http://dx.doi.org/10.21088/ijab.2454.7964.8222.5
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Kamal Kumar Datta, Uttam Bhattacharyya/Behavioral Economics may be the Option for Growth Strategy: Myths and Reality Check on Indian Economy/Indian Journal of Agriculture Business 2022;8(2):77–87.
 

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Abstract

Developing countries have taken an enormous hit in terms of capital outflows, growing bond spreads, currency depreciations and lost export earnings, including from falling commodity prices and declining tourist revenues. Lacking the monetary, fiscal and administrative capacity to respond to this crisis, the consequences of a combined health pandemic and a global recession will be catastrophic for many developing countries and halt their progress towards the Sustainable Development Goals. In line with the government’s stated policy of Aatmanirvar Bharat or self reliance, Indian will integrate its rich economic and spiritual heritage with modern economic ideas for ethical wealth creation through a marriage of the invisible hand of the market with the hand of trust. We must recognise that wealth creation is a collective process and that market outcomes are the product of how these various “wealth creators” interact. We must drop the false dichotomy of governments versus markets and begin to think more clearly about the market outcomes we want. Public investments should be the mission oriented, instead of focused on “facilitating” or “incentivizing” business. Policy should actively shape and create markets, not just fix them when they go wrong. Fiscal and monetary policy will be important, but only if coupled with the creation of opportunities in the economy. Money creation, through quantitative easing, will not fuel the economy if the new money ends up in banks that do not lend. And when businesses do not see opportunities, interest rates stop affecting investment. Until the 1980s, productivity increases were accompanied by wage increases and rising living standards. This link was broken by a drop in labour’s negotiating power and companies’ increased financial orientation. The farm sector is likely to register positive growth even as the rest of the economy (barring the government sector) contracts. Federal structure will be the key for effective corporate governance and hence should be more involved in innovation policy, pressing for investments in education and training the long run drivers of wages. By generating a virtuous cycle where private investment, wage and employment growth as well as consumption feed into each other. The rise in agricultural activity, coupled with higher allocations to the MGNREGA also appears to have led to a sharp drop in rural unemployment as observed in the CMIE data. However, healthy growth of the farm sector, even if it continues, is unlikely to offset the economic losses suffered

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  • Uttam Bhattacharyya, Associate Professor, Department of Economics (Rtd), Former Faculty, Institute of Development Studies, Kolkata 700064, West Bengal, India.
    ,
  • Kamal Kumar Datta
    ,
  • Uttam Bhattacharyya
    ,
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Cite this article

Kamal Kumar Datta, Uttam Bhattacharyya/Behavioral Economics may be the Option for Growth Strategy: Myths and Reality Check on Indian Economy/Indian Journal of Agriculture Business 2022;8(2):77–87.
 

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DOI: http://dx.doi.org/10.21088/ijab.2454.7964.8222.5
Keywords EmploymentFiscal PolicyGovernment PolicyGSTMGNREGAInfrastructurePM-KISANTBI.

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