10% of GDP is a lot of infusion, and the economy would surely respond with a zing. But countries don't usually have the slack to do this. No government keeps that much capacity idle. It can only be found by one of two things - cutting something else, or double-counting stuff.
In a lot of public expenditure, the focus is on where money is spent. There is far less attention to see where it is being withdrawn from, because that is not published or highlighted. A good impetus plan should therefore also say what's being de-funded to accommodate new things.
Once the de-funded parts are also taken into the accounting, we may find that the infusion into the economy is not 10%, but a lot lower. What we need to focus on, to tally the economy as a whole, is NET additions in public expenditure.
Another common feature of announcements about public expenditure is that they tend to count what's routine as though it is special. We see this each year with the investor meets of the states - which are no more than group announcements of ongoing projects.
In the current situation, we've even seen a third variant - a big announcement of public expenditure is made, but the fine print says that the private sector will provide the bulk of the money. We saw that with the infrastructure investment plan announced some months ago.
The reason for all this shuffling is the same - there is only so much money. As long as we look for ways to find this money within the books and accounts of the government, what is gained and what is lost must tally. There are only two exceptions to this.
The first is, governments can let the people keep more money - thru lower taxes. The public spends money differently - and often more efficiently - than governments, and it also does it faster. That will provide some VELOCITY to expenditure, although the quantum won't change.
This higher velocity of spending can also be achieved by decentralising expenditure. Local governments will spend better and faster than the Centre on many fronts, so putting more public funds in their hands can also speed up things.
The other way of funding a big impetus is by cutting down on corruption. Ask yourself - is at least 10% of the money in sarkar looted? If yes, that's the best place to start. Looted money is often privately hoarded, stopping it will let the funds flow to public spending.
This takes political will,, because the whole system is greased by corruption. And it's very hard to achieve because those at the bottom of the political pyramid - the local reps and their allies - control the political system more than the figureheads in government.
Leaders come to power by piggybacking on a lot of local political capacity and effort. To sideline what has put them in power, it's important to find an alternate set of local support whose motives are different. There's more than 10% there, if one wishes to go in that direction.
For a test of any announcement, ask 3 questions. Does it bring competence and integrity to public life? Does it make society and industry more equal partners with sarkar? Does it decentralise and federalise? If answers are not yes, it's probably more announcement than substance.
