The Hindu : Opinion / Letters to the Editor : A response

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Friday, Jan 07, 2005

Opinion

Opinion - Letters to the Editor

A response

Sir, — Prabhat Patnaik mistakenly attributes to me the claim that an open economy cannot be afflicted by lack of aggregate demand (Jan. 5). I claimed only that a competitive India can sell any excess of supply of steel and cement over domestic demand to the rest of the world, since India is in effect a price-taker in the world market for these. In any case, aggregate demand management is a macroeconomic policy problem. A microeconomic sectoral policy, such as employment generation, is not the most effective instrument for addressing it. Again, I did not suggest that a step up in growth will always increase employment generation, but only if the biases against employment such as from inappropriate trade policy, labour laws, etc., were removed. My reference to past experience and implementation problems was mainly to highlight their relevance to scaling up the employment programme. Nowhere do I refer to increasing transfers to the rich but only that if subsidies intended for the poor are not reaching them, and if other subsidies have no social rationale, eliminating them and using the resources for well designed and well implemented employment programme for the poor. It ill serves meaningful debate if labels such as neo-liberal are used to characterise arguments rather than refute them with logic and reason.

T.N. Srinivasan,
Chennai

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