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Planned & Organized Deficit Spending

Our population of 1.3 billion citizens entitles us to be ambitious and PODS can show the way to be so. It is to be noted that PODS is universally applicable also.

Photo Credit :

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When Prime Minister Modi visualized that he would be able to give every India Indian citizen INR 15 lakh I am sure that his natural instinct made him say so. It is possible. This is how:-
Assumptions:

No Supply side lag or no production lag
Commerce runs at No Profit No loss basis.

A government can plan & organize up to a 100% deficit and sustain itself even when there would be no taxes, no shortages of capital, no displacement of personnel & no inflation. USA ran up a 25% deficit during the WWII years without any insurmountable problems. Don’t be scared of Deficits, whether you are a politician or an economist. I recommend reading Professor Stephanie Kelton’s book “The Deficit Myth” to this effect & as well as to dispel all the apprehensions on Deficit Spending. All monies required in India would be the local currency Indian Rupee (INR), and we have to believe in the supremacy & sovereignty with unlimited supply of the same. However, the key to successfully achieving this is an absolutely foolproof supply side….as everyone individually is born a natural Consumer (Demander), as well as a Producer (Supplier) in due course; the trick is to see that for every unit of demand there has to be a compulsory corresponding unit of supply resulting in no inflation or deflation. This can be replicated up to INR 7.5 lacs of demand, as well as 7.5 lacs of supply of various goods, products and services that are need required by citizens. In this case, the Gross Domestic Product is INR 7.5 + 7.5= 15 lacs per citizen. INR 15 lacs is given to the citizen to work & buy goods, products & services which he/she him/herself is enabled to supply also….that quantity of “gold” required (Supply of goods, products & services) to back the amount demanded to buy. If there was only gold backing the currency, what would one do with 15 lacs of gold ??, but if 15 lacs of goods, products and services back this deficit, or is the underlying work, assets, & value of these monies then a consuming and supplying market of citizens is created. By running up to a 100% deficit if required, where money is a given in the market, one can enable consumers & producers in any product, good or service market economy. With money a given the market will supply (as producers can produce without shortages of monies) and consumers can buy these products as they are also money enabled to consume whatever they need which is supplied.

Given the state of current cashless technologies, monies need not be printed with paper, ink , security threads & machinery but issued electronically via the seamless electronic pipelines of the already in place NEFT/RTGS & other systems, all the way, to every individual citizen’s smart mobile phone so as to enable to transact his/her needs & requirements with supply merchants who accept payments & transact on their cell phones. Thus, there is no reason whatsoever to not being able to demand & supply needs like hygienic food, edible water, clothes, education, shelter, judiciary, health, transport & a sustainable clean environment by the government. These needs can be catered to in the domestic economy with domestic currency. Lastly, a GOI Central Bank (The RBI) need not issue treasury bills and bonds to raise money. All that is required is that the authorized bank officials’ type in the figure of monies required to both demanders and suppliers, in a fraudless manner, via the existing transparent electronic platforms….it is as simple as that. However, the Banks and other government personnel will have to enforce supply of goods, products & services. So the ITO & others will convert into the EDSO (Enforcement Directorate of Supply Officers)….no displacement of personnel.

There is nothing Made in the World that cannot be made in India except the availability of crude petroleum, which would have to be imported given our current usage. However, because of the impact on the environment, I do not think crude petroleum is the right choice especially due to our sub standard emissions numbers. One could argue “Swaraj” pretty competently, but then with money as a potential given in our PODS markets/economy, we could also invite selected technologies from all over the world, give the technologists:- visas or citizenship, INR lines of credit at Zero or negative interest, no taxes, power, land, permissions & personnel. These lines of INR credit should also be available to domestic Indian companies. For all you know the techies could be PIOs or NRIs who could and maybe should answer this clarion call, not with FDI, but with selected technologies that they have patented overseas. There is a case for taxing the PIOs & NRIs in case we run short of hard currencies which could be returned in INR at a future date while paying 10% interest electronically but not before arbitrarily fixing the FX rate @ INR 60/- per US $1/- for the next 30 years with the basket of currencies that the INR is pegged to.

Given the current COVID -19 situation, and after seeing USA & the UK (and so many developed economies also) announcing a $ 2.2 trillion & 330 billion pounds stimulus and support package for their respective economies, India should take the cue, and announce a INR 165 trillion (adjusted for Purchasing Power Parity-PPP i.e. approximately INR 40 trillion) package for all the daily wage workers, farmers, SMEs as well as large businesses. But do remember the EDSOs will have to perform on the supply side.

Lastly, note that the Swiss spend approximately $ 66000/- as per capita income under PPP dollars system. In comparison, India spends $ 2000 nominally & $ 8500/- as per capita income using PPP system of comparison. So India currently has 8500/- X 1.3 billion citizens = PPP GDP of $ 11.050 trillion. If Prime Minister Modi wants his way then from nominal per capita income (PCI) of $ 2000 per annum he would like to spend 15 lacs or $ 20000/- PCI nominally (Given the current FX rate & using PPP method, this would be $ PPP GDP of $ 111 trillion). So what he wants to do is increasing our numbers slightly more than tenfold over current levels. It’s a tough task but it is doable in the long run, depending on how fast we can build up the supply side to this level of demanding $ 55.5 trillion & supplying $ 55.5 trillion worth of good products & services, using the PODS system. This perhaps is his economic vision blueprint.

Our population of 1.3 billion citizens entitles us to be ambitious and PODS can show the way to be so. The figures are huge but so is our population. It is to be noted that PODS is universally applicable also.

The question then arises is how does one get into & start in the PODS mode? The answer is The GOI of India has to start spending in an equally balance mode, such that with every unit of money put in the demand channel, is matched with every unit of money producing one unit of supply in the supply channel to be made & bought at the same time (Remember our supply lag assumption). For example, One orders a KG of sugar on Amazon.com & is enabled to buy it, through some money paying job or government stimulus, and gets delivery the next day.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


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Vidur Raj

The author is Self taught & thought intellectual academic, in out of the box macroeconomic policy, since 1984-85. His website is www.omdic.com

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