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Submitted by Nachiket Mor on
The findings of Kraay (2010) resonate with me. In the Indian context I worry that schemes such as the NREGS have resurrected the old Keynesian multiplier models to build their case for more government spending and higher fiscal deficits. There is no question in India there is a great deal of disguised unemployment and there is urgent need for job-creating growth. However in the presence of a strong income effect I fear that schemes such as the NREGS have merely resulted in a contraction of labour supply and slowed down the process of urbanisation that is so essential to long-term Indian prosperity. This combined with a strong "execution deficit" and very poor project selection mechanisms I fear may be resulting in negative multipliers in India. This is certainly not my area of expertise and I would be eager to learn from you and the comments of your readers if my fears are well founded or not.