Amit Mitra expresses three economic concerns
A mixture of high inflation and unemployment, lack of demand stimulus and a broken supply chain leading to large companies following vertical integration
Posted on 12.21.21, 02:28 AM
Amit Mitra, senior chief adviser to Chief Minister of Bengal Mamata Banerjee and the state finance department, on Monday raised three economic concerns – a mix of high inflation and unemployment, the lack of stimulus measures demand and a disrupted supply chain leading to large companies as a result of vertical integration.
“In history, we rarely see inflation and unemployment rising simultaneously. This is in violation of what we economics students call the Phillips curve. Today, wholesale price inflation is 14.2 percent and at the same time the year-over-year unemployment growth is 10.48 percent.
“This was seen in the 1970s when I was a student in the United States because of the oil shock. What worries me is that we are heading towards stagflation, ”Mitra said at an event organized by the Institute of Cost Accountants of India.
He also referred to Union Finance Minister Nirmala Sitharaman pulling government ministries on slow capital spending, but said spending on that head alone was not enough to create demand. surplus.
“The Union Minister of Finance, my good friend, because she chairs the GST Council and I am an active member, herself admitted two days ago that there was no private investment. She sent a notice to all the departments that did not spend enough capital. My humble submission is that the capital expenditure to build infrastructure is lagged over time. There is a need to create excess demand right now, ”Mitra said.
“Bengal has put money directly into the hands of the people, which immediately creates demand. We have also started to stimulate supply, which is creating demand. We have reduced the stamp duty on registration by 2 percent and we have also reduced the circle rates by 10 percent. Immediately our real estate industry picked up.
He also touched on the supply chain issues facing large companies that depend on struggling MSMEs across the country. “Large companies, when they don’t source from suppliers, launch vertical integration. This means they are starting to do what the suppliers used to do, ”he said.
Mitra also referred to the recently released World Inequality Report 2022. “What worries me is that the share of the poorest 50 percent of the population has now fallen to 13 percent of national income. Inequalities of this nature will lead to tensions in our democracy, ”he said.