Lessons from shutdown

Nov 09 2013, 05:53 IST
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SummaryThis refers to Paul Krugman’s recent column “The damage done”.

This refers to Paul Krugman’s recent column “The damage done”. It was really interesting to read the report prepared by the macroeconomic advisers for Peter Peterson Foundation in which it is stated that “the fiscal policy is unsustainable and large, prospective deficits and debt, driven by ‘mandatory’ spending on social benefits for the ageing population and insufficient revenues, pose an eventual threat to the US economy. Yet, partisan divided government has failed to address this long-run problem sensibly, instead encouraging a policy that is short-sighted, arbitrary, and driven by calendar-based crises…” Paul Krugman strongly criticises the report. Economic theory suggests that as the public debt and deficit will rise, interest rates will rise and private investment will dry up, further reducing the growth rate, and will increase the unemployment rate. It is interesting to see how the game of politics is played in the most advanced economy between the Republicans and the Democrats. Uncle Sam should understand that the world is watching and expecting a more responsible behaviour.

If you look at India, the country has been, at times, at a high risk of impasse, but the government never shut down per se. Interests of minorities are always protected; even a leader of very few voters can dictate the terms and can positively negotiate. Dysfunction or inefficient governance are built-in characteristics but they never lead to a shut down. Overall, India should keep a close watch on capital flows, changing exchange rates and safeguard the interest of her countrymen.

Shishir Sindekar, Nasik

PPP or EPC?

This refers to the comments of Saikat Das of NHAI in “NHAI not averse to PPP” (FE, November 7). I agree with him that for the time being this is the right time to review PPP in India with regard to highway projects. To make the highways in order and to achieve targets, it is not wrong that for some of the projects, NHAI reverts to the EPC system. The delays in completing some of the projects, handing-over and mishandling of toll plazas by some PPPs are the examples which show that partially reversal to EPC system by NHAI will be a balancing act.

Prem Kumar, New Delhi

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