New problems,fresh insights

.The global dip of 2008 while bringing in new problems gave us newer insights as well. To stimulate economies  patch work solutions were attempted by substituting public and private debt for investment.Borrowing against future income and consumption can only sustain short- and medium-term growth.  Economies that went for large stimulus spending got caught up in a closed cycle, their balance sheets  damaged  as demand  plunged steeply.Huge deficits then followed in its wake. For re- railing growth an evolving  thumb rule is that deficits have to fall within a time horizon of 5-10 years  or else they cause worse maladies :-  a sovereign-debt crisis,  leading to destructive spike in borrowing costs, or a growing burden for the gen-next  taxpayer. There are concurrent concerns as well that need to be addressed ;social-welfare systems, subsidy regimes , demography  driving up costs such as  health care,maintaining  current consumption levels, funding  public-investment shortfalls  to boost growth  and so on.It is difficult to reconcile all of these objectives at one go. Reforms  on tax, regulatory regimes, could  help  restore balance without imposing large additional costs in the public space. But these are not sufficient to infuse the economy with a growth momentum. As a corollary, to sustain current levels of consumption and entitlements without crowding out public-sector investment,  one  must perhaps assume  that the state’s borrowing power to be unlimited. But then ,every nation has its own version of a social compact that defines the rights and responsibilities of its citizens, the role of the state, and the idea of inclusiveness. The most successful public policies and fiscal choices must  rely on adapting to changing demographic, technological  and importantly,intertwined global  factors.
     ( PUBLISHED FIN .EXP APR 20 )