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A thread on why cutting down MPLADS fund is going to be disastrous for the economy. Apart from the issues related to centralised control of funds, there are major economic implications for this move by the centre. [With inputs from @Ra_shmi_Tweets ] (1/n)
When experiencing an economic crisis, the first thing the govt should do is increase public spending. This is because the economy needs to have more money circulating. The logic is simple.
People should have more money, so that they demand more and consume more. (2/n)
People should have more money, so that they demand more and consume more. (2/n)
If income falls, purchasing power falls, demand fall, supply falls, unemployment increases and the cycle continues. This will lead to depression. [A link to a previous thread on why this happens shall be posted at the end.] (3/n)
Now, low and medium income group are the most important groups here because their Marginal Propensity to Consume is high. MPC is how much you increase your consumption with an increase in your income. (4/n)
MPC being higher in low income group means that they tend to spend more of whatever additional income they earn. Spending more means more money gets circulated further, increasing demand further, creating a multiplier effect. This is why more focus should be on the poor. (5/n)
What the government should ideally do is to focus on rural economy, especially the primary sector, increase basic minimum pay across all sectors, increase transfer payments and take up infrastructure projects. (6/n)
And these can be ideally done only using MP funds since MPs know what will and won& #39;t work locally. The projects they take up, the kind of people they are dealing with all have simultaneous economic implications. Taking it away is pushing the already sick economy into a coma.(n/n)
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