19 June, 2021

Does it Trickle Down Or Ladder Up?

After Piketty, the IMF does a rethink on inequality and poverty alleviation

Does it Trickle Down Or Ladder Up?

Trickledown economics rides on the presumption that eventually the benefits of high economic growth will percolate to those at the bottom of the pyramid. That has been the mantra in India since 1991, influenced in no small part by International Monetary Fund (IMF) policymakers. But now the IMF has had a—gasp!—rethink. In a recent paper, a five-expert group has debunked the trickle-down effect. “By lifting the ‘small boats’ of the poor and the middle class, we can build both a fairer society and a stronger economy,” Christine Lagarde, MD of the IMF, has said.

The call for a bottom-up approach should serve as a wake-up call for India. Remember the heated debate on growth-versus-development last year between Nobel laureate Amartya Sen, Prof Jagdish Bhagwati and Prof Arvind Panagariya (currently part of the Modi government)?  The Bhagwati camp argued that high growth—via infrastructure development with larger private sector participation—would help a country bridge the widening divide between haves and...

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