In dealing with everyday news, the important but not-so-novel news often gets left out. The focus here is on one such issue. Besides being outspoken on tariffs and other such matters, US President Donald Trump had stated, “Look at India. It’s filthy. The air is filthy.” It is not clear that he was talking about just clean air, or cleanliness more generally.
The statement hurts, but there is no denying that the country is, with some exceptions, not clean. It is true that people do mostly keep their own homes and workplaces clean but elsewhere the public authorities do need to get their act together.
The government did launch the Swachh Bharat Mission in 2014 and it has been quite successful in substantially reducing open defecation. But, more generally, cleanliness remains a serious issue. The familiar story is simply about spending more public money and improving state capacity for maintaining cleanliness. However, the broader story is surprisingly very different.
Sin vs virtue goods
Let us digress a bit — for pedagogical reasons. Consider sin goods like liquor, cigarettes, etc. These can be harmful and so the government tries to discourage their consumption. But a ban is usually not advisable because there is, among other things, the fall of an industry and even a fall in the aggregate employment and GDP.
Now consider the opposite, which is to encourage what is good. This brings us to the main issue here — cleanliness. Let us classify it as a virtue good — the opposite of a sin good.
Spending more on virtue goods like cleanliness is the opposite of less spending or no spending on sin goods like liquor — with one difference.
A ban on sin goods can reduce aggregate output and employment quickly while a push to some virtue goods can work relatively slowly. This qualification aside, there is indeed a similarity between the two cases. It is just that it is a fall in the aggregate output and employment in one case and a rise in the other case.
Now policymakers are usually reluctant to ban sin goods. Then they should be keen on promoting virtue goods! Maintaining cleanliness is a virtue in itself. But it has the added economic benefits. And, no, this is not just about the standard effect of improved cleanliness on health, tourism, etc., which can, in turn, increase GDP in the future. It is a very different story here. There is a more direct effect. How exactly?
Consider, to begin with, the simplified case in which the only inputs required for maintaining cleanliness are planning, supervision and labour.
In other words, only manpower is required. In this case, people will pay more for cleanliness, and they will reduce their spending to a very small extent on each of the very many goods and services in the economy. So far it is a story of reallocation of spending.
Economy impact
But now some unemployed people will get jobs and they will soon spend their income and demand various goods and services in one way or another.
The demand by the newly employed people makes up for the initial fall in demand due to the requirement to pay more for the output of, what may be called, the cleanliness industry. This industry can be expanded in a big way.
So, the prevailing output and employment are somewhat maintained, and additional jobs and output are possible.
The additional output is not in the form of goods but in the form of cleanliness services.
Next consider the more realistic case in which there is a need to spend on not just salaries but also on materials, bins, equipment, etc. In this case, the job creation is relatively less.
Accordingly, the demand due to the additional income by the newly employed people makes up only a part of the demand lost after people are required to pay a little more for cleanliness.
However, the spending on materials, etc., makes up for the remaining fall in the initial aggregate demand in the economy. It is true that there can be, in the process of adjustment, some temporary imbalances between demand and supply of various things, and there can be changes in relative prices. All this can reduce the additional output compared to the previous simpler case in which only manpower is required.
However, fortuitously the cleanliness industry can be, at least in the context of India, a relatively simple industry and so the adjustment is unlikely to be very difficult. There is often a tendency to associate an outside push to output and employment with, say, monetary stimulus by the central bank.
But there is no such stimulus here. In this case, people pay some additional local taxes or charges, and thereby forego some usual consumption, which paves the way for what is needed in the cleanliness industry. It is this which is missing in the case of additional spending through a monetary stimulus. So, the policy here is, by and large, non-inflationary which is unlikely if instead “too much money chases too few goods”.
An interesting question remains. If we can raise output and employment in the cleanliness industry, then why stop there? Why not expand more generally? The cause for which people are required to sacrifice some existing consumption has to be widely acceptable. And, the additional charges/taxes imposed have to be small.
Finally, the adjustment process should not be very difficult. These criteria are more or less met in the push to the cleanliness industry. So, there is a plausible feasibility here. But we need to be careful in expanding other industries through the proposed policy. To conclude, it is high time maintaining basic cleanliness becomes a priority — more so when there is, in fact, an opportunity here.
We can get a little higher, and not lower, growth in aggregate GDP and employment.
The writer is an independent economist. He taught at Ashoka University, ISI (Delhi) and JNU
Published on April 16, 2025
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