What do you think is the relationship between budget deficits and growth rates?

Question

What do you think is the relationship between budget deficits and growth rates?

What do you think these relationships say about the "development" process?

With the going on "global" recession and increase in budget deficits of governments world wide, what if any, are the economic implications you can think of? 

What happens when a strong State run country like China changes policies - reconsidering the "one child policy," "pegging the value of the "yuan" or "builds strong infrastructure"

what happens if the government goes "corrupt" like in India or Brazil?

Explanation / Answer

Budget defecits and growth rate are directly related. As we know state undertake huge investment in country to develop infrastructure . Infrastructre plays an important role in growth process . Infrastrctre bottlenecks in form of underdeveloped supply chain logistics dampen growth process. State undertake investment to develop human capital. Human development is vital for growth process. But from where did goverment will bring money to invest . For investment goverment either borrows or run down its own savings . Thus if goverment is spending more than its income then it is creating defecit.

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