We have a fairly wide set of economic advisors for the Indian government at different levels who provide perspectives on the official view. As they are economists, there would always tend to be varied interpretations on the causes and solutions for various economic issues.
The issue today is whether we can chart out prerequisites for the Chief Economic Advisor’s (CEA’s) position, now that the present incumbent, Kaushik Basu, is about to bid goodbye by the end of this month.
The issue is: what should be the qualifications or background of India’s Chief Economic Advisor?Moneycontrol.com
Let us look at the present set of economic advisors in government. To begin with there is Basu himself. Then there is Montek Singh Ahluwalia, who heads the Planning Commission and represents another position which goes back to the days of planning and socialism. The Prime Minister’s Economic Advisory Council (PMEAC) is a more recent addition, where the Chairman, C Rangarajan, tells us straight the view of the PMO.
Currently, the PM is also the FM, so there would be some convergence of views. Otherwise, the ex-FM, Pranab Mukherjee, was also a veteran economist in his own way.
He had his own economic advisor, Rajeev Malhotra, who is not so much in the media, but plays a very important role in what happens in the finance ministry. Then there are opinions coming from non-core economists such as the finance secretary, who has expertise and authority on the same subjects.
Moving to Mumbai, we have another set of economists, who occupy the Reserve Bank of India, headed by the governor and four other deputy governors – each an experienced economist with his own kind of specialisation. The Mumbai Club on Mint Street looks at the monetary aspects while the Delhi Club is more macro when not dealing entirely with the budget. It also has to look at things from the government’s angle – meaning it has to keep politics in mind.
However, views are still expressed across domains. Expecting a convergence of opinion is as challenging as getting John Maynard Keynes to agree with Milton Friedman or Robert Lucas or Friedrich Hayek. But, still they do generally talk the same language as all these arms function as a whole.
The issue is: what should be the qualifications or background of India’s Chief Economic Advisor? The choices, or rather the options, are: an academic or a practitioner, one with a global or IMF flavour or home-grown and nurtured, a corporate or a public sector background, an Indian or a foreigner, one with political experience or an independent economist, a Keynesian or a Monetarist. These considerations are not exhaustive but could come in when considering the replacement.
While there are economists from the west who would speak the IMF language of a Raghuram Rajan (who is one of the contenders for the job, and who stands for less government and more markets), there are foreigners like Joseph Stiglitz, who probably think more about developing economies, and could actually serve as spokespersons for the government when confronting the global bandwagon.
Stiglitz probably rightly believes that we need different standards for developing countries and one size does not fit all. We already have the Planning Commission, where the present incumbent as Deputy Chairman has IMF at the back of the mind. He has now assimilated the ground reality to strike a balance.
Academicians are good because they are neutral, but then the background again matters because there is always a conflict of opinion when it comes to balancing the situation at the ground level with the ideology being pursued in text books. This matters because most people with foreign backgrounds would tend to steer towards free markets and efficient allocation of resources, while governments are all about the opposite, with political compulsions and social motivations being the driving forces.
This leads to conflicting situations where one has to take a call on the extent to which diversions from prudence can be accepted. After all, governments are supposed to do what the private sector does not and building a road to let the BMWs roll by is not more important than, say, the NREGA with its leakages.
Also, a consideration which is worth talking about is whether the CEA should know the real India. How many of them have actually stayed or been to interior India and seen how people live or die to really understand how the nation functions?
Views on, say, the public distribution system (PDS) would tend to be different where we speak of efficiency and use of the Unique ID and technology for better delivery while at the ground level we do not have electricity to actually turn on the lights.
This is important because every time we talk of policies we are critical about delivery and little realise the actual good that may be taking place somewhere in a corner which we are not aware of. Similarly, saying that diesel should be deregulated or power subsidy reduced sounds good in theory but, then, when we see a farmer struggle to pay for his fuel to run his pump set one could come away with a different impression. Therefore, a precondition for the CEA should be that we need someone who knows the theory well, but also knows how the country functions.
The CEA should be one who can actually draw the right balance between what should be done, and given the constraints of political expediency and social conditions, what can be done. Given that there are strong arguments for and against certain policy reforms, we need innovative thinking to find solutions within these walls.
The vote hence should be in favour of a homegrown economist as we already have someone with the IMF knowledge in the Planning Commission. Corporate economists could also work, but they could be brainwashed into presenting a corporate view, which though compelling, may not be pragmatic. The public sector could also be considered, but the PMEAC probably has one which has been associated with the government for long.
Political economists could be biased by ideology, but a foreigner could be interesting. A name like Jean Dreze would strike the right note because we would actually have an Indian view of India rather than a view from the IMF or a foreign university where the voice is not indigenous. Given that our policies have eluded the poor most of the time, we need someone who can seriously think for them and give advice.
The author is Chief Economist, CARE Ratings. These views are personal
