Prime Minister names economic advisers

Accelerating growth is priority, says Rangarajan

The government today notified the setting up of the Prime Minister's Economic Advisory Council (EAC). Apart from advising the Prime Minister, the council would be providing inputs for the Budget and on policy making to the government.

The four-member council consists of experts in agriculture, Industry and public finance.

"The council will have a three-fold function," C Rangarajan, the council's newly appointed chairman, told Business Standard. It will offer periodic reports on the state of the economy to the Prime Minister.

The modalities have to be settled, but the EAC would draw on various sources of information and piece them together, he said.

The EAC would also offer advice on various issues it considers important. "The PM may also make references to the EAC for advice," Rangarajan said. The EAC is expected to hold its first meeting in the first week of January 2005.

Other than Rangarajan, who chaired the Twelfth Finance Commission which has just submitted its report, the EAC also includes Suresh D Tendulkar, professor at the Delhi School of Economics, GK Chaddha, vice-chancellor, Jawaharlal Nehru University, M Govinda Rao, director, National Institute of Public Finance and Policy and Saumitra Chaudhuri, economic advisor, ICRA.

The previous government had a jumbo EAC with over 20 members. The limited size of the new EAC indicates that there are "public policy issues the PM would like us to address," said Rao.

"Accelerating economic growth and ensuring that it results in larger employment opportunities are the primary issues facing the economy today," said Rangarajan adding that what needed to be done in terms of saving, investment and even for industry segments will be considered.

"In terms of the overall macro-economic situation, the country needs a savings rate of 28 per cent to achieve 7 per cent economic growth. As against this, the current savings rate is only about 23-24 per cent," he said.

"Fiscal consolidation is to decrease the revenue deficit and therefore, it is important to improve the savings rate," he said. The EAC would also take up sectors like textiles where the ending of the multi-fibre agreement had resulted in a completely new scenario.

DK Chaddha, agriculture expert and non-farm development in rural areas, said that the issues of regional disparities in agriculture and employment, especially in rural areas, were issues of national importance which had to be addressed.

"We yet have to hold meetings with the PM for clear directions on what we have to do," he said.

The question of how to combine welfare programmes, which look at current equity, and investment, which has a long term impact on growth was an issue most economies had to grapple with, said Tendulkar, an expert in industrial economics.

Chaudhuri, who is the only person in the council who has a private sector profile, said that the EAC was meant to provide a "different perspective as it would look at the economy as a whole. "

India is poised to do great things, but very often the issue is how to do things and why things are not working".

Seeking advice

• The four-member council headed by C Rangarajan consists of experts in agriculture, industry and public finance
• The council will brief the Prime Minister periodically on the state of the economy
• EAC will hold its first meeting in January 2005