Horses for courses

Neither the UPA nor the Modi government has much cared what sort of economist it appoints to what job, says the author

Of the many things the Modi government has been criticised for since 2014, one is its disinterest in economists. But if you go back a decade — more, if you want to — you will find the same problem. Neither the UPA nor the Modi government has much cared what sort of economist it appoints to what job.

There are two pivotal jobs that matter — to the extent the boys in the IAS allow them to matter. One is chief economic adviser (CEA) and the other is deputy governor in charge of economics at the RBI.

These guys are paid to worry about certain things. But what if they worry about the wrong things?

In newspapers, for example, we don’t let the editing staff worry about news and the news gatherers worry about editing. Any member of the editing staff who questions the news gathering staff will soon be told off. And vice versa.

In the advisory positions in government, however, this basic rule doesn’t apply. It’s almost as if the IAS — it’s a bird, it’s a plane, no it’s the IAS! — has taken over. Specialisation doesn’t seem to matter as long as the CV is a mile long.

I have no idea what Arvind Virmani’s specialisation — Harvard PhD notwithstanding — was but he had at least worked in government for a very long time. His predecessor, Ashok Lahiri, was an econometrician by training.

The Economists

Kaushik Basu was basically a theorist. Moreover, he had been living abroad since 1993. Nor had he ever worked in government. He thus suffered from two handicaps. Raghuram Rajan was an engineer who wandered into economics. His specialisation was finance.

Arvind Subramanian was a trade economist. His approach to the government and India’s economic problems were also rather unsuited to the job.

After nearly a decade of these guys, especially the last three, we are entitled to ask: What did they contribute? Their CVs gained but what did the government get in return?

Indeed, how could they contribute anything useful when they were ships that pass through the ocean that is government policy? All three now have gone back to the US to their jobs in various universities and the latest fashions in academic economics.

Even if we grant them their intellects, is it any wonder that the IAS guys didn’t take them seriously and even, on occasion, treated them as a nuisance?

Even the current CEA is a finance man. Eventually he too will return to academia, with a nice add-on to his CV.

I have a suggestion to make therefore: In order to qualify to even apply for the job of CEA, the applicant should have worked for at least 10 years in government. That’s more or less how it used to be till about 2004.

Even if it’s not 10 years it should be some meaningful minimum. In any event, this parachuting must stop. The current system is a total waste of taxpayers’ money.
 

The RBI, like the government, also employs a lot of economists. In government, the CEA is their head. In the RBI it’s economist deputy governor who heads the economists.
 

Since 2009, only the late Subir Gokarn had proper Indian experience. But he, too, was not a money or finance man, which is what the job requires. He would have been more suited as CEA.

After him came Urjit Patel, whose specialisation was not quite monetary economics. He had worked at the RBI as a consultant, though, in the 1990s. Nor, despite his intellect, was he cut out to head the research department of the RBI.

He was succeeded by Viral Acharya. His specialisation was, in my view, more suited to the Securities and Exchange Board of India.

Now the RBI has to recruit his successor and I would suggest it look inwards into its own research department, just the way it used to until S S Tarapore’s retirement in 1996.

What’s to be done?

I think the government should set up a cadre, which is a fast-tracked one, to which economists in the age group 40-50 are recruited. Economists from the Indian Economic Service should also be eligible to apply, as should the ones from the RBI. No one else should be eligible, least of all from the IAS, IFS, etc.

Once this cadre has been set up, the CEA and the deputy governor should be selected from it and nowhere else because if you don’t know whom you are working for — the sovereign, not yourself — you are bound to be, as one former CEA recently said, of little use other than as editor of the Economic Survey.
 

And even that requires different skills.