Macroeconomics: Then and now

We need a different approach in an economy that is more open, more private sector oriented and much less monsoon dependent

A little over 40 years ago, when I joined the Planning Commission, Professor Sukhamoy Chakravarthi asked me to conceptualise a model for short-term macro-policy analysis. My response was in the genre of a monsoon compensation model with two sectors — agriculture and non-agricultural. 

Agriculture, in the short run, was modelled as fixed quantity and flexible price sector, the fixed quantity depending on the monsoon and agricultural prices being determined by domestic demand and supply. Non-agriculture in the short run, on the other hand, was modelled as fixed price and flexible quantity sector, output and capacity utilisation being determined by effective