It was the moment of truth for Kolkata-born economist Anirvan Banerji. In 2000, his boss, the founder of one of America’s leading economic research institutes, had died, and left him in charge.
It was March 2001, and everyone, including the then Federal Reserve chairman Alan Greenspan, was predicting fair weather ahead for the US?economy.?The Internet bubble had burst, but the economy had barely twitched. The stock market looked unshakeable.
There was just one problem. Banerji’s team at the Economic Cycle Research Institute (Ecri) did not agree with the venerable Greenspan. Their economic models pointed in one direction, and one direction only—towards recession.
“The record of failure to predict recessions is virtually unblemished,” Banerji says, talking about Ecri’s forecasting models. “We were in a moment of truth: either we call a recession or we don’t.”
Exactly one year to the day, Banerji realized that “recession was unavoidable”. Geoffrey Moore, the founder of Ecri, had passed away. The man whom The Wall Street Journal called “the leading pioneer in indices” had been Banerji’s professor and mentor for 15 years. His passing left an enormous hole at Ecri.
Now the former student, along with co-director Lakshman Achuthan, had to prove the company had the ability and confidence to plug that hole. They knew that if they incorrectly called a recession, the world would think that without Moore, the group couldn’t survive.
“I was really wishing I could talk to Geoff at that time,” Banerji said.
Still, for the 51-year-old, there was only one way forward. “If you believe in your work, stick to it.” Banerji did just that. He stuck out his neck and predicted a recession was looming. Hardly anyone took him or his team seriously. In economic circles, they were called “party-poopers”. The Dow Jones rallied 20 points over the following week.
Banerji says if you believe in your work,?you should stick to it.
But other economists gradually joined the “party poopers”. Finally, when passenger airliners flew into the Twin Towers on 11 September 2001, the recession that Ecri had predicted struck home.
And when their fellow economists sifted through the evidence, one clear consensus emerged. Ecri had been right. Recession would have hit with or without the events of 9/11. And suddenly, Banerji’s team were the toast of the economic town.
Ecri’s job is to monitor the business cycle, to watch the world’s economies to predict when markets are growing and when they are about to tip into recession.
Giant corporations and governments—from DuPont to Disney and from Toyota to Taiwan—flock to Ecri’s doors, for advice on when and where to invest, and when to pull back.
But Banerji’s work is not all about dry economic numbers. Sometimes it surprises even him, like when a multinational pet food company contacted him and started talking about what the company referred to as “doggy down time”.
Banerji was puzzled. Would recessions really hurt pet food sales? Don’t all dogs have to eat? But the team did some research. As it turns out, when a dog dies, the owner typically waits to get a new dog. That “down time” depends on how well financially the owner feels he or she is doing.
“If you aggregate millions of pet owners, when the economy is doing bad, fewer dogs are being fed,” Banerji recounts. “We couldn’t even imagine that a recession would affect them, but it does.”
These days, Ecri is also reaching out to ordinary investors and small businesses, a venture that began with its 2004 book, Beating the Business Cycle: How to Predict and Profit from Turning Points in the Economy.
The book’s success prompted the group to expand its website to offer daily economic updates for subscribers, who pay $20 (Rs814) a month. Whether you are trying to decide which job offer to chose, or if graduate school might be a better bet, or if you want to know when to buy or sell a home, Ecri’s website promises invaluable advice.
“What we can do is to monitor the business cycle and give you the ability to ride the cycle, making it much smoother and more viable,” he promises.
Banerji came to the US to attend Columbia University where he received a graduate degree in business in 1985, after getting a master’s degree in business administration from the Indian Institute of Management in Ahmedabad in 1979 and an engineering degree from the Indian Institute of Technology in Kharagpur in 1977. He had finished his schooling from St Xavier’s School in Kolkata.
He never intended to stay in the US—until he came under Moore’s influence. But, to this day, he still retains his Indian citizenship.
“It’s mostly sentimental, but you never know,” he says. He does return to the country of his birth regularly, as Ecri expands to cover Asia’s third largest economy. In 2000, he launched an economic index for India with Pami Dua, an economics professor at the Delhi School of Economics.
Together, they author monthly newsletters that track the rises and falls of India’s economy. Dua says it is Banerji’s intuition and skills she so greatly admires.
“We’ve been writing together for seven years, once a month, so that really says it all. He has a deep insight into using the system of indices.”
Banerji wanted to help Indian business move away from using “the weather and war mentality” to predict business cycles. But to do that, India needed a recorded history to gauge its business cycle.
“India needs to establish a track record over the years before people can understand that [the business cycle] can be useful to them,” Banerji insists. “You can’t predict the economy until you start collecting data.”
Perhaps it is not surprising that this measured man is not getting too carried away with the meteoric rise in India’s economy. Caution, he says, remains the watchword for an economy that used to be based on the monsoon rains, but now is swept by a whole new array of forces.
“Now that it has become a world economy, more factors play into the rise and fall. People must move cautiously,” he says.
Whether in India delving behind the numbers or in Connecticut reporting to delegates from the Chinese government, Banerji is pleased with his personal business cycle. For the moment, he’s happy to be riding on the wave of success.
“We are in this very privileged position of doing interesting research, while earning a decent living and at the same time helping people,” he says.
Sixty in Sixty is a special series that we plan to run through 2007, the 60th anniversary of India’s independence. We will introduce you to sixty Indians—both here and abroad—who are not rich or famous. These are people who are making quiet, but important, contributions without seeking headlines, to help make India and, in some cases, the world a better place. We also welcome your suggestions on people whom you think should be profiled in this series. Please send your suggestions by e-mail to email@example.com