Illustration: Jayachandran/Mint
Illustration: Jayachandran/Mint

India’s search for policy economists

The lack of quality policy thinkers is an acute problem in the state capitals

The appointment of Harvard University economist Gita Gopinath as an adviser to Kerala chief minister Pinarayi Vijayan has led to the usual political drama. Leftist ideologues have angrily asked how a communist chief minister could seek the advice of a “neoliberal" economist. This debate comes just weeks after the Subramanian Swamy-led social media campaign accusing Raghuram Rajan for not being “mentally fully Indian". The two hysterical ends of the Indian political spectrum seem to be fused together in a common paranoia.

Vijayan has done well to appoint Gopinath, an accomplished macroeconomist who got a tenured position at Harvard at the young age of 38. The Kerala chief minister had earlier appointed economist V.K. Ramachandran to the state planning board rather than the usual Marxist thinkers.

There are three broader lessons from this episode that also deserve attention.

First, India needs a new generation of policy economists to replace an older generation whose greatest achievement was the first generation of economic reforms. The government saw several lateral entries into economic policymaking since the 1970s—Manmohan Singh, Montek Singh Ahluwalia, Bimal Jalan, Rakesh Mohan, Vijay Kelkar, C. Rangarajan, Arvind Virmani, Shankar Acharya and many others. Then there were professional civil servants such as Y.V. Reddy, D. Subbarao and N.K. Singh as well. Most of them were trained abroad, but at least part of their impact was due to the fact that they stayed within the system for a couple of decades, thus helping them win the war of attrition.

Second, it is important that Gopinath has been appointed by a state government rather than in New Delhi. The lack of quality policy thinkers is an especially acute problem in the state capitals. There is a lot of talk about a new federal arrangement that gives states more freedom to take decisions as well as bigger financial transfers from the national tax pool. The third tier of government also needs to come into its own. The big challenge in the age of cooperative federalism will be for local governments to build administrative capacity to take advantage of the new opportunities. Good policy advice will be a starting point. That is something that most state governments lack.

Third, many people ask the very valid question of why the Indian government habitually seeks talent only among economists who are working in foreign universities or multilateral institutions such as the International Monetary Fund. Good local economists with perhaps a deeper understanding of Indian institutional realities may seem to be a better choice. We agree that there is sometimes a blind obsession with economists who have worked abroad, an obsession that sometimes discriminates against the many good economists who are based in India, especially in the few good economics departments outside New Delhi. But it is also true that most of the best economists of Indian origin have fled local academic cesspools. The challenge then is to create a new policy ecosystem that encourages the best economic talent to stay behind in Indian universities, think tanks and research institutes.

It is now time to get a new generation of policy economists into the government system. There also needs to be a climate that allows new lateral entrants to stay for the long haul, rather than for just a few years. Kaushik Basu had a short stint as chief economic adviser. Rajan will be packing his bags soon. Arvind Subramanian has settled in. So has Arvind Panagariya. But there needs to be a much bigger absorption of talent into government through lateral entries. (The recent decision by the Narendra Modi government to appoint non-Indian Administrative Service officers to 28 joint secretary posts is welcome in this context.)

Where that talent comes from is currently only a secondary concern. Anybody who is troubled by the fact that Indian economists based in foreign universities get preference should also be asking the corollary question about the decline of Indian economics institutions. It is a far more important issue than the current empty debate about origins.

Will economists based abroad understand the institutional realities of India? Tell us at views@livemint.com

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