Unlike the practitioners of the “dismal science” — an old description of economics that still holds good – Arvind Subramanian brings a certain cavalier tone and attitude to his pronouncements, and in a way to his approach to the work at hand — presenting the big picture of the economy, which he and his finance ministry colleagues do in the annual Economic Survey.
After Kaushik Basu, Subramanian is the one who has tried to infuse a lighter tone to the heavy subject at hand. He described the November 2016 demonetisation, Prime Minister Narendra Modi’s ostensible “surgical strike” in the economic sphere, as “reverse helicopter drop” — that is, instead of infusing money into the system, money was sucked out of the system. He was also critical of the international rating agencies for not recognising the government’s achievements in achieving macro-economic stability. He has roundly berated the rating agencies for not upgrading India’s credit-worthiness. It is a legitimate grouse of a bureaucrat, and Subramanian in his role as CEA remains a bureaucrat, a cog in the wheel, but a conscious and intelligent cog.
In the Sixth V.K.R.V Rao Memorial Lecture – honouring the economist who had established iconic institutions like the Delhi School of Economics — in Bengaluru on Thursday, Subramanian took cudgels against the esoteric-sounding “macroeconomic policy commentary and research.” And he does not mince words, and goes for the jugular: “Experts often hold back their objective assessment. Instead, they censor themselves, and in public forums are insufficiently critical… To the extent they offer criticism, it is watered down, to the point of being unidentifiable as criticism.” And he follows this with the deceptively innocuous question: “Why do experts do this? Why do they refuse to speak truth to power?”
You realise that this is a rhetorical flourish and he does not intend to be scathing, though he raises the expectations of some rapier thrusts. He confesses right away that this pusillanimity of the pundits does not hold good in other spheres of economic debate — such as on trade policy and development policy.
So somewhere, Subramanian, instead of declaring war, is only indulging in a skirmish of sorts, a private duel almost, with those engaged in macroeconomic policy — that is those who argue on specific issues like growth rates and interest rates.
It may be tempting to apply Subramanian’s pulpit denunciations to experts across the spectrum, which covers not just the issue of interest rates but also education policy, culture policy and ideological positions. Not that the CEA has not the stomach for big battles, but that was not what was on his mind at the V.K.R.V. Rao Lecture. All that we can say is that Subramanian had played the blinkered expert, expressing his dissent over the state of affairs in the small corner of the macro-economic policy debate.
But there is enough blood to be drawn even in this remote corner, and Subramanian does draw out some. Apart from berating the rating agencies, his main anger seems to be with the Reserve Bank’s Monetary Policy Committee for not cutting interest rates after the demonetisation. He argues that experts had argued for a rate cut, but when the MPC did not, they went ahead and praised the central bank for its prudence.
Obviously, he finds this irritating. So, Subramanian is not looking down upon the Indian intellectual scene from his Olympian heights of theoretical macro-economics, but he is really fighting over the RBI’s refusal to cut interest rates and those who are not criticising the RBI’s mulish — a term that he does not use but which he seems to imply — stance. This might be a legitimate quarrel for all its churlish tone. The government is unhappy and the CEA is giving eloquent expression to it in terms of an intellectual debate.
Subramanian does not seem to follow his own prescription. It is surprising that he refuses to see the point of view of the rating agencies in not upgrading India’s position. They have their own assessment, and it could very well be the case that they are wrong. What Subramanian needs to prove is that despite the failure of rating agencies to recognise the shining achievements of the Narendra Modi government, the Indian economy is prospering. But he knows that it is not, and if he is sufficiently self-critical he would realise that demonetisation has not been of much help. But given his position in the government, it would be difficult for him to speak truth to power.
His complaint is that there is not enough fiscal and monetary policy support to tackle the “weak economic activity” now that “inflation is under control”. And that there are not enough voices condemning the RBI for not putting its shoulder to the wheel to get the economy going.
His criticism of the experts seemed to promise a national debate over the culture of deference that hovers like an evil spirit over the Indian intelligentsia, and to argue that in the Narendra Modi era the experts are kowtowing much more than ever before. But it does not. Like a good economist, he is sufficiently blinkered to keep his criticism confined to the government’s detractors in word and deed, and that includes the Reserve Bank of India.
Should we be happy there is some hope in the war that Subramanian has declared against the RBI and the rating agencies, and hope this would provoke macroeconomic experts to hit back at the iron-clad, mail-fisted Narendra Modi government sufficiently hard?
