Terming himself as an “insider outsider” in the government, Chief Economic Adviser Arvind Subramanian criticised experts for withholding objective assessment of policies and trying to remain on the “right side” of power”.
“My claim is that experts often hold back their objective assessment. Instead, they censor themselves, and in public fora are insufficiently critical and independent of officialdom, whether the officials are in Mumbai or Delhi. To the extent they offer criticism, it is watered down to the point of being unidentifiable as criticism,” he said.
Subramanian said it is difficult to understand the reason as to why experts feel the need to stay on the right side of power. “If you ask them, they would say they are just trying to be ‘constructive’. But I feel something else is at work. For a variety of reasons, experts feel the need to stay on the right side of power – whether the RBI or the government,” the CEA pointed out while delivering a lecture organised by the Nehru Memorial Library and Museum.
He said even bankers are careful not to get onto the wrong side of the government or the RBI, because they worry about losing access and because they are regulated by them. On the behaviour of officialdom, he said all they want is validation.
He added that he himself has given a dissent note in a government constituted panel to review Fiscal Responsibility and Budget Management (FRBM).
Terming fiscal deficit targets suggested by the FRBM panel headed by former revenue secretary N K Singh as “arbitrary”, Subramanian had said that adherence to them will aggravate “booms and busts” to the detriment of the economy. He said that the important thing about fiscal deficit is that it should not be “irresponsibly expansionary”.
Citing the example of RBI monetary policy review during demonetisation, Subramanian said a consensus had built up among the investor community and economic analysts that the RBI would lower interest rates.
This consensus, he further said, was based on a declining trend in inflation from the second quarter of 2016-17 and the projected short-term adverse impact of demonetisation on growth. It turned out that the monetary policy committee (MPC) did not cut rate, he said, adding that it rather signalled a more hawkish stance — by going from accommodative to neutral — and has maintained that stance since then. “Yet, instead of criticising the official decisions, analysts found ex post logic to attribute merit to these decisions. Far from criticising the central bank… analysts praised the policy stance…,” he said.