In a move that could bring its advisory council’s ears closer to the ground and to market realities, the government Thursday announced the appointment of Nilesh Shah, MD of Kotak Mahindra Mutual Fund, and Neelkanth Mishra, MD, India Strategist and co-head of equity strategy, Asia Pacific for Credit Suisse, for two years as part-time members of the economic advisory council of the Prime Minister.
While V Anantha Nageswaran, dean of Institute of Financial Management and Research, was the third person to be inducted into EAC, the appointment comes almost three weeks after the two part-time members Rathin Roy and Shamika Ravi were dropped from the council and Sajjid Chinoy, chief India economist at JP Morgan, was inducted into it.
Speaking on his appointment, Shah said: “This is an honour to serve the country. I look forward to add value to the committee from my learnings of last three decades as a student of the market.”
Shah has been a star fund manager for over two decades — he has handled ICICI Prudential Mutual Fund and was CEO of Axis Capital, the investment banking arm of Axis Bank.
At a time when various indicators including bank credit growth, sales of passenger vehicles, two wheelers and retail
consumption are showing a marked slowdown that is getting reflected in GDP growth numbers too, there is a sense in the market that appointment of credible market names will help build confidence in the market.
Terming it as an “excellent move,” Naushad Forbes, co-chairman of Forbes Marshall and a leading voice of India Inc said, “It is a very healthy sign to bring the best economic capability and competence in the advisory role for the government. I would also like to see the government bringing in top rated academic economists, who are willing to work with the government, as full-timers.”
This also comes when many including former RBI Governor Raghuram Rajan have raised concern over the government not willing to take criticism. Recently, Rajan in a Linkedin post said, “If every critic gets a phone call from a government functionary asking them to back off, or gets targeted by the ruling party’s troll army, many will tone down their criticism.With no criticism, the government will live in a pleasant make-believe environment, until the harsh truth can no longer be denied.”
Last month, the government had reconstituted the EAC-PM under existing chairman Bibek Debroy, for a period of two years. Ashima Goel of Indira Gandhi Institute of Development Research continued to be one of the two part-time members with Chinoy in the Council. Ratan P Watal continued as Member Secretary of the EAC-PM.
Both Ravi and Roy had been critical of the government’s approach in tackling the economic slowdown. Ravi, Director of Research at Brookings India, had in a tweet on August 22 said, “We are faced with a structural slowdown. Urgently need to follow a #NationalGrowthStrategy with time bound goals for many ministries. Need major reforms, not mere tinkering. Leaving economy to the finance ministry is like leaving the growth of a firm to its accounts department.”
Roy, Director at National Institute of Public Finance and Policy, had argued the need for pushing structural reforms instead of fiscal stimulus. “Muddled macro, asserting slowdown cyclical then arguing for sector, admin reforms, relative price distortion fixes – all measures to fix structural problems. Easy macro policy absent structural change can temporarily boost growth. That’s not countercyclical. That’s populist,” he said on August 21.
India’s GDP growth fell to a 25-quarter low of 5 per cent in April-June quarter. The IMF recently cut India’s growth projection for 2019 to 6.1 per cent, which is 1.2 per cent lower than its April projections. World Bank also revised down India’s GDP forecast for financial year 2019-20 from 7.5 per cent to 6 per cent.
The EAC-PM advises the Prime Minister on macroeconomic issues and other matters referred to it by the PM. So far it has not made its suggestions public. The Council has submitted papers on issues including employment, macroeconomic situation and growth.