Days before Nobel, Abhijit Banerjee advice to Govt: Cut red tape

On October 9, Banerjee, while speaking in response to former RBI Governor Raghuram Rajan as part of the OP Jindal Lectures at Brown University in the US, targeted the BJP-led NDA government for the “recentralisation” of decisions, policy moves that had adversely affected the rural demand and for crippling institutions.

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Appreciating the previous Congress-led UPA government for its initiatives like the National Green Tribunal and the Right to Information Act, Banerjee, who works at MIT, said: “This government felt that the government has given away too much power so they started recentralising all decisions. Institutions exist. But you put people at the top who do not have any real authority to punish people who stick out their neck and put the PMO in every possible decision. That’s how you do it. You don’t actually destroy the institutions, you kind of take away their rights.”

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He said that “institutions went from hyperactive to zombies” as there is an extra bureaucratic check on the system”. Banerjee said that decisions were delayed citing that the PMO would have to take a final stand on them. Painting a dismal picture of the Indian economy, with those in rural areas becoming poorer, Banerjee said investment was collapsing, public borrowing growing, real estate sector freezing and demands plunging to very low in the rural sector.

He blamed demonetisation, GST and policy decisions taken to “pin down the inflation pretty low and removed UPA’s spigot that was funding the economy” — such as the low MSP – for the demand deficit among the lower-income group

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The economist, who suggested an increase in the MNREGA wages, rise in prices for farmers, monetary policy relaxation and “pray” as alternatives for short-run, urged the Modi government to “be grateful and act fast” if the short-term measures bought some room.

He advised it to strengthen institutions “by signalling that PMO will not interfere with decisions made by professionals and will not reward currying favours and trying to double-guess what the PMO would want… by withdrawing cases that look obviously politically motivated (you should demonstrate that they were doing wrong before you act), by encouraging the media to pursue transparency and by accepting criticism.