Opinion The Past,the Future and the RBI

Former Governor of the RBI YV Reddy when asked why the RBI did not make policies based on the expected outcomes said that the future was difficult to anticipate and the past was known.Thank God we have a Central Bank,which keeps on talking Economics and Statistics. Governor Subbarao (please do the right thing by him,Mr.Prime Minister,wink,wink) apparently speaking on World Statistics Day said that ‘The Lakdawala Committee used the same measurement criteria for poverty decided in 1979 by the Task Force on projections of minimum needs and effective consumption demand.’ He then pointed out the fun and games everybody had with this. But little did the Governor know that the fact that the Task Force was not superseded by the Lakdawala Committee will haunt him,by that I mean Governor RBI and thereby hangs a tale. Therefore we are not talking of the past in the 80s but a page which is still there,quite like the grin of the cat in Alice in Wonderland.

But as Wodehouse would say,first things first. What is called The Lakdawala Committee was not approved by Prof. D.T.Lakdawala. He was in fact quite peeved at the draft. I know it,because I was the Chairman of the Task Force,Governor Subbarao talked of and by 1986 was quite convinced it had outlived its usefulness and as Member Planning Commission set up the Lakdawala Committee in fact to redefine the poverty line the Task Force had developed. The members were only concerned about some statistical adjustments which gave results. Lakdawala who had a lot of common sense would not accept and wanted me,a research colleague at that time,to go and contradict and explain what the Committee should do. I was not biting since I had been dropped by the successor Planning Commission from the Lakdawala Committee,after Rajiv Gandhi,my boss lost the election and I resigned from the Planning Commission. But before the matter could be sorted out Prof Lakdawala passed away and the Report which carries his name doesn’t have his signature.

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How does all this affect the present. There is a common thread and that was Prof. Suresh Tendulkar. He was a member of the Alagh Task Force and the Lakdawala Committee and then,logically the Chairman of the Tendulkar Committee. When the Tendulkar Committee was set up I was happy. At last the Alagh Task Force which had served like the Hindustan Ambassador — a yeoman’s role for decades would be changed,an outcome I had been advocating in print since 1985 and which I wrote again after the Tendulkar Committee was set up. But now Suresh would not bite. He finally kept the Alagh urban poverty line as the National poverty line and that is why you have the strange result that if you compare the old Official Poverty Line figures with the new ones from the Tendulkar Committee,the urban poverty proportions are the same,but the rural proportions go up. I kidded him the last time I met him saying that he did not junk the old poverty line because he was a member of its parent group. Those numbers are the control totals for the NREGA and are guidelines for the Food Security calculations even by the NAC. In a professional piece I argued with a bit of algebra that the Alagh Task Force went from calories to poverty and the Tendulkar Committee went from a poverty line to calories,but economic policy is not just an exercise in causal chain logic. Governor Subbarao will bear the consequences since he will have to steer economic policy particularly interest rates and so on arising as a consequence from all this. This page from history will it seems only be facing him,particularly since the Planning Commission which ruled the poverty roost with an iron hand for over thirty years seems to have hung up its gloves and the others don’t seem to care.