: Chief Economic Advisor Arvind Subramanian on Tuesday came down heavily on experts for holding back objective assessment wondering why they refuse to speak the truth and try to remain on the right side of power -- be it the Government or the RBI.
“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.
He wondered as to why experts refuse to speak the truth to power adding 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 NK Singh as “arbitrary”, Subramanian had said that adherence to them will aggravate “booms and busts” to the detriment of the economy.
All the commentary over last 15-20 years has made 3 per cent (fiscal deficit target) magic number but it has no magic validity at all, he said, adding, the important thing about fiscal deficit is that it should not be irresponsibly expansionary.
“Therefore, in my dissent note to FRBM, I said one objective should be gently declining debt and gently declining deficit path to accomplish that,” 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 Nehru Memorial library and Museum here.
Throwing more light on the peculiarity, Subramanian said that before policy decisions are made, observers tend to express their views that they think officials are likely to take on board. After policy actions, they try hard to endorse the decisions already taken.
“As a result, we in the Government do not really benefit from their wisdom. This is a serious problem, because high- quality policymaking demands high quality inputs and high quality debates,” he stressed.
“The paradox is that in other spheres — such as trade policy or development policy — one sees a more vibrant, healthy, and unself-censored debate. Why is there such little debate about macro policyIJ I would venture three explanations,” he said.
Speaking about bankers’ dilemma, Subramanian said they are careful not to get on to the wrong side of the Government or the RBI, because they worry about losing access and because they are regulated by them.
Quoting renowned American writer Upton Sinclair, he said, “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”
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, as consistency would demand, analysts found ex post logic to attribute merit to these decisions. That is, far from criticising the central bank for holding rates constant over the past three announcements, analysts praised the policy stance as prudent and helpful in boosting the credibility of the inflation-targeting framework,” he said.