Raghuram G Rajan
left the Reserve Bank of India as its Governor after completing his three-year tenure in September 2016. There were expectations that he might continue for a couple of years more. But about three months before his tenure was to end, Rajan shook everyone up on a Saturday afternoon by announcing that he had decided to get back to academia in the United States.
On August 1, Arvind Panagariya
announced that he had resigned as vice-chairman of NITI Aayog
and he would get back to the US to resume teaching in the same university from where he came. Panagariya joined the Aayog in early 2015, making the duration of his stay with the Modi government
well short of three years.
What is common between the two departures? Both were academics with some stints in between at multilateral institutions like the World Bank, the International Monetary Fund and the Asian Development Bank. Both are going back to the academia after a surprise decision to leave the Indian government.
Remember that even Rajan had the option of having an extended tenure. But there were differences of views over the length of the extended tenure as a result of which Rajan decided to get back to teaching. Panagariya was reported to have got a tenure that was coterminous with that of the prime minister, but he too decided to cut it short, apparently because he did not want to give up a permanent tenure as a professor, which he would have lost if he had continued in the Aayog beyond August 2017 as his university had declined to extend his leave any further. Panagariya had to choose between a permanent teaching job in the US and a limited-tenure job in the Aayog. He opted for the former.
What is not common between the two departures is equally worth noting. One, Rajan was originally appointed by the United Progressive Alliance government and the Narendra Modi government
continued with him. But Panagariya was appointed by the Modi government.
Two, Rajan was known for making statements on the government's policies that many believed were beyond his brief as the RBI Governor and therefore became controversial. But Panagariya created no such controversies although some of his policy papers had irked some members of the Sangh Parivar incurring their displeasure. And three, Rajan enjoyed a high profile and revelled in that, while Panagariya chose to stay away from the limelight and understandably enjoyed no such prominence.
Whatever be the common elements or dissimilarities in the stints of Rajan and Panagariya, the Modi government
today cannot be faulted for wondering what its approach ought to be for hiring economists from the academia for jobs in economic ministries or regulatory institutions. As it is, trained economists from the academia take some time in adjusting to the demands of a government job as an economic policy advisor
or a regulator. Some make a smooth transition while others do a fine job but often create controversies by making avoidable statements or taking a stand that may show the government in poor light.
And yet the government today seems to have no option other than looking at eminent professors in top Indian or foreign universities to have their services as advisors or economic administrators. Within the government system, there are few top bureaucrats who can play with distinction the role of an economic policy advisor
or economic policy administrator.
Almost invariably, the Modi government
has had to turn towards the leading foreign universities to look for talents that it could hire.
Be it Arvind Panagariya, Arvind Subramanian (at present the chief economic advisor in the finance ministry) or Viral Acharya (the current deputy governor in the RBI), they all were teaching in US institutions before they were hired by the Modi government.
But Panagariya is now gone, Subramanian is due to complete his three-year tenure next month (and nobody is clear if he is getting an extended tenure or leaving) and Acharya just started his three- year tenure last December.
So, what should the government do in the current situation to retain talents and expand the pool of talents from which it could build a top-class team of economic policy advisors or technocrats?
One, the government must fine tune the contracts for hiring economists as experts in different central ministries in such a way that both their tenure and exits are better managed. This might require the government to provide clear tenures for these economists and take quick decisions on crucial issues such as any extension of the tenure.
Two, the Modi government
should learn from the past. There is no substitute to nurturing talents within the government particularly such specialist talents that cannot be sourced from the civil services.
About twenty-five years ago, the Union government’s key economic ministries and other institutions had such eminent and distinguished economic advisors and policy administrators as Bimal Jalan, Montek Singh Ahluwalia, Shankar N. Acharya, Vijay L. Kelkar, Rakesh Mohan, Deepak Nayyar and Nitin Desai in different roles advising the government on economic policies. None of them was imported into the system one fine morning. They were allowed to remain part of the government for a reasonable period of time and in due course became important players in decision making. The net outcome of that exercise was that successive governments benefitted from their advice and economic management skills for several decades.
Unfortunately, that practice of nurturing specialist talents within the government system was discontinued from the late 1980s. Consequently, even as many of these names retired from service or quit the government, starting from the early 1990s to the early years of the 2000s, the governments in the last decade and a half have had no benefit of such experts while framing economic policies. Simultaneously, identifying new talents to fill specialist posts in economic ministries became a difficult task. Yes, you had a Kaushik Basu or a Raghuram Rajan or an Arvind Panagariya.
But they did not stay in the system for long.
It is, therefore, time the Modi government
started building a team of economists who could be groomed and trained by allowing them to grow and gain experience of working in different central ministries and organisations of the government. This might require proper training of the young economists who join the Indian Economic Service. The growth path for those Indian Economic Service officers, who are talented, should be closely monitored and if necessary fast-tracked in deserving cases so that the government in coming years has the benefit of top-class expert advice from within the system instead of relying only on experts, who are hired for a short tenure and stay even for a shorter term.
Equally important would be to allow lateral entries of professional economists at different levels so that the government has an expanded pool of talents from which it can identify and select the best technocrats to be part of economic ministries. It will be important for the government to remember that such talents could also be sourced from the many economic policy think tanks and top academic institutions within the country.
Hiring top economics professors from foreign universities can help up to a point in meeting a short-term gap, but that alone cannot be a substitute for building a team of economic policy experts within the government that can serve the long-term interests of its economic policy formulation.
Disclaimer: Views expressed are personal. They do not reflect the view/s of Business Standard.