An economist's selective notes

Kaushik Basu offers an engaging account of his days at North Block and World Bank but steers clear of controversial issues

cover — Policymaker’s Journal – From New Delhi to Washington D.C. by Kaushik Basu

7 min read Last Updated : Jul 30 2021 | 10:08 PM IST

Imagine you have just joined the Indian government as chief economic advisor (CEA) in the ministry of finance. You are given the final draft of the Mid-Year Economic Review, which your predecessor has prepared and which you now have to approve before the finance minister (FM) tables it in Parliament. You take that copy along to read on your flight from New Delhi to Kolkata, and after reading it, place it in the magazine pouch in front of your seat – but absentmindedly leave it behind while disembarking. You realise your folly only when you reach home. What would you do?

All kinds of thoughts would come to mind: what if the copy was picked up by the next passenger? What if that passenger happened to be a senior officer in the government? Or a businessperson who might hand it over to a television channel or inform someone in the government? Or worse, what if that passenger was a journalist?

This is precisely what happened to Kaushik Basu, who was, a week after taking charge as CEA on December 8, 2009, flying to Kolkata with the final draft of the Review that Pranab Mukherjee was to present in Parliament three days later. Having lost the document, a worried Basu even thought of resigning if it got leaked to the media. But good sense prevailed. He called the Kolkata airport and said he had left a precious document, his “research paper”, on the plane. He was told the plane had already departed for Mumbai.

Distressed, Basu realised the only thing he could now count on was luck. So he went to sleep. And indeed, he got a call from Kolkata airport early morning. A sweeper had found the “research paper”. That, in a way, marked Basu’s entry into the world of policymaking, heralding many more such episodes that were as funny as they were insightful.

Basu’s latest book, Policymaker’s Journal – From New Delhi to Washington D.C., is laced with such riveting stories. The book is based on the diary he maintained during the seven years when he took a break from teaching, spending about three years as CEA and four as the chief economist at the World Bank.

Basu’s prose is elegant and lucid. His ability to pepper his stories with the skill of an accomplished raconteur makes the book an easy read. He also appears streetwise as he does not take long to deal with the idiosyncrasies of bureaucracy. He respects the Indian media for its independence but is also mildly irritated by its intrusive behaviour and ill-informed interpretation, of which he is a victim on more than one occasion.

The diary entries also reveal Basu’s propensity to land himself in trouble. On a trip to the US with Mukherjee, his comment on European politics is misinterpreted by the Indian media as an observation that there is no hope of fresh reforms in India till the elections. That happened in April 2012 and the Manmohan Singh government was already seen to be suffering from a paralysis of decision making.

The next day Basu is asked to meet Mukherjee in his hotel suite at 7 am to explain. After the necessary clarification is issued, Basu also meets the Prime Minister on his return to explain how he was a victim of misreporting. Manmohan Singh brushes aside Basu’s concerns and politely tells him how Indira Gandhi’s principal secretary, P N Haksar, had “summed it all up when he wrote that in India, growth and reforms have to be delivered ‘by stealth’”.

That says a lot about Basu but perhaps reveals a lot more about Singh. Indeed, the recounting of Basu’s many meetings with Singh are a highlight of the book. They show Singh’s innate goodness and his statesmanlike qualities but expose how politically weak and resigned to indecisiveness he had become even by 2012.

Basu does not brush under the carpet the many embarrassing moments during his stint in North Block. On two occasions, he plans to resign – once when the FM asks him to join him at a meeting with the Reserve Bank of India governor in Mumbai on a day he has already scheduled one of his lectures in Guwahati. He walks into Mukherjee’s room, who takes one look at him and allows him to go for his Guwahati lecture.

The second is when Basu uploads his research paper on the finance ministry website, arguing how the corruption law in India should be amended to absolve the bribe giver of any guilt. This, in his view, would break the conspiracy of silence that both the bribe receiver and giver enter into because the law treats them both as guilty. This became a major political controversy, with demands for the paper to be withdrawn from the website. Basu decides if he is forced to do so, he would resign. Much to his relief, the FM issues no such instruction to him. More importantly, the PM disagrees with his views but allows him to retain the paper on the website and speak to a television channel to explain his stance. It is a different matter that so overwhelmed is Basu by their cool and mature response that he chooses not to speak to the channel.

The only area that creates some tense moments for Basu seems to be monetary policy management. His diary entries show that he admires the independence of the RBI, but there is also a hint of the stress all his meetings on monetary policy with the RBI governor and the FM generate. Even his assessment that inflation cannot be reined in just by interest rate tightening is opposed by the RBI and others in the government. Basu seems to be a lonely voice here.

Though Basu’s tenure at the World Bank was longer than the time he spent in the finance ministry, the diary entries of his North Block days are more detailed and substantive. His World Bank entries are largely focused on globe-trotting (he visited 20 countries in about a year) and fighting turf battles within the Bank, or failing to find acceptance for his idea to launch a Living Life Index to measure the ease of living for the common people.

But he tastes success in forcing the publication of an annual data series to compare how nations fare in terms of the bottom 40 per cent of their populations; and in refocusing the World Development Report to examine how economic development depends also on non-economic issues. Towards the fag end of his tenure, Basu also succeeds in shifting the direction of deliberations in the World Bank. As an alternative to the widely accepted Washington Consensus, he bats for the Stockholm Statement that underlines that economics is not just about free trade, deficit control and GDP growth, but also about inequality and sustainable growth.

It also seems Basu provided key inputs for Barack Obama’s famous advice to Narendra Modi in 2015 on the need to uphold the country’s values of freedom, guaranteed by the Constitution. And that Arun Jaitley should visit former prime minister Manmohan Singh before he presents his first Budget in 2014 was an idea Basu mooted during his meeting with the finance minister.

The problem with the book, however, is that unlike the promise of the blurb, Basu does not offer any special insights into how he advised the Indian government or the World Bank leadership on critical policy issues. None of his entries takes you into the nitty-gritty of preparing budgets, the thinking behind controversial proposals like the Vodafone tax or how the Singh government managed the fallout of the many corruption controversies.

That makes you wonder if the diary entries were carefully selected or sanitised by Basu before he decided to expand them into a book. In that respect, Basu’s efforts are no patch on the famous diary entries published many years ago by B N Tandon, a joint secretary in Indira Gandhi’s secretariat during the Emergency years.