Viral Acharya's RBI exit marks end of an unsuccessful UPA-era experiment

The import of academics without any government experience at top Indian institutions was based on the belief that a mere knowledge of academic economics would be enough to serve in government

The premature departure of Viral Acharya, deputy governor of the RBI, hopefully marks the end of a very unsuccessful experiment started by the United Progressive Alliance (UPA) government in 2013, when it brought in Raghuram Rajan as the Governor of the Reserve Bank of India (RBI).
 
This was followed by the appointment of Urjit Patel and Viral Acharya, both academics without any experience in government.
 
In the government itself, the experiment was started in 2009 when Kaushik Basu was appointed the Chief Economic Advisor in the finance ministry, followed by Arvind Subramaniam. And, we must not forget Arvind Panagariya, who was appointed Vice-Chairman of the NITI Aayog.

 

One must hope that this practice of importing economists to top posts will stop now. Earlier, such imported economists started near the middle.
 
The importation at the top was based on the belief that a mere knowledge of academic economics is enough to serve in government. As it turns out, it is not because after learning to fly on a simulator you may be able to crash the plane but certainly not fly it over long distances.
 
That requires a knowledge of other things, not the least of which is the lay of the land. In this case, that comprises knowing how government functions, namely, that it is a political entity and not something out of textbook on mechanism design.

 
None of the five economists mentioned above, whose professional excellence is beyond dispute, had the faintest idea of this. As a result, they failed in influencing policy except when it suited the political objectives of the government, whether UPA or the National Democratic Alliance (NDA). In that sense they performed no better than columnists.
 
One problem was the tendency to assume that everything India had done and did was wrong. This happened because the tests used to judge the validity of policies were the ones that applied solely to the US – not even Europe, let alone other parts of the world.

 
At the core of it lay an understanding of economics in which local politics and equity played no part at all. Whether it was the reform of labour laws or the independence of central banks or the reform of land acquisition laws or corruption or whatever, the same problem arose.
 
Indeed, it was the exact equivalent of the political scientists who apply the norms of the western hemisphere to Indian politics and political institutions. What we hear therefore are howls and cries of anguish.
 
All of them forget, however, that whatever they have now is the result of 500 years of evolution, often very bloody and expensive. To try and use these values and institutions as if they were Completely Knocked Down (CKD) units was doomed from the very start.

 
So what next? If India is going to stop importing economists, will it choose from the government pool of talent or will it look for people outside it? For example, who will replace Viral Acharya? Someone from the IAS or the RBI or some Indian academic institution?
 
The answer to this question will form the basis of appointments for the next five years. One can only hope that the choice will always be on merit and not political or ideological considerations.
 
Finally, a word of caution to my colleagues in the media: the jobs they get so excited about are, in the final analysis, not very important jobs. They are senior management, not top management.

 
Or, in the jargon of economics, substitutability is very high because the responsibilities are not that critical. So the advice: don’t go by the title, go by the work.