While the entire world is outsourcing to Bangalore, the city must not outsource its own thinking to Western universities, think tanks and international institutions whose governance structure continues to reflect the political economy of the yesteryears, said Alok Sheel, member secretary of the PM's Economic Advisory Council.
Inaugurating the 'National Workshop on Macro Policy Environment, IPRs and Competition Policy' at IIM Bangalore on Tuesday, he advised young researchers, students as well as experts from the area of Economics and Social Sciences (ESS) area that emerging markets need to step up to the plate by injecting their own perspectives into the global debate.
The global economy is not out of the woods; it is on extraordinary life support, he said. However, even with such support advanced countries, with the exceptions of Germany and the United States, are struggling in the aftermath of the Great Recession, Sheel said.
"In a demand-constrained world, India has the luxury of grappling with supply-side problems. Our supply side crisis is of our own making, so the solutions should be within our control. This will not be easy," according to Sheel.
"This calls for tremendous political will. In India, we should leverage our three 'brahmastras' (critical levers or arrows) - agriculture that targets the inflation problem, labour-intensive manufacturing that targets current account deficit and fiscal restructuring that targets the infrastructure deficit. We should fire these three arrows from the crossbow of good governance,"he added.
Stating that financial depression may not remain an emerging market phenomenon, Alok Sheel reiterated that emerging markets were now better placed to inject their own perspectives into the global debate at premier high tables like the G20.
"The world is slowly recovering from one of the worst economic downturns since the Great Depression. In its wake, both economists and policy makers are in a state of self-doubt about the state of the global recovery, and also about what still works and what does not," he observed.
Quoting from personalities as diverse as Alan Greenspan and T S Eliot, he reiterated the changing nexus between economic debt and growth. With its framework broken, monetary policy is driving up asset prices rather than driving recovery, he said.
"The economic landscape is changing on account of globalisation, financialisation and rapid aging of societies. We need a new growth and policy paradigm from policy makers and economists."
He declared that on a philosophical plane, both finance and economics need to stop pretending that they can ever be natural sciences. "They are human sciences driven by human behavior across space and time," he said, suggesting that economic policy, financial models and even regulatory practices must take note of their impact on human behavior and adjust accordingly.