Most of your predecessors in this job have been macroeconomists. Your academic focus has been elsewhere. Do you, therefore, view this transition as particularly challenging?

Not really. I have as much interest and have done as much work on macroeconomic issues as my esteemed predecessors. What creates the contrary impression is that I have written even more extensively on microeconomics topics. Moreover, I believe that the micro-macro divide in economics is overdone. Good macroeconomic policy ought to be founded in serious microeconomics and I hope to be able to bring my specialisation to bridge this anyway-artificial divide.

Have you thought about how you can marry your considerable academic expertise with your very different, new assignment?

I have had an abiding interest in economic policy and I view this job not as a job at all, but an opportunity to put into practice my academic and scientific interests and to be able to give back something worthwhile to my country. I do not for a moment minimise the hurdles I will have to face in trying to put the best ideas to work and I am sure my first couple of months will involve a steep learning curve. But the reason I agreed to step down from my cherished profession of research is that I want to be able to make at least a small dent in the lives of ordinary people. I consider it a great honour that I have been asked to be Chief Economic Advisor and I am going to do the most I can to make this a success.

This is your first job in government. Are you worried or concerned about the bureaucracy (in general) in the functioning of government?

I don?t think there is anybody, including bureaucrats, who looks forward to encounters with the bureaucracy and all I can say is that in this I am like other bureaucrats. More seriously, no, I have no apprehensions on this score.

When I founded the Centre for Development Economics in Delhi, which, I may gladly add, is one of the most important institutes for development research in India and globally, there were regular interactions with the government.

I have also earlier been the director of the Centre for Analytic Economics at Cornell, which involved ample amounts of administrative work. Fortunately, one un-researcher quality in me is that I like working with people and so, again not unmindful of the fact that I will have to learn a lot, I am very excited at the thought of my first stint in government.

One of the biggest challenges of this government is to bridge the fiscal deficit. What are your views on deficits?

My view on this is fairly traditional. Deficits must be kept on a tight leash in the long run and even in the medium term. However, during recessions one may need to use them to administer stimulus to the economy. This is exactly what our government did last year and this has yielded results. But we have to, within a short time, get back to reining in the deficit.

Dhiraj, let me also add that I would not have taken this break from my active and cherished life in research to work on just routine fiscal matters. I come to government with a lot of ideas that I will in due course put in public space. Let me give you one example. I feel India needs to work really hard to cut down on bureaucracy and corruption. If the current bureaucratic hurdles can be cut by say even 10%, this can have a dramatic effect in energising the Indian economy.

India fortunately now has a government that wants to do things. I have data with me to show that cutting down bureaucracy and corruption is now feasible and I hope to be able to work on this during my tenure. I have other such plans and ideas but let me not go into those now.

You have been in the US during the global economic crisis. What in your view are the major lessons for India from the financial crisis? Should the crisis mean we go slowly on financial sector reforms?

No, in my view, that will be a wrong lesson. We have to persist with more, not less, financial reforms. In fact, financial reforms have to be a perpetual process. As the players in the financial market get more sophisticated and discover new products and new strategies, government has to evolve new policies that regulate behaviour without stifling enterprise and innovation. The big risk of crisis arises not from financial sector reforms but from stagnation in financial sector reforms and their failure to keep up with the evolving markets. Done correctly, reforms can create a vibrant stock market, enabling firms to raise funds and make new investment, boosting growth and creating jobs.

There is a renewed debate on the relative roles of the state and market after the crisis. Where do you stand?

The crisis taught me many things but nothing on this. On the roles of the state and the market, I believe what most good economists believe, which is far from what ideologues believe. Both play vital roles but in different domains. The market needs to be given as much room for free functioning as possible so that it can innovate and create new ideas, products and strategies. The state on the other hand has to direct its attention to the poor, making sure that they get their basic needs?education, medical facilities and other essentials, which can help them get integrated into the mainstream of society and the economy. It also has to play an enabling role for the markets to function well?enforcing contracts efficiently, and ensuring that all players abide by the rules of the game.

There is much talk about exit strategies from stimulus. Are you worried about inflation or do you think that growth is still the priority for India?

I think it is wrong to think of inflation control and growth as contrasting objectives. Inflation in the long run adversely impacts growth, and vibrant growth is a cure for inflation. In my opinion, we must not waver from the high growth path that India has been on in recent years. We have to simply ensure that the spoils of this growth are better distributed. Indeed, a better distribution could in turn boost the growth rate further. My personal view?and I stress that this is my view, which may not be shared by others?is that an annual growth rate of 10% is well within the reach of India. If this is sustained for ten years, it can change the face of this country.

Do you think we?ll have to exit from the stimulus before the major developed economies?

I have talked enough. Give me a few months in this new job and I will answer the question.