Indian-American economist Abhijit Banerjee Tuesday flayed government for appointing retired bureaucrat Shaktikanta Das as the next RBI Governor, and warned that the decision leaves a lot of “frightening” questions about governance issues at key public institutions. The professor of economics at the Massachusetts Institute of Technology (MIT) made a strong pitch for strengthening the credibility of all key institutions like the Reserve Bank. When asked about the appointment of Das, who oversaw the controversial demonetisation decision as the finance secretary, his first reaction was that we should be “frightened” at the possible governance outcomes.
“Institutions exist, partly to give us forbearance, to say that ‘even if I want it, I can’t do it, my hands are tied.’ We should tie our hands a bit more. But this is too much untying,” Banerjee added. On Patel’s sudden resignation Monday, he said “we should all worry if this is a sign of institutional stress”. On the changes made to GDP computation to show a dip in growth during the UPA era, he said Central Statistics Office has been doing important work for the last many decades and underscored the need to protect its credibility.
Banerjee suggested an impartial person, preferably someone from outside, should be assigned the task of going through the changes and confirming if it meets the best accepted practices. Earlier, delivering the seventh CK Prahlad memorial lecture, he said the country will continue to grow at a faster clip for the next few years, not because of its inherent strengths, but because of misallocation of resources till now. He, however, said there is a need for growth to be higher than 7 percent, stating that it is fast turning into the new Hindu rate of growth, and warned that we risk falling into the middle income trap if it continues at this rate.
Banerjee also expressed concerns on the current state of affairs, claiming he sees a political paralysis where the ideas are being good but there is a bit of trouble implementing them due to political reasons and lack of manpower within government. He also warned that the current state of affairs run the risk of the country slipping into a “civil war” or some strife because of the uneven growth.