Archives: Event

The 5th C D Deshmukh Memorial Lecture 2017

Dr Vijay Kelkar, one of India’s most prominent economic policymakers and thinkers with over four decades of public service in and outside the government, delivered NCAER’s 5th C D Deshmukh Memorial Lecture at the Nehru Memorial Library Auditorium, Teen Murti Bhavan, in New Delhi, on January 27, 2017.

The distinguished audience included eminent economists, civil servants, industry analysts, media and a large number of students. Dr Kelkar, who was recently elected President of the prestigious Indian Statistical Institute, and is Chairman of the National Institute of Public Finance and Policy and the India Development Foundation, spoke on his Reflections on the Art and Science of Policymaking. Dr Bimal Jalan, former President of NCAER’s Governing Body and former Governor of the Reserve Bank of India, was the evening’s Guest of Honour.

NCAER instituted the C D Deshmukh Memorial Lecture series in 2013 in memory of Sir Chintaman Dwarakanath Deshmukh, one of India’s most eminent economists and a founding father of NCAER in 1956.

The 2017 Memorial Lecture by Dr Kelkar came at a time of heightened economic and political debate in the country, with the Union Budget 2017-18 scheduled to be presented to Parliament in five days’ time on February 1st, impending elections to five key state assemblies, the demonetisation initiative launched in early November, and events in the US, UK, Europe and the Middle East that foretell growing economic and political uncertainty in 2017 and a challenge to the post-war, global economic order.

Against this backdrop, Kelkar drew on his intense experience and close involvement in some of India’s most significant economic reform initiatives, including as former Finance Secretary and Chairman of the 13th Finance Commission, to remind the packed audience at Teen Murti Bhavan that good economic outcomes relating to growth and efficiency come only from following a principled approach to economic policymaking.  Kelkar emphasised ten critical elements of what he called the science of policymaking, complementing this with his observations on the art of policymaking that balances economic, political and state capacity concerns.

While introducing the speaker, Dr Shekhar Shah, NCAER’s Director-General, said, “Vijay Kelkar is exactly the right person to deliver this C D Deshmukh Memorial Lecture.  There is a consistency of approach and a coherence of purpose running right through Dr Kelkar’s illustrious career.”  He added, “That, teamed up with Kelkar’s unbounded optimism about India’s prospects, his humility, grace, and generosity to his fellow colleagues, particularly those junior to him, and his willingness to roll up his sleeves and take on any number of the challenges our country faces with patience and a light, inspiring touch, make him the immense force for change that he has been for all these decades. We are privileged today to have him share with us his guidance on good policymaking at a time in India and overseas when the need for such advice has perhaps never been greater. ”

At the outset, Dr Vijay Kelkar thanked NCAER for offering him the opportunity to pay homage to the memory of Dr Deshmukh, whom he described as “a titan among Indian policymakers.”  Kelkar recounted how Deshmukh had headed the selection committee that gave him his very first job in India. In focusing on the science of policymaking, Dr Kelkar argued that well-functioning markets and competition can be tremendous sources of prosperity, creativity, innovation and individual freedom, and that we should be mindful of the adverse consequences of the State interfering needlessly or coercively in the workings of the market. Noting the benefits of competition, Kelkar stated, “The market economy yields good outcomes for society when there are high levels of competition. Competition pushes firms to cut costs, to innovate, and to deliver the best bargains for customers.”  However, markets are also vulnerable to ‘market failures’—arising out of what economists call ‘externalities’, poor information, unregulated market power and socially desirable goods and services that are undersupplied—creating the critical role for good government to correct such failures.

In each case, Kelkar noted that the State and the policymaker have a major role to play. But in doing so, we should worry about the fundamental role of incentives for people and how they will be affected, about balancing the costs and benefits of policy interventions, and about the State’s capacity to implement its policies. He talked about the need for ‘sunset’ clauses on policies and laws, regular monitoring of their effectiveness, and avoiding the temptation of trying to attain multiple goals with too few policy instruments. Turning to the art of policymaking, Kelkar emphasised the part played by politics, intuition, philosophy, and experience in real-world policymaking, over and beyond sharp economic analysis. He noted the vital need to sequence the building of State capacity by first establishing easy objectives before attempting to tackle complex ones. As an example, Kelkar noted that “it is better to first build a single-rate GST with a low GST rate, achieve full mastery of this, and only then consider more complex possibilities such as high rates and multiple rates”. According to him, some of the constraints that impede rational analysis in the country include the unavailability of comprehensive data, flaws in the standard public data sources, and limited access to statistics and analytical models for undertaking the formal economic assessment of many problems.

While delineating ways of improving policymaking in India, Dr Kelkar stressed the need for continuous research on the Indian economy.  He said that India needs to encourage independent policy think tanks, universities and research organisations that conduct policy research and foster public debate. In this context, Kelkar said, “We should …recognise the scarcity and value of criticism, and create an environment where we disagree without being disagreeable. There should be pleasant friendships, and an environment in which many persons are comfortable airing divergent views. Critics of public policy strategies are a valuable part of society, and essential for the process of crossing the river by feeling the stones.”

He referred to Shri Lovraj Kumar, a distinguished past President of NCAER, former civil servant and also Dr Kelkar’s mentor, who had held that in open societies more knowledge leads to better policies.  Kelkar noted that NCAER, founded by Dr C. D. Deshmukh along with others, was an outstanding reason for his optimism in this regard. Dr Kelkar concluded the 2017 Lecture with the argument that policies formulated in a transparent manner and implemented on an ‘MFN’ basis—favouring no one party over others—have a much greater chance of acceptance and achieving outcomes. Citing the example of the Finance Commission’s awards for revenue sharing, he said that these have been accepted by all stakeholders because the policy recommendations were arrived at on a fair and transparent basis.

In thanking him, Dr Shekhar Shah said, “What Vijay Kelkar has done today is to provide us a road map and a torch for troubled times.”  He added, “Kelkar’s lecture should be must reading (and viewing) for all policymakers keen to make the most of the immense opportunities India offers for its future if we know how to use them wisely.”

Vijay Kelkar is one of India’s most influential policy economists, with over four decades of public service in and outside government. He is currently the Chairman of NIPFP and the India Development Foundation, and was recently elected President of the Indian Statistical Institute. He has been involved in some of India’s most significant economic reform initiatives, including on direct and indirect taxes, on fiscal responsibility and its underlying law, as Chairman of the 13th Finance Commission, on enhancing domestic oil and gas production, as Chairman of the Committee on PPPs in Infrastructure, and his strong and steady promotion of India’s long-awaited GST. Kelkar has been India’s Finance Secretary, the Executive Director for India, Bangladesh, Bhutan and Sri Lanka on the IMF Board; Secretary, Ministry of Petroleum and Natural Gas; Director and Coordinator of the International Trade Division at UNCTAD in Geneva; Chairman, Bureau of Industrial Costs and Prices; and Secretary, Economic Advisory Council to the Prime Minister. Kelkar recently joined with Ratan Tata and Nandan Nilekani to start Avanti, a technology enabled platform for financial inclusion.  Kelkar was awarded the Padma Vibhushan by the President of India in 2011. Kelkar holds a BE from the College of Engineering, Pune, an MS in Economics from the University of Minnesota, and a PhD in Economics from the University of California, Berkeley.

The 2017 C D Deshmukh Lecture is part of NCAER’s celebration of its 60th year

 

Previous Lectures:

IPF 2016 Lecture

India and the Global Economy Post-Brexit  by Dr Arvind Subramanian

Dr Arvind Subramanian, Chief Economic Advisor, Government of India delivered NCAER’s 2016 India Policy Forum Lecture  on July 12, 2016 to an audience of distinguished economists, civil servants, industry analysts, media, and students at the India International Centre in New Delhi.  Dr Subramanian spoke on India and the World Economy in the wake of Brexit. He also released NCAER’s 2015-16 India Policy Forum volume on this occasion. The Union Finance Minister Shri Arun Jaitley also joined the lecture as part of the distinguished audience.

The 2016 IPF Lecture was part of the annual India Policy Forum economic policy research conference organised by NCAER with the objective of promoting rigorous research on Indian economic policy. The IPF comprises presentations of original commissioned papers, the annual conference leading to a published volume, and the annual IPF Lecture. A distinguished international Advisory Panel and an international Research Panel guide the IPF.  The annual IPF Volume is the highest ranked economic journal out of India based on citation counts. The IPF enters its 13th year in 2016.

In introducing the speaker, Dr Shekhar Shah, NCAER’s Director-General, said, “This is the India Policy Forum’s 13th year as we also celebrate NCAER’s 60th Anniversary in 2016.  We are especially privileged for the 2016 IPF Lecture to have with us Dr Arvind Subramanian, who in his position as the Chief Economic Advisor to the Government of India has perhaps spoken in one of the clearest voices in recent times on economic policy, both looking backwards with realism and analytical rigour and looking ahead with superb insights into the changing shape of global trade and finance.”

Dr Arvind Subramanian started his talk by complimenting NCAER and the IPF, and noted that, “It is fair to say that the IPF remains one of the really big events in the summer season of New Delhi… It has produced over the course of the last 12-13 years a lot of good research on policy in India of which I have been an avid consumer.”

 

In his IPF Lecture Dr Subramanian spoke about the implications for globalization of     Brexit and other recent developments, and what they might mean for India’s          prospects for sustained, rapid  development and convergence with the advanced    countries.  He distinguished between periods of “post-War re-globalization” from about 1960 to 1990 and then a period of “hyper-globalization” from 1990 to about 2012, with the latter coinciding with what he called the phenomena of a “Weakening West” and the “Rising Rest”, with the latter obviously including India.  He said that it was ironic that there was an inversion in the concerns on globalization: in the earlier period the anxieties were in the South around issues such  the “Washington Consensus”, and now the anxieties were in the North with the rising disenchantment against globalisation in both the US and Europe.

Looking at the developments over the past decade now culminating in Brexit and the rising tide of anger over globalization in the US, he noted that “hyper-globalization is dead, but long live globalization.”  Clearly the world had moved. It is more than likely that “deep globalization”, such as immigration and labor mobility, even amongst equals, would be difficult to sustain.  But it is very likely that “shallow globalization”, such as in ideas, technology, and even foreign capital, may be sustainable.

If there were to be limits on globalization, Dr Subramanian asked what the implications for India might be.  Should India turn to domestic consumption-led (the “Make for India” approach) led growth? If not, will the current external environment allow an export promotion/globalization strategy?  As Dr Subramanian put it, “Can the world absorb another China?” And finally, what should India do to pursue outward looking growth?

In the rest of his fascinating speech that held a standing-room only audience of more than 150 people at the India International Centre in rapt attention, Dr Subramanian shared his thinking on these three vital questions. He noted that domestic consumption-led growth of 8 percent was historically unprecedented and theoretically doubtful. So India should not just pursue a domestic-oriented growth strategy.  If China’s rebalancing were to be successful and assuming that the world’s carrying capacity for services was larger than for manufacturing, then Subramanian felt that India could achieve 15 percent real export growth and sustained 8 percent GDP growth, not uniquely without an outward strategy, but perhaps differently from other countries with a combination of services and manufacturing dynamism that India can uniquely achieve.

Dr Subramanian concluded by noting that India and other developing countries have a strong incentive to keep global markets open and preventing a reversal of globalization, and that India’s rapid growth depends on it. This would require India to assume even more of a leadership position on globalization and perhaps even a revitalizing WTO and multilateralism. Quoting Keynes, Subramanian observed that India must ensure that the “projects and politics of nativism and isolationism do not play serpent to the paradise of open markets and borders.”

Dr Arvind Subramanian is the Chief Economic Advisor to the Government of India. He has been the Dennis Weatherstone Senior Fellow at the Peterson Institute for International Economics in Washington DC, and has taught at the Kennedy School of Government at Harvard and at Johns Hopkins’ School for Advanced International Studies. Subramanian has also been a Senior Fellow at the Center for Global Development and Assistant Director in the Research Department of the International Monetary Fund, and has served at the GATT in Geneva during the Uruguay Round of trade negotiations. His books include: India’s Turn: Understanding the Economic Transformation (2008), Eclipse: Living in the Shadow of China’s Economic Dominance (2011), and Who Needs to Open the Capital Account? (2012). He has also published widely in leading magazines and newspapers, including The Economist, Washington Post, New York Times, Wall Street Journal, and Financial Times. He continues to contribute to one of India’s leading financial dailies, the Business Standard. Subramanian received his BA in Economics from St. Stephens College at Delhi University, an MBA from IIM Ahmedabad and an MPhil and DPhil from Oxford.

 The 2016 India Policy Forum Lecture is part of NCAER’s celebration of its 60th Anniversary

Investor-friendly India: How are India’s States Faring? A NCAER-PRI Dialogue

Investor-friendly India: How are India’s States Faring? A NCAER-PRI Dialogue

NCAER organized an NCAER-PRI video-dialogue, the third in the series of an on-going dialogue with PRI. The theme of the dialogue was India’s investment climate and focused particularly on India’s states. PRI, the Policy Research Institute in Japan, is affiliated with the Japanese Ministry of Finance. The Dialogue follows two earlier video-dialogues in February and June 2015 and is part of the work envisaged by NCAER and PRI to foster joint work and greater collaboration in enhancing economic relations between Japan and India.

Interest in India as an investment destination has risen sharply in Japan, particularly in the light of Prime Minister Modi’s ‘Make in India’ campaign and reciprocal visits by the two prime ministers, including Mr Modi’s last visit in November 2016 when the two countries also signed a civil nuclear pact. The number of Japanese companies entering India has gone up substantially in the past year. Building on this momentum, India and Japan have set ambitious goals for bilateral trade and investment.  Under the India-Japan Special Strategic and Global Partnership, the two prime ministers have set an ambitious target of 3.5 trillion yen for public and private investment and ODA and a doubling of the number of Japanese companies in India in just five years. Many have heralded this as a special moment in India’s relationship with Japan.

Tuesday’s dialogue featured three presentations on India’s investment climate.  Ms Mythili Bhusnurmath, Senior Consultant, NCAER, spoke on “The NCAER-State Investment Potential Index (N-SIPI)”, Mr Tomofumi Nishizawa, Research Manager, Asia and Oceania Overseas Division, Research Department, JETRO, spoke on “Japanese Companies in India: Expectations, Achievements and Challenges” and Mr Neelkanth Mishra, Managing Director, Equity Research, Credit Suisse Securities India, made a presentation on “Doing Business in India: What has changed and What has not.”

The presentations were followed by a lively open discussion with useful questions from New Delhi led by Dr Shekhar Shah, Director-General of NCAER, and followed by perceptive comments and questions from Tokyo. The Dialogue was attended in New Delhi by NCAER researchers and other invited participants and in Tokyo by a number of Japanese participants eager to know more about investing in India.

The 18th Annual Neemrana Conference

The National Council of Applied Economic Research (NCAER) in collaboration with the Indian Council for Research on International Economic Relations (ICRIER) organises an annual conference at Neemrana Fort Palace. This year’s Conference was held during 16-18 December 2016.

Measuring Money: Using Divisia Monetary Aggregates to avoid Policy Mishaps

The inadequate availability of high-quality monetary and financial data has long been associated with misinformed policy decisions.  Conventional, simple-sum, money-supply measures are not adjusted to account for differences in the degree to which different assets actually serve as money.  Divisia measures, named after the early 20th century French economist, Francois Divisia, make proper adjustments based on rigorous index number theory; they have been shown to offer a more accurate picture of what is really happening to a country’s money supply.  In the US, since monetary assets began paying interest over a half century ago, Divisia measures have given better forewarning of U.S. recessions than conventional, simple-sum, money supply measures.

In his presentation, Dr Soumya Bhadury, Associate Fellow at NCAER explored the potential role of Divisia monetary aggregates in the Indian context, including how better data can assist the new Monetary Policy Committee decision-making process. With financial instruments becoming increasingly complex, the simple-sum monetary aggregation done by almost all major central banks, including the Reserve Bank of India, can lead to misjudgments about liquidity in the economy and prevent systematic assessment of risk and its mitigation, as in the case of dealing with a potential market bubbles. Divisia aggregation has made major inroads in the professional literature on aggregation. Besides explaining these aggregates, Bhadury elucidated the experiences of the European Central Bank and the central banks of Poland, the United Kingdom, and the United States after their adoption of such aggregates. . Dr Partha Chatterjee, Associate Professor, Shiv Nadar University and Dr Kanhaiya Singh, Senior Fellow, NCAER shared their comments.

Soumya Bhadury joined NCAER recently as an Associate Fellow. Prior to this, Bhadury taught at the University of Kansas while working on his PhD there. His dissertation focused on the role of correctly measured monetary aggregates in exchange rate determination for open economies. Bhadury’s research interests lie in macro and international economics with a special focus on the exchange rate, and in monetary theory and policy.

    Get updates from NCAER