Indian macroeconomic debate in dismal state: CEA (Lead)

New Delhi, May 16 :  Macroeconomic debate in India is in a dismal state, resulting in the lack of contrarian views to official policy, Chief Economic Advisor (CEA) Arvind Subramanian said on Tuesday.

"The state of macroeconomic commentary in India is disconcerting because independent experts refuse to speak the truth, and we end up getting only the one official view," Subramanian said at a seminar here at the Teen Murti Memorial Museum and Library. 

Citing the example of economists outside of government, think-tanks and researchers, he said experts did not express their honest opinion on macroeconomic policy because "they feel they should stay on the right side of power".

Unlike the more open debates in trade and development policy areas, macroeconomics lacks high quality, critical and contrarian inputs, because these come from groups like bankers or investors "who are dependent on the government", Subramanian said. 

Besides, the "disinterested commentators lack confidence and are diffident to go contrary to official policy wisdom," he added. 

"We need more disinterested voices, especially from the universities, researchers and think-tanks, who are distant from the power centres. We need to build up such intellectual capacity in Indian macroeconomics, which is not considered sexy enough for academic interest," the CEA said. 

In support of his argument, Subramanian cited the example of the Reserve Bank of India (RBI) maintaining status quo on interest rates over its previous three policy reviews.

He said though many analysts had been calling for a rate cut by the RBI before its review, most of them "instead of criticising the RBI for holding rates, toed the official line post-facto, saying the credibility of the apex bank had been enhanced".

"Public interest is better served by debate and critical views on official policy."

The CEA stressed that "truth, however elusive it may be as a category, is not compromised or moderated by the fear of power."

Applying this dictum personally to one who is now in government, Subramanian said he saw himself in the category of persons called "insider-outsider", who are governed by an "unwritten rule".

"The unwritten rule is that inside you try to influence the debate as much as possible, while outside you defend the official policy," he said. 

This rule allows the insider-outsider that "extra space". 

"The insider-outsider can be more truthful internally, as also on the outside, which space is not available to the babu-bureaucrat," he said.

"This space has to be acquired and it is a very fragile commodity," he added. 

Last month, Subramanian reignited the debate on the politically sensitive issue of taxing agriculture income, saying states have no constitutional restriction on taxing farm incomes.

This followed Finance Minister Arun Jaitley tweeting that the central government has no plans to impose any tax on agricultural income.