Kaushik gets candid

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Kaushik Basu , Chief Economic Adviser, Government of India. R. Ragu
The Hindu Kaushik Basu , Chief Economic Adviser, Government of India. R. Ragu

The country's Chief Economic Adviser opens up about life in North Block and making the transition from academics to Government.

He says modestly that he did a “very quick PhD in Economics at the LSE (London School of Economics) with Amartya (Sen), in two years…”

But isn't that some sort of a record, I interrupt Kaushik Basu, Chief Economic Adviser (CEA) to the Government of India. The soft-spoken man, who has criticised the sloth in decision-making at the Government level, smiles: “I had to wait to submit my PhD because LSE doesn't accept any thesis before two years. Usually it takes 4-5 years, but it wasn't a record. There are others who did it in two years.”

Basu, who did B.A. in Economics from St. Stephen's College in Delhi in 1972, returned home in 1976 after his doctorate. He was supposed to study law in England after a Master's in Economics, so he could take over his father's successful legal practice in Kolkata. But even as he was “buying law books, I discovered I had fallen in love — not so much with economics — but the idea of logic and deductive reasoning. I came under the spell of Amartya Sen in his mesmerising early days... the young Amartya, who was my professor.”

He taught at the Delhi School of Economics for 17 years before going to Cornell University in the US. His entire career was in academics till he joined the Government as the CEA. “I am the first CEA with no experience of Government!”

So has it been a cultural shock?

“A big shock. Returning to India was no shock as I'd lived for 17 years in Delhi. Even from Cornell through 15 years, during the summer and winter breaks I visited India. So there were no surprises there, but the Government was a total shock. I've never worked in a setting like this.”

From frustrating to fascinating

He admits that “in the beginning it was frustrating, bewildering... you feel as though you've been cast into a Kafka novel. The massive machinery was churning and it wasn't a world I was used to.” Basu adds that in his first month as CEA, if he could have walked out without embarrassing anyone, he'd have done just that. Subsequently the challenge took over, and he told himself that if anthropologists could stay in remote villages for 8-9 months, “North Block can't be a greater challenge!”

There was also the excitement of “being within the Government and making policy for India.” Yesterday he completed two years as CEA in a “journey that has been very exciting. It's not that you approve of everything you see but you enjoy every bit of being there,” he smiles.

Basu adds that his post is “really at the top of the political economy of decision-making where you see Cabinet ministers jockeying for little policy moves.” He comes into the picture only at the ultimate level of policy decision. Take, for instance, petroleum decontrol; “whether you will allow or not the decontrol of diesel. And when it comes to the absolute final-level decision, it is of course the interface between political considerations and economics and there is a certain adrenaline rush in watching the last-minute moves… it is like a crime thriller… will it go through or not? The body language and interplay at the top level… all this is absolutely fascinating.”

Has his work ever given him sleepless nights, or made him a BP patient, I ask .

“No, I never get sleepless nights. And that is something temperamental; I'm lucky I don't get stressed at all... My wife does the stressing on my behalf!” Alaka Basu is a demographer and was earlier at Cornell, but now works as a visiting professor at JNU.” But, the work for him is tiring at times: “The sheer number of hours one has to put in can occasionally be exhausting,” he adds.

Improving subsidy delivery

Asked to name one policy decision that has positively impacted large numbers, the CEA says, “Something that could potentially impact large numbers is the redesigning of the delivery of subsidies.” Right from Day One he has been putting up papers and briefs and taking a position; “I am not making an argument for cutting it down, but redesigning the delivery mechanism so that whatever we are spending will reach the target.”

This, he agrees, has to do with Rajiv Gandhi's famous comment about only a fraction of welfare money reaching the beneficiaries. “This is very important; I do believe we'll move in that direction, particularly with Nandan Nilekani's software architecture. If that happens, it will be a huge benefit.” He says the delivery system can be improved by giving the beneficiaries money or smart cards to be used only on food, so that the misuse is minimised. This is better than giving essential commodities to the PDS stores with appeals they shouldn't be sold in the market, because monitoring 5 lakh stores is virtually impossible.

“We've been talking about this for some time and it looks like it may happen; this would give me immense satisfaction. In the world of policy even a small good move can impact huge numbers,” he adds. On inflation and other pressing issues before the UPA Government, Basu says he has participated in the debate “with a lot of gusto”. He doesn't agree when many bureaucrats complain that their advice isn't taken. “By the very definition of ‘advice,' more will be given than taken. Otherwise it is not advice but command. Also, some advice, even when not taken, can change the way people think about policy and that is very satisfying.”

He has no regrets about taking this assignment; dealing with the Prime Minister has been very gratifying. “I've known him for a very long time… I came because of him. He's a very decent human being, listens very hard and I have enjoyed my interactions with him. He understands what I'm talking about.”

He didn't know Finance Minister Pranab Mukherjee; “I didn't even know what the equation would be like. But it's just wonderful now... it's not wonderful because he'll always listen to me or not listen to me. It's just that he gives it a hearing and he is a thinking person so he takes the arguments very well. There are times when I know he can't do anything because the politics won't allow him. But just to know it's a person who understands the logic really helps.”

Emperor of economic maladies

Basu's take on inflation is that “unlike many other problems which can be cured by greater determination, with inflation that is not the case. It is one of the most baffling economic malaise that can strike a country... it is the emperor of economic maladies.”

What makes it difficult, he adds, is that we don't fully understand the mechanics of inflation. It is like trying to control a malaise which is only partially understood. “Just because inflation continues to remain high doesn't mean that we are not determined… there are some illnesses which are not easy to cure. If they persist, it doesn't mean the doctor is deliberately sitting back and doing nothing. Inflation is one of them.” There are some very rough medicines that could be applied, but “it would be like administering steroids which have huge side-effects and so you want to be very cautious in using those treatments.”

But unlike inflation, says Basu, there are other problems where the Government should indeed work much harder. “Corruption is the Government's responsibility and we have to do something about it.”

(This article was published on December 8, 2011)
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