Rats are Leaving Modi’s Sinking Boat

Two Arvinds, Arvind Panagaria and Arvind Subramanian, have resigned from the top economic positions in the Modi government before their terms ended. Arvind Panagaria was the vice chairman of the NITI Aayog, the former economic planning commission, and Arvind Subramanian was the chief economic advisor. They both resigned and went back to their former teaching and research positions at the American universities.

Announcing resignation of Arvind Subramanian his boss the finance minister Arun Jaitley cited personal reasons for his departure, but obviously something else is going on as in the case of Arvind Panagaria. The case of Arvind Panagaria is quite revealing. After resigning from his position, he penned a scathing criticism of rising protectionist policies of the Modi government. His criticism is important because he was an insider and knew exactly what Modi government was doing. In an important article published in the Economic Times he said:

When GoI raised custom duties on a number of products in December 2017, as an eternal optimist, I took the view that this had been done for revenue reasons. But increases in duties on a long list of products ranging from kites and footwear to cellular mobiles phones and motor vehicles in Budget 2018 have ended that optimism.

He went on:

The clear message from the revenue secretary: stay tuned, more tariff hikes are on the way.

For those of us old enough to remember the India of the 1960s to the 1980s, this is déjà vu. Thanks to ultra-high protection and tight internal regulation, India was condemned to per-capita growth rate of less than 2% during 1950-51 to 1990-91. Imports as a proportion of the GDP, which did not even once touch the 10% mark during the four decades, fell to as low as 4.1% in 1969-70. Exports were consistently lower yet.

… Sadly, a new generation of bureaucrats seems to have now replaced its more enlightened predecessor. It is on course to erect the wall of protection all over again.

… Defenders of the revival of protection would probably argue that this time it is different, because the economic environment today is not the same as that under licence-permit raj in the 1970s and 1980s. But haven’t we heard this before? Didn’t our bureaucrats tirelessly tell us prior to 1991 that the experience of Singapore, South Korea and Taiwan didn’t apply to us because we are different?

I am sure the real reason behind the chief economic advisor’s departure is something similar as he was totally sidelined by Modi and Jaitley. He wasn’t consulted before demonetization as well as his views re GST implementation were also brushed aside.

Modi government is not only ignorant of economics, but also very arrogant. Working with such arrogant politicians is impossible for any self shame person and that too an intellectual. When politics starts to trump over economics then there is no reason for any economist to work with the government. Both should have never joined Modi government because the real job of an economist is not to tell the government what it can do, but to tell it what it cannot do!

These both Arvinds became disillusioned and realized their mistake of coming to India to advise Narendra Modi whose thumping win in 2014 created an atmosphere of lot of (false) promises. Working just for four years revealed the ugly reality to them. They realized that the Modi boat is sinking and so they decided to leave it early before they go down with it.