Can PMEAC be answer to ailing economy?

Suddenly there is a lot of commotion on the economic front as if something has gone wrong overnight. The critics of government have risen in number and voices of dissent are emerging from even within the ruling party.

Two structural reforms – demonetisation and GST – are being painted as the devils for all ills. Amid all this, the Prime Minister has hurriedly set up his Economic Advisory Council that will provide him with independent advice on the issues of macroeconomic importance and other things which it deems fit. True, the economy is not in good shape as the data has been suggesting. But a close look at the data points suggests that slowdown is there for quite some time. In fact, from the beginning of last year (January-March 2016), eight months before demonetisation was announced and the GST was still being discussed in Parliament.

Certainly, there are other structural problems which have been ailing the economy. The GST and demonetisation may only have added to the illness. The GST was adopted by other countries after at least two years of deliberations. a minimum of two years while being opted by other countries in the world. Demonetisation, which is considered as an extraordinary tool for an extraordinary situation, has been slapped on India at a time when it was growing perfectly well. In fact, it had overtaken China giving rise to aspirations that India might actually be a mega global economic power. But the economic advisers of the prime minister must have found some merit before advising him on such a move. Prime Minister Narendra Modi candidly admits that he is an economic novice and depends heavily on the team of his economists.

It was a year and a half into his forming the new government that he had announced demonetisation. Prior to that there was growing criticism about his failure to bring back back black money. Proceedings in Parliament were being disrupted and the Opposition unitedly attacked him on not doing any bit to realise his electoral promise of getting back hard-earned taxpayers' money.

A similar attack is now being hurled at the government and the Prime Minister for creating an economic crisis that many are saying is an offshoot of demonetisation and faulty implementation of the GST. If an independent economic advisory council is also a knee-jerk reaction, it is not yet clear.

Some even say that a day before Modi reconstituted his advisory council, the Financial Times of London in an editorial had held his two reforms as the culprit of all ills and suggested him to set up an independent advisory council. This of course has to be taken with a pinch of salt because national policies are not determined by suggestions from other countries. But the new government had disbanded this body when they came to power in 2014.

The Prime Minister's Economic Advisory Council (PMEAC) existed in the earlier UPA government. Modi had also abolished the Planning Commission, but had created a policy think tank in its place -- 'Niti Aayog', whose vice chairman is an economist and is supposed to advise the prime minister on issues of national ramifications.

There is the Chief Economic Advisor attached to the Finance Ministry, who lends his advice to both, the prime minister and the finance minister. Why then the absence of the PMEAC was so sorely felt that too just 18 months ahead of general elections? Insiders say that there is abundant pressure on Modi to revive economic growth, before India goes into hustings and he needs advisers independent of the Finance Ministry or any organisation attached to the government.

But the question is how independent can the PMEAC be whose chairman is a member of the Niti Aayog. Will he be able to advise the prime minister independent of what the Aayog thinks on a particular economic issue? The prime minister wants out-of-the-box suggestions to many structural problems.PMEAC Chairman Bibek Debroy is known for that. It was on his suggestion that the Railway and General Budgets were merged. He is expected to give his valued input on at least four areas which are plaguing growth.

The current state of PSU banks laden with bad loans of close to Rs 10 lakh crore. The sagging private sector investment, which has forced the economy, to run only on one leg. Whether Debroy will be able to turn India's destiny ahead of the 2019 elections, remains to be seen.

DH News Service