Budget 2008-09: Whither Indian Economists?

Almost a month has passed since the Budget was announced. The media has stopped discussing loan waivers. Economists are done with their write ups on the same as well. I guess it is no more glamorous or more pressing matters might have cropped up. This post discusses some of the concerns relating to the loan waiver which had been voiced by the media and my concern for economics in general and economists (associated with policy making) in particular.

P. Sainath says that “The UPA government’s waiver is no solution to even the immediate crisis let alone long-term agrarian problems. Nothing in this budget will raise farm incomes.

Satish Nandgaonkar writes in The Telegraph that the loan waiver was unjust because “the waiver helps only if the loan has been taken from a government-backed institution, but most farmers in Vidarbha borrow from moneylenders at the start of the sowing season to buy seeds.” Didn’t the economists behind the budget know this?

The economist from Harvard, P. Chidambaram said that “loan waiver will strengthen banking.” I had thought that the loan waiver was targeted at the farmers in India! But then, the FM talks about growth quite a lot and how it is the only fast remedy to poverty. I wonder what growth he refers to!

Gurcharan Das thinks that the loan waiver is immoral as it “wounds that moral universe. It tells the farmer not to bother to repay his next loan, because, who knows, another party will be in power and it too will cancel his debts. What message does this send to the honest village woman who struggles every week to repay her micro-loan?” He has brought in the ‘moral’ angle to the loan waiver. It is interesting because, the government frames laws and establishes morality which is then modified by the civil society. The concern should be whether the loan waiver achieves its objectives or not.

Mutiny.in does not question the FM’s ‘economic sense’ and goes on to say that “but, burdened no doubt by political considerations, the Finance Minister has made this unabashedly populist announcement.” Populist-in what sense?

India cancels small farmers’ debt” says the BBC. It also has a picture of a representative small farmer. I wonder whether the objective of the waiver was to help the small farmers at all. The rationale behind the waiver is debatable. It has not fooled the public therefore it won’t help in the elections. It has done nothing to resurrect the farmers in distress.

According to Business Standard, the present budget is evidence for politics winning over economics. The author(s) have not studied anything but neo classical economics. Their notion of politics and economics as distinct disciplines is quite scary. This is where Classical Political Economy aids. They do not view economics as an independent arena. For them, it is very much a part of politics, society, etc.

India Today describes the budget as “Bad politics bad economics”. According to me, this is the best description of the budget.

The Indian Government consults famous economists who have been trained abroad and in India and also has talks with various eminent economists. Have they suggested ‘wrong’ policies? Or is that the Government decided not to accept their policies? To make such ‘loan waivers’, one does not need an academician.

Economists like Keynes, Smith, Ricardo, etc wrote ‘economics’ books not for fame or money but to help their respective economies. They studied economics to rectify the problems that existed then. Though a lot of research papers and articles are being published by Indian Economists, none of them seem to help the people of India. What are economists doing these days?