On December 11, Surjit Bhalla, a noted economist, quit the Economic Advisory Council (EAC) to Prime Minister Narendra Modi. In an interview with THE WEEK, Bhalla shares his experience of working at the EAC and the reasons behind his early departure. Excerpts below:
Why was it necessary for you to leave the EAC?
I had put in my papers on December 1. I left with the view and still am in complete agreement with the economic policy of the government. There had been no disagreements on any issues. I had even completely supported demonetisation. As an economic adviser, I had tried to show the positive results of the government's economic policy.
There are two reasons for my resignation. Recently, I signed a contract with one of the major television networks to be their full-time consulting editor from December 1. There I would be commenting on politics and economy, and it would not have been right to do so while continuing as an adviser to the prime minister.
Secondly, I am working on a book, to be published by Amazon Washington, which is looking at polity. I am working on the draft now and a few (more) chapters are left (to be completed). The book is titled 'Citizenraj: Indian elections from 1952-2019'. In this, a few chapters are forecasts about issues that would be upcoming in the 2019 elections. Again, it would have been a conflicting situation. Therefore, my decision to leave the EAC.
What do you think have been your major contributions while at the EAC?
I am very satisfied with the work that we have done at the EAC. There are two ways to give inputs to the prime minister. One is to prepare a report, which is quasi-academic and detailed regarding the subject. In this, employment had been a major subject of my study at the EAC. This resulted in a public paper titled 'Population, education and employment in India: 1952-2018'. This was a joint study done with Tirtha Das, IIM Bangalore professor.
Basically, it goes against the grain on the rhetoric of Raghuram Rajan that India needs 12 million jobs in a year. There were about 8.5 million jobs in the early 2000s. In the Modi period, 5.3 million jobs have been added every year. You need at the most about 6-7 million jobs every year.
So, how does one account for the decline in job creation numbers then?
There are two reasons. One is that there is an incredible decline in human fertility rate. The UN data has shown that in the age group of 15-24 years, employment numbers have dropped by 28 per cent. What has happened here is that a huge thrust on education has brought back people in this age group from working to studying in schools. This is a success story of this government. There is a huge expansion in education.
I had also advised that the Long Term Capital Gains (LTCG) tax was a burden on investors and that increasing import duties may not be useful. It is important as an adviser that your advise is heard. And in this government, we were heard. Whether they were accepted as decisions is not always important. So, for me, it was a great satisfaction to be heard by the highest in the government.
How do you see the Indian rupee faring in 2019?
Our interest rate is the highest in the world. A year ago, we were the third highest after Brazil and Russia. This huge interest rate hurts the economy immensely. And I have been saying this for ten years now. Calibrated tightening by the RBI is not the answer. If real interest rates were cut then the rupee will strengthen immediately. It can lead to faster growth, higher investment and strengthening in the value of the rupee. I hope the new RBI Governor Shaktikanta Das would understand the need to adopt a path that stops only at targeting inflation, which has settled at four per cent for a long time now.