Tower of babble

CAPITAL VIEW

There is a veritable tower of babble in the capital when it comes toeconomic speak. Instead of one voice and one entity talking oneconomic issues, we have multiple voices, more often than notdivergent, leaving policy wonks and analysts a befuddled lot in theirwake. Unlike P Chidambaram's tenure in North Block when his was theonly definitive voice on economic matters, there is confusion prevailing thesedays. And the din gets louder all the time as various policy czarspump up the volume. So, one obviously has the finance minister PranabMukherjee speaking, but then we have deputy chairman - PlanningCommission Montek Singh Ahluwalia, followed by newly appointed chiefeconomic adviser Kaushik Basu, finance secretary Ashok Chawla, PrimeMinister's Economic Advisory Council chairman C Rangarajan, country'schief statistician Pronob Sen and of course the RBI Governor fromMumbai's Mint Street adding to the prevailing confusion. Fortunatelythe new commerce and industryminister Anand Sharma prefers to keep to himself. In UPA 1, we hadKamal Nath in that role and he being articulate also indulged inecononmic speak, but limited himself to international matters.
Take the latest instance of RBI hiking the repo and reverse repo rate,signalling the beginning of higher lending rates on Friday. None ofthe afore mentioned worthies had a clue. The only man who provided adirect hint that a rate hike was imminent came from the RBI DeputyGovernor on Thursday itself. Each one of the policy czars has his owntake on economic issues and numbers. No two czars share a commonalityof thought process. What does this do to the financial marketplace?Given that the world is watching India as an investment destination, alot of bulge bracket investors have money riding on this country andthey are spooked when they hear disconnected babble. I am notadvocating that the government speaks sotto voce, but clarity ofthinking will emerge on government policy direction only if a handfulof designated individuals speak in the same voice.
You can argue that it is much worse in the Barack Obama administrationin the US. He has appointed a czar for just about everything. Name itand you have a czar - bank bail out, pay, energy, drug, regulatory,urban, US border, auto bail out, stimulus accountability, tech,performance, Iran, Middle East, Af-Pak et al - at last count therewere over 20 such heavyweights. Republican Presidential candidate andSenator John McCain was quoted as saying, "Obama has more czars thanthe Romanovs who ruled Russia for three centuries." While one cannotcomapre the US system with ours, thesheer volume of economic speak coming out of government buildings isscary at times. It often results in static.
Let me substantiate with some recent instances. When the inflationworm began its trek northwards, C Rangarajan a monetarist and a formerRBI Governor began to advocate RBI action to suck out liquidity.However, Montek Singh kept saying that inlfation was a function ofsupply side imbalances and time was not ripe for an interest ratehike. Look at GDP numbers - CSO said 7.2 percent, FM's mid term reviewin parliament said 7.5 per cent, the Economic Survey again tabled inparliament said 7.5 per cent, Montek stated in and around 8, RBIthought 7.5 percent going on to 8, Budget assumed 7.5 per cent again.On Budget day when GDP data for the third quarter came out at a woeful6 per cent, nobody was forthcoming with any ideas. Of course theearlier figures were the full year guidance while 6 percent were forthe third quarter only. But a negative agricultural number was reasonfor everyone to be acutely dismayed. Now let us turn our attention toinflation - RBI projected 8.5 percent for March, it is already 9.9percent. Government has insisted that food inflation will start comingdown in April, but WPI is within kissing distance of 10 percent inMarch. If that was the prognosis, then why did RBI jack up repo andreverse repo rates in March itself? Probably to prevent the economyfrom overheating and asset bubbles from tripping.
Bottomline, policy czars are not in consonance with one another. Onlythe FM and RBI should be speaking on economic issues, the rest shouldbe told to keep quiet.

(Afternoon Despatch & Courier)