Look back in anger

The economic refugees of earlier years have been replaced by well-placed people leaving (or staying away from) India’s unattractive political economy, writes T N Ninan

T N Ninan, Business Standard
22nd February

Montek Singh Ahluwalia, in his non-memoir, Backstage: The Story behind India’s High Growth Years, recounts how he and wife Isher decided to return to India from Washington 40 years ago, giving up attractive careers at the World Bank and International Monetary Fund (IMF). Montek joined government as an economic advisor in the finance ministry, and Isher joined a think tank. They would have had modest salaries and below-par government housing, but they felt they were contributing to India’s development process. Along the way, they became the capital’s power couple, so life had its compensations.

Other economists too came back around the same time, some earlier and some later: Manmohan Singh, Bimal Jalan, Vijay Kelkar, Shankar Acharya, Rakesh Mohan and so on. They returned after studying at the best universities and working in plum jobs at international organisations. They and others like them became the leading makers (or influencers) of economic policy for the next three or four decades, rising like Montek to high offices and enjoying good reputations, plus of course the bungalows of Lutyens’ Delhi and social cachets that would not be available to them elsewhere.

The question that was posed earlier this week at the release of Montek’s book was: Why aren’t people like them coming back today, bag and baggage, to set down roots here in India? The ones who came more recently were clutching the green cards that gave them an escape hatch through which to return to green pastures: Arvind Panagariya, Raghuram Rajan, Arvind Subramanian and other perfectly honourable gentlemen like them.

One answer is that India has always had economic refugees, and they went where they could find jobs (in West Asia and Singapore), or a better education that would underwrite good careers. Many have done brilliantly, heading global tech giants and winning Nobel prizes. But there is a darker side to the story. Although India is no longer the desperately poor country of the 1980s and 1990s (having risen a few years ago to lower-middle income status), it has ceased to be an economic prison like Cuba, and offers more career options with higher salaries, vastly superior cars and consumer goods, modern hospitals and new liberal arts colleges, and the simple freedom to travel without signing “P” forms and getting eight dollars to take with you, it seems to have become a less attractive country in which to live and work.

Businessmen, including some with recognisable names and faces, are becoming “overseas citizens”. They are investing more in other markets where life is simpler. Wealthy professionals with internationally marketable skills and degrees are also taking their money with them (prompting the finance minister in her Budget to introduce a tax on such money transfers). They may be fleeing tax terrorism, prodded by more limited economic opportunities than they had imagined, or simply keeping one foot in India and another overseas because public discourse here has acquired a nasty edge and who knows what’s coming next. Or perhaps it is just the air quality in our cities which is a deterrent. Whatever the reason, the economic refugees of old have been replaced by well-placed people leaving (or staying away from) India’s unattractive political economy. Diplomats from under-populated countries like Australia and Canada report a sudden increase in the number of Indians seeking to emigrate.

The other question is, should our economists look back with satisfaction, or in anger? To be sure, there were high points like the reforms of 1991, the years of rapid growth a decade ago, and transformation in sectors like telecom. But we should not have waited till 1991 to launch the reforms. As Montek writes, Rajiv Gandhi was warned by the IMF chief in early 1988 that a crisis was building up, but he did nothing. The telecom revolution here was not special to India; other countries too engineered dramatic improvements in teledensity. Nor were India’s years of rapid growth unique; emerging markets as a whole grew at 7.9 per cent in 2004-08. Forget China, today India is being bettered in trade by Bangladesh and Vietnam. And the Thai baht is worth Rs 2.25; it was half that in 1991.

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