‘Harvard’ has left the Modi government. Can ‘hard work’ reverse the economic slowdown?

Narendra Modi swept to power in 2014 on the back of a promise to overhaul India’s economy, putting it firmly on the path to double-digit growth. He also had a team of top economists running the show: Arvind Subramanian, who was picked to be the Chief Economic Adviser, and, Arvind Panagariya, who was given charge of the NITI Aayog.

Both had distinguished themselves on the global stage, and broadly fit into a narrative that accompanied Modi in his first few years – that of Non-Resident Indians who gave up plush lives abroad to dedicate time and effort into rebuilding India.

Some of this began changing in 2016, as a campaign grew for the government to get rid of Raghuram Rajan, who was then governor of the Reserve Bank of India, another Indian economist who had made his name internationally before returning to take up a posting in the country.

Rajan was a vocal commentator on all sorts of issues, often taking a line different to that of the government, and many within Modi’s Bharatiya Janata Party called for him to be sacked. It was suggested that his foreign credentials were a liability – proof that he was better suited to the elite West than genuine concerns in developing India. BJP leader Subramanian Swamy even said Rajan was party to a plot by the America’s Central Intelligence Agency, to ruin India.

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Eventually, Rajan did leave, after the government made clear that his tenure would not be extended. But the narrative did not go away with him.

In January 2017, after Modi had carried out his landmark demonetisation move to render 86% of India’s currency illegal overnight – evidently without consulting his Chief Economic Adviser – he used a Modism that encapsulated this belief that these economists who had made their names abroad were not really working for India’s interests. “Hard work is much more powerful than Harvard,” the prime minister said. This energised many in the establishment who were unhappy with foreign-educated economists bagging certain roles.

• In August 2017, NITI Aayog chief Arvind Panagariya decided to quit his job and return to the academic world in the United States.
• Later that month, Rajiv Kumar, the Oxford-educated economist who replaced Panagariya at the NITI Aayog, wrote in a newspaper column that “the colour of foreign influence, especially Anglo-American, on the Indian policy making establishment that came in the last few decades, is fading away”.
• In June 2018, Chief Economic Adviser Arvind Subramanian resigned, asking to return to the United States “on account of pressing family commitments.”
• In August 2018, the government appointed Chartered Accountant S Gurumurthy to the RBI board.
  
• In December 2018, the Oxford and Yale-educated Urjit Patel – who had replaced Raghuram Rajan as RBI governor just before demonetisation but then butted heads with the government over the question of the central bank’s reserves – resigned due to “personal reasons.” Patel was the first central bank governor to resign before the end of his term in decades.
• In June 2019, RBI Deputy Governor Viral Acharya, who has also been abroad for the bulk of his professional and academic career, resigned six months before the end of his term. Acharya had angered the government by questioning its demand for the RBI to transfer its reserves to it.

This, of course, is not the full picture. Many policymakers who were educated and worked abroad remain in government. Chief among them is NITI Aayog head Rajiv Kumar himself, who, for all his talk about the “Anglo-American influence” on policy, was educated in Britain.

But the trend is true to the narrative, and some have suggested it goes beyond just the foreign/homegrown divide.

Great media attention is being paid to Modi’s current economic team because this might be when the country most needs a steady, learned hand. In 2014, Modi came to power with benign global conditions that allowed inflation to be brought under control. This time around, his term begins with India’s economy slowing down. It is no longer the world’s fastest-growing major economy, while serious questions are being raised about the validity of India’s statistical data.

Coupled with global headwinds, this means India needs much more work to ensure the slowdown doesn’t turn into a slippery slope. With the Budget around the corner, on July 5, we might soon get a glimpse of what this “homegrown” policy thrust of the second Modi term will look like.

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