‘Going into a tailspin’: Nobel laureate Abhijit Banerjee on Indian economy
India-born Abhijit Banerjee, who was awarded the Nobel for Economics on Monday along with his wife and fellow MIT professor Esther Duflo and Harvard’s Michael Kremer, said the Indian economy is doing “very badly”, citing declining household consumption data and that it’s “going into a tailspin”.
Banerjee and Duflo, who work together in MIT’s economics department and married in 2015, jointly addressed a news briefing at MIT, at which they spoke about the award, their work — “movement”, they called it — to promote “randomized controlled trials” and their many research projects in India and around the world. Banerjee, who wore a light-coloured Nehru jacket, answered one question in Bengali, in response to a request from the questioner, and Duflo, who is of French origin switched to her mother-tongue for a few questions.
“The economy is doing very badly in my view,” Banerjee said in response to a question about the state of the Indian economy. He cited the dip in NSS data of average consumption in urban and rural India between 2014-15 and 2017-18 to add “that’s the first time such a thing has happened in many, many, many many years”.
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“That’s a glaring warning sign,” he added.
Banerjee also weighed in on the ongoing controversy — an “enormous fight”, as he called it — in India over which data and numbers are to be relied upon as indicators of the health of the economy and criticized the government for considering as “wrong” all data that is “inconvenient to it”.
But he said the government was aware of the problem with the economy that is “slowing very, very fast”.
The Nobel winner refused to get into his prescription for what could the Indian government do to deal with the problem but, citing a “large deficit”, he added, the government was “aiming to please everybody but pretending to hold on to some budgetary targets and monetary targets”.
With “the economy going into a tailspin,” he said, first in Bengali and then English to a question from a Bengali language TV channel, this is the time “you don’t worry so much about monetary stability and you worry a little bit more about the demand … right now demand is a huge problem in the economy.”
Asked how it felt to be joining other Nobel winners from Kolkata, the professor said, “I assume they were all much more distinguished than me.”
Banerjee was born in Kolkata and studied economics at Presidency at the University of Calcutta, then went to Jawaharlal Nehru University and Harvard University, where he received his Ph.D in 1988. He is currently the Ford Foundation International Professor of Economics at the Massachusetts Institute of Technology.
“It is wonderful for the movement,” Banerjee said at the news briefing with Duflo, adding, the prize will hopefully make it easier for them to promote the use of “randomized controlled trials” in development economics — in place of intuition or the flavour of the day, as Duflo put it — “to open doors” and “open opportunities” to do more.
Duflo, who is only the second woman to receive the Nobel for economics and the youngest across all the categories and genders, said she took the call about the prize first and then she handed the phone over to Banerjee, who, she added, went back to sleep after the call. She showered, dressed and went out to address a press briefing.
Vijay Govindarajan, a distinguished professor at the Tuck School business at Dartmouth who knows Banerjee, said, “By honouring them, the Nobel Committee is putting the spotlight on the problems of the poor in countries like India and the continent of Africa and the need for breakthrough technologies and innovations to solve such problems—affordable health, access to clean water, and quality education, and renewable energy, to name a few.”
Banerjee and Duflo founded the Abdul Latif Jameel Poverty Action Lab (J-PAL) at MIT with Sendhil Mullainathan in 2003, and he remains one of the lab’s directors. His MIT bio says Banerjee is “a past president of the Bureau of the Research in the Economic Analysis of Development, a Research Associate of the NBER, a CEPR research fellow, International Research Fellow of the Kiel Institute, a fellow of the American Academy of Arts and Sciences and the Econometric Society, and has been a Guggenheim Fellow and an Alfred P. Sloan Fellow and a winner of the Infosys prize and author of many articles and four books, including Poor Economics, which won the Goldman Sachs Business Book of the Year”.
The MIT bio also said he “is the editor of three more books and has directed two documentary films. He also served on the U.N. Secretary-General’s High-level Panel of Eminent Persons on the Post-2015 Development Agenda”.
In one of the papers he did with Duflo, they found that rotating checkpoints for drunken driving in three police station area in Rajasthan, reduced night accidents by 17%, and night deaths by 25%. Fixed checkpoints had no significant effects.
Another study led by him showed the untapped mathematical potential of working children who performed calculations involving business transactions easily, but struggled in written test papers.
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