Extremely Serious: Nobel Winner Abhijit Banerjee on Indian Economy

Banerjee critiqued the state of Indian economy, calling the fall in consumption an “extremely serious issue.”

Indian-American economist Abhijit Banerjee is one of the three who have been awarded the Nobel Prize for Economics.

(Photo: The Quint)

Indian-American Abhijit Banerjee who is among the 2019 Economics Nobel winners, recently critiqued the Indian economy, calling the fall in consumption an “extremely serious issue.”

Banerjee won the award along with fellow economists Esther Duflo and Michael Kremer, as announced on Monday, 14 October. Banerjee, born in 1961 in India, studied at the University of Calcutta and the Jawaharlal Nehru University in Delhi. He got his PhD in 1988 from Harvard University.

Delivering an address at the Brown University 9 October, the 58-year-old slammed the Indian government, stating that institutions were turning into “zombies” and the centre’s big-ticket economic decisions were responsible for the “demand problem,” reported NDTV.

“Over a four year period, average consumption is going down, (which) hasn’t happened in many many many many many years. And this is after being corrected for inflation. By many years, I am guessing the 70s. This is a fact that should be extremely serious.”

Abhijit Banerjee

From Hyperactive to Zombies: Banerjee on Indian Institutions

He added that institutions in India went from being “hyperactive to zombies” and the latter was worse as it means that they are now “completely frozen.”

“We went from the situation where we are with no institutions to having potentially better institutions which have their own challenges, to a situation where the institutions are now an extra level of bureaucratic check on the system. Institutions went from hyperactive to zombies, and zombies are the worst because now you are completely frozen in a sense... they are not doing anything particularly,”

Abhijit Banerjee

Banerjee also pointed that a combination of demonetisation and GST implementation has created a “demand problem.”

"In addition, there is a demand problem. And this is a combination of demonetisation, which had a huge effect on demand and had a multiplier, GST implementation, and also in the monitory policy regime, that basically tries to pin down inflation pretty low," he said.

Rajan Echoes Banerjee

In the same address at Brown University, former Reserve Bank of India (RBI) Governor Raghuram Rajan has said that “majoritarianism is taking India down a dark path”.

Rajan also said that India was experiencing a weakening of institutions.

“India is losing its economic way, in part because it is centralising power without a persuasive economic vision. We risk wasting the demographic dividend.”

Raghuram Rajan, former RBI Governor

Watch Abhijit Banerjee’s the full address here.

(With inputs from NDTV)