Economy

Swadeshi Flip Flop: New Niti Aayog Chief Makes a Smooth U-Turn on IMF

In 2013, Rajiv Kumar argued that a troubled Indian economy should approach the IMF for help. Today, as new Niti Aayog head, he believes that India is better off without foreign academic and institutional help.

The aim behind the NITI Aayog and PMO's plan is to reduce government expenditure on autonomous bodies. Credit: PTI

The aim behind the NITI Aayog and PMO’s plan is to reduce government expenditure on autonomous bodies. Credit: PTI

The new boss at NITI Aayog, Rajiv Kumar, has set the swadeshi cats among the pigeons. Days after taking charge after the choreographed exit of economist Arvind Panagariya, Kumar has hit out at the proverbial “foreign hand”. He said the days of foreign-trained economists driving Indian policy were numbered, hinting at more exits from the think-tank.

In doing so, Kumar made it clear that he was batting for the powerful swadeshi lobby. It is no secret that Panagariya was at loggerheads with the Swadeshi Jagran Manch and other RSS-affiliated economic organisations and unions that were unhappy with NITI Aayog’s “liberal stance” on many burning issues of the day.

These range from introducing genetically-modified foods, sensitive issues of healthcare and labour and railway reforms.

That’s why Panagariya – who along with his guru Jagdish Bhagwati gave Narendra Modi a clean chit in the Gujarat riots – decided that it might be better to head back to the cold comfort of a tenured post at Columbia University.

Interestingly, some of Kumar’s strongest words were reserved for a venerable bogeyman for Indians: the International Monetary Fund, or IMF. “Another related problem that was often observed was that Indian policies would have the influence of multilateral organisations like IMF, World Bank, or those universities to which these experts would have incredible reverence,” Kumar wrote in his Dainik Jagran column that was reproduced in the Indian Express.

Funny thing is that just a few years ago, 2013 to be precise, Kumar advocated that a troubled Indian economy approach the IMF for help. “Rather than delay it, we should go to the IMF [for help] not in terms of getting money but to give a reassurance that the government is serious about reforming the economy. It is a big political step the government needs to take,” economist Rajiv Kumar then told Outlook.

In those days, Kumar was with the influential policy think tank Centre for Policy Research. In another comment, Kumar explained the rationale behind his prescription to “approach the IMF now than a few months later when the situation will probably be desperate.”

“How do you convey to the market that we have enough ammunition… What are your options… One option is to go the Mahathir way and impose stricter capital controls. But India is very different and you can’t seal the economy now. So, what other options do you have? You have to take steps from the position of strength to send a strong signal to the markets,” Kumar told Economic Times.

Sure, 2013 was a rough year for the economy, with slow growth and a falling rupee. But it definitely didn’t merit a health check up at the IMF. The BJP was then eyeing power, and “friendly” economists talked down the UPA’s management of the economy. It clearly takes a special art to change one’s tune according to the situation at play. It’s called politics, forward thinking. Importantly, that’s what gets you the top job in India’s premier think tank.

As Kumar will soon realise, it’s not going to be easy riding the swadeshi tiger. There could be more flip-flops to come. Crafting economic policy has not been an easy task in the Modi regime, given the enormous power the RSS wields within the government. There has been a clear push towards safeguarding the rights of Indian firms, domestic interests. The latest example of this is the attack on multinational chartered accountant firms soon after Prime Minister Modi recently took the Institute of Chartered Accountants of Indian to task on erring members. The line being pushed out in government is that liberal reforms have “corrupted” traditional Indian accountancy firms.

After treading cautiously in the initial days of demonetisation, Kumar came out openly in support of India’s “golden moment”, where he argued Modi “has risked the support of the core constituency of the BJP and RSS – traders, middlemen and small entrepreneurs”.

More recently, in the Indian Express, Kumar has sought to take on the unscrupulous middleman in the name of helping the farmer.

“The PM must seriously reconsider liberalising FDI entry in the retail of fresh agro-produce and in multi-brand retail more broadly. It can contribute significantly to reducing the farmers’ plight. Agriculture needs marketing reforms urgently. No need to wait for another round of studies by the NITI Ayog. These are rather well known.”

Both these reforms will attract the charge of selling out to foreign interests. Now that he has been tasked with leading NITI Aayog, Kumar will have to do more twisting and turning to reach out to the swadeshi lobby.


Sunit Arora is a Delhi-based journalist and former managing editor at 
Outlook magazine.