Warrior against Poverty
Banerjee and Duflo’s decade-long work on poverty and development economics fetches them the Nobel Prize in Economics
LONG BEFORE ECONOMIST Abhijit Banerjee won the 2019 Nobel Prize in Economics jointly with his wife, French-American economist Esther Duflo, and American Michael Kremer, ‘for their experimental approach to alleviating global poverty’, their work was captured in Banerjee and Duflo’s 2011 bestseller, Poor Economics. Eight years later, announcing their win, the Nobel committee wrote, ‘The research conducted by this year’s laureates has considerably improved our ability to fight global poverty... their new experiment-based approach has transformed development economics.’ (The trio has said they will donate the prize money, reportedly amounting to Rs 6.5 crore, to the Weiss Fund, administered by Harvard University, for research in development economics.)
Banerjee was educated at the University of Calcutta, Jawaharlal
Nehru University and Harvard University, where he received his PhD in 1988. He is currently the Ford Foundation international professor of economics at the Massachusetts Institute of Technology. In 2003, along with professors Duflo and Sendhil Mullainathan, Banerjee founded the Abdul Latif Jameel Poverty Action Lab (J-PAL) and is one of the lab’s directors. Banerjee and Duflo pioneered the use of randomised control trials in development economics through the award-winning J-PAL. By 2010, J-PAL researchers had completed or were engaged in over 240 experiments in 40 countries around the world, and very large numbers of organisations, researchers and policy-makers have embraced the idea of randomised trials. ‘The response... suggests that there are many who share our basic premise—that it is possible to make very significant progress against the biggest problem in the world through the accumulation of a set of small steps, each well thought of, carefully tested and judiciously implemented,’ Banerjee and Duflo write in Poor Economics. Banerjee also served on the UN Secretary-General’s high-level panel of eminent persons on the post-2015 development agenda.
Not one to shy away from speaking his mind, Banerjee, when asked by the media about the Indian economy after he won the Nobel Prize, said it was “doing very badly”, advising the government to focus on reviving demand without worrying too much about financial stability.
SHAKTIKANTA DAS assumed office as the 25th governor of the Reserve Bank of India (RBI) at a time the central bank was the cynosure of all eyes, albeit for the wrong reasons. The previous governor, Urjit Patel, had locked horns with the central government on a host of issues, most importantly that of the RBI’s autonomy. With Patel’s acrimonious exit in December 2018, Das had his work cut out. Not only did he have to quickly mend the RBI’s relations with the Centre, he also had to do whatever possible to bring the tottering Indian economy back from the brink. The former task wasn’t as tough as the latter—after all, as secretary in the department of economic affairs, Das had shadowed his then boss, former finance minister Arun Jaitley, in public appearances to explain and justify demonetisation. But rescuing the Indian economy has proved a more formidable challenge. Growth was suffering, and the impact of demonetisation and a poorly implemented Goods and Services Tax (GST) were visibly taking their toll. It surprised no one, then, that the RBI’s monetary policy committee (MPC) went on to repeatedly cut interest rates in consecutive meetings through 2019, slashing rates by a total of 135 basis points by early December. But these moves have not helped much. A slowdown in consumption, among other factors, pulled GDP growth down to a six-year low of 4.5 per cent for the second quarter of 2019-20. Now, Das has a new challenge before him, in the form of rising inflation. Retail inflation rose to an over threeyear high of 5.5 per cent in November 2019, triggered by a rise in food prices, especially onions. The MPC maintained status quo on rates in its meeting early December, and if it chooses to do so again, it could affect growth. Das also came to the government’s aid this year, transferring Rs 1.76 lakh crore to the latter as per the recommendations of a panel led by former RBI governor Bimal Jalan, including a Rs 1.23 lakh crore surplus for 2018-19. To improve lending, Das has also moved to take a few public sector banks out of the prompt corrective action framework. However, he will have to continue battling the vast volume of non-performing assets at public sector banks (around Rs 8 lakh crore as on March 2019) while restoring the ailing non-banking financial companies back to health.