An alumnus of IIT-Kanpur, IIM-Calcutta and the top-ranked Booth School of Business at the University of Chicago with work experience at JP Morgan Chase, ICICI Bank and Tata Consultancy Services, Dr. Krishnamurthy Subramanian is Chief Economic Adviser of the Union government. Excerpts from an interview with Dilip Thakore:
Mainly authored by you, the path-breaking Economic Survey 2019-20, for the first time in living memory, unambiguously recommends that the Union government and Indian society repudiate post-independence India’s socialist legacy and reverts to its ancient and very successful traditions of free markets and free enterprise. What has been the reaction of the BJP government at the Centre and the establishment to this recommendation?
It’s been unequivocally supportive. Evidence of this support is seen in several reforms that have been recently announced reducing the role of State and enabling the private sector by efficiencies and reforms in factor markets. Research conducted by historian Angus Maddison, clearly shows that for three quarters of known economic history, that is till 1750 AD, India accounted for more than one-third or 33 percent of global GDP. Just to give you a sense of India’s dominance, the US which has been the global economic superpower for about half a century, accounts for 15-16 percent or thereabouts of world GDP.
This magnitude of dominance that India had, didn’t happen by accident. It was by design. And when we examined the design we discovered the timeless principles that create economic prosperity. It’s the combination of free enterprise, the invisible hand of the market propagated by pioneer economist Adam Smith, supported by the hand of trust. In the Economic Survey we provided evidence that it was the marriage of modern economics with time-honoured Indian philosophy and literature — not scripture — contained in ancient Indian texts such as the Arthashashtra in Sanskrit and Thirukkural in Tamil that generated prosperity and doubled India’s annual GDP growth rate after 1991 when the economy was liberalised and deregulated. Unfortunately, after the subjugation of India by the British and later our “tryst with socialism”, we deviated from the timeless principles of free markets and free enterprise. But now we are coming back to those principles and the new reforms that have been announced are in that spirit.
Would you say that the recent labour and agricultural reforms are reflective of this new thinking?
Absolutely. Not only that, when announcing the prime minister’s Covid-19 relief package the government clearly stated that except in a few strategic sectors, government will have no business being in business. And even in these sectors, the number of state-owned enterprises will be limited to four. As a statement of intent, this is very important because it comes against the backdrop of the socialistic past where wealth and wealth creation was tolerated as a necessary evil. Now for the first time, this government is liberally using the word ‘privatisation’ instead of euphemisms like divestment and disinvestment. I believe that we are on the cusp of a marriage between time-tested Indian economic philosophy with modern economic principles.
In EducationWorld, we believe that universal literacy and high quality, especially primary-secondary education is a prerequisite of economic and national development. To what extent do you agree with this statement?
There is enough research in this area, especially focused on developing economies, which clearly shows that return or bang for the buck in primary education is significant. However in the Indian context, it is not so much the paucity of funding for primary education as poor governance — especially in government schools — that is the cause of India’s poor record in learning outcomes and education. It’s not that government teachers are not well paid. Yet their relatively good remuneration is not reflected in the learning outcomes of government schools. Therefore, the importance of good governance in the public education system, especially at the lower levels, is critical for achieving better outcomes. While there may be a case for increasing budgetary allocations for primary education, I think ensuring that the money being invested is efficiently utilised by improving governance, is more important.
In your path-breaking Economic Survey, you have cited India’s ancient political scientists Kautilya and Thiruvalluvar, in support of the proposition that the invisible hand of the market, supported by the hand of trust, is the prescription for national prosperity. Now, the moot point is, is this prescription valid for the education sector as well?
It’s not only valid, it’s salient for the education sector. Let me take an example that people don’t talk about very positively — the test prep coaching industry for the civil service, IIT-JEE, NEET and other public entrance exams. If you think about it, it’s a market solution. Ideally, one would want an honours stream in classes XI and XII in every school where the school itself prepares students for these exams. There could be a curriculum that trains them for these examinations and as good teachers you get in the test prep schools. But since this innovation has not happened, we have the coaching industry in which only the best survive.
There are some excellent teachers in coaching institutes and they are paid very handsomely. This is a market-oriented solution working to prepare and equip students for the engineering industry, medical profession and even the civil services. We need many private sector players who bring quality into education.
For instance, the school and college rankings published by EducationWorld and other publications. Parents look at these very carefully because they are certification of quality. It is another market-oriented solution. As in the case of ratings for financial instruments which guide investors, school rankings help parents who are possibly making a far more important investment — in the education of their children. These are illustrations of how the market and private enterprise can play important roles in education.
The standard argument against this is that poor people can’t afford private coaching and education…
That’s why the bang for the buck argument is important. Think about it as a thought experiment. If consistently low-performing government schools are closed down and parents are given coupons equivalent to the amount government spends on children in these schools, they would be able to send their children to private schools where they would get better education.
That’s a very good point, because the reality is that in public schools, per capita expenditure is perhaps higher than in private schools…
I’m aware of that. And that’s why I’m stating this. That’s why governance and administration of government schools — especially state and local government schools — is very critical and political parties need to pay greater attention to improving governance in public education. But at the same time, while I’m in favour of the invisible hand of market being allowed full play, the hand of trust of private schools is equally important.
Education is an intangible product. You get to discern its value only after 10-12 years when children write school-leaving competitive examinations. Therefore, it’s really important for private education providers to play for the long run, and focus on ethical wealth creation. I say this with enormous seriousness, because one hears many stories of purportedly not-for- profit private schools and institutions being used as vehicles for diverting sums away from education into other sectors and enterprises.
That’s why ethical wealth creation is important in the context of education and private education institutions. They need to inspire trust. Ethical wealth creation — the marriage of the invisible hand of markets supported by the hand of trust — is crucial, especially in the education sector.
So would I be correct in interpreting that your advice to private institutions is that they should inspire trust?
Absolutely. I’m saying it explicitly. This is my message to Indian industry and education institutions. Education brands that inspire trust — Harvard, Yale, Chicago — have won the trust of government and their communities by playing for the long run. This is something that our education institutions need to learn if they want autonomy and freedom. They should ensure that the labour of love that they’re investing in schools and HEIs (higher education institutions) benefits the next generation and several generations after. Trust is something that has to be accorded high premium. Aspiration to growing rich quick is the shortcut to jail — in industry and education.
Last question. How optimistic are you about the future of Indian education and the national resolve and capability to develop the country’s abundant high potential human resources?
I am an incorrigible optimist so maybe you’re addressing this question to the wrong person. You will very rarely hear a pessimistic answer from me.
What about national resolve? Is there sufficient will? Because as we discussed through the interview, education is not moving up the agenda of any political party or even society…
I disagree. The National Education Policy 2020 is based on recommendations of the Kasturirangan Committee which comprised eminent educationists including Dr. Manjul Bharghava, professor of mathematics at Princeton University. The inclusion of stalwarts like these to craft NEP 2020 is indicative of the seriousness the Central government accords to education.
I believe that NEP 2020 has the ingredients for revolutionising Indian education. Now we need to focus on implementing it. In this connection, the key message I want to convey to parents is to monitor administration and governance of your children’s schools. Ask the right questions and demand accountability. This is more important than pouring money into education. If parents or parent groups assume the responsibility of asking questions of the school administration and thereby keep their administrators on their toes to deliver high-quality education for their children, it will become easy to implement the new education policy. Our research indicates that in schools where parental involvement is high, learning outcomes are better. Citizens need to ask questions on governance with teachers being asked to teach and teach properly.
These are the ground level realities and issues that parents need to concentrate on. Organisations like yours need to really take these issues to parents at the grassroots, not only in the English, but vernacular media. Last mile implementation, administration and governance can hugely improve the quality of education dispensed in education institutions, especially schools.