Why Did Arvind Panagariya Resign From NITI Aayog?

Rajiv Kumar will assume office of Niti Ayog vice-chairman on Friday. But speculation over Panagariya continues.

Arvind Panagariya resigned from the post of vice chairman, NITI Aayog, after serving for roughly two-and-a-half years in that position. Panagariya’s main contributions in this cabinet-rank position include the completion of the three-year Action Agenda (available on NITI Aayog’s website). Based on Panagariya’s interviews to the media, it seems the work on a Seven-Year Strategy and a Fifteen-Year Vision has also been almost completed.

With deeper fiscal federalism now in place, NITI Aayog was charged with the task of providing the states with technical assistance and policy advice. Unlike in the case of its predecessor, the Planning Commision, it was not charged with the distribution of resources to the states.

And, Panagariya himself was actively involved in advising the states. The NITI Aayog, under Panagariya’s leadership, has also made contributions in crafting the Modi government’s policies in the areas of agriculture, health, education and digital economy.

Also Read: Panagariya Resigns as NITI Aayog Chairman, Will Teach in US

Ambitious Action Agenda

The most concrete among his contributions as the NITI Aayog chief, which is available for everyone to see, is the 200-page, thorough and ambitious Action Agenda (AA), which emphasises rapid and sustained economic growth as the main driver of poverty reduction, and promoting exports as the most important component of the government’s job strategy.

The AA is also recommending labour law reforms, through a liberal definition of “startups” and through state-level initiatives, to get around political difficulties in carrying them out at the Centre.

The document also makes more recommendations for stimulating job creation in specific labour-intensive sectors, such as apparel, electronics, food processing, gems and jewellery, financial services and tourism.

Panagariya, himself, has had a role, through his policy advice, in bringing about the recent labour reforms in Rajasthan, and I believe, has been pushing many other states to do the same.

Bidding Farewell to NITI Aayog

• Panagariya’s significant contribution as NITI Aayog chief was the 200-page Action Agenda that had a roadmap for creating jobs.
  
• Speculations on the reasons for his resignation include multiple power centres, from Amitabh Kant to RSS.
  
• Panagariya’s explanation of going back to academics is justified as American universities have an upper limit of two-and-a-half years leave for public service.
  
• Unlimited intellectual freedom that Panagariya’s Columbia profile provides cannot be matched with his NITI Aayog job.
  

Speculation Over Panagariya’s Resignation

It is true that the NITI Aayog does not wield the same kind of power as the Planning Commission used to. While this aspect of the transformation has been widely criticised, I think restricting the power of such government institutions in a market economy is actually a good idea.

After making some substantial contributions, some tasks completed and few others quite advanced in the pipeline, why did Panagariya resign? The media has been over analysing Panagariya’s resignation.

Speculations on the reasons for his resignation range from additional power centres in the NITI Aayog, such as its flamboyant CEO Amitabh Kant, to RSS not being happy with Panagariya’s recommendations and Prime Minister Modi not protecting him from verbal attacks by the RSS.

Also Read: NITI Aayog to Now Be Open to Private Sector Experts

It was also mentioned in some reports that, despite having a cabinet rank, he was not invited to cabinet meetings and that may have offended him. This apart, Panagariya wasn’t happy with the impetus to “babu power” and harassment by tax officials, following the announcement of demonetisation.

Short Tenure of Sabbatical

Despite all the above reasons quoted in numerous articles written on Panagariya’s resignation, I think the reason for his resignation is simple. It is exactly what Panagariya says it is. American universities normally have an upper limit of two to two-and-a-half years on leave for public service. There could be some variations in this regard.

For example, the leave granted to Kaushik Basu by Cornell University was longer and so was the leave to Raghuram Rajan by the University of Chicago. A fair comparison here would be with Shang-Jin Wei – another very distinguished economist and a chaired professor at Columbia – who served as Chief Economist at the Asian Development Bank for exactly two years (until recently), after which he had to return to his position at Columbia.

Questions have also been raised as to why Panagariya did not give up his position at Columbia. Again, Panagariya’s response that such positions don’t come by so easily at his age, makes a lot of sense. Note that Rajan was much younger (in his early fifties) when he left and he would have probably continued at the RBI giving up his Chicago job, had the government allowed him to do so.

Also Read: 7 Quotes That Prove Raghuram Rajan is Our Most Badass Economist

Public Service as an Economist

But this apart, I have also seen questions being asked by the Indian media about Panagariya’s commitment to his country, such as, why could he not have sacrificed his Columbia position (with its associated perks and no mandatory retirement) to perform public service for his country. There is an easy response to this.

Apart from the fact that there could be family reasons (he has children who were born in the US and have grown up there and work there and he wants to be close to them), we need to realise that he can still carry out public services by writing and researching on the Indian economy.

This is the kind of public service he has been doing for the past two decades (in a very distinguished academic career of over four decades). What his professorial position allows him to do is to write freely, providing the government constructive criticism and pushing for the reforms he believes in, without caring about how the Prime Minister is going to receive it. This is not possible in any government job. The unlimited intellectual freedom that Panagariya’s Columbia job provides cannot be matched by his NITI Aayog job and both Columbia and India might be better off for it.

Also Read: Why NITI Aayog’s Job Creation Plan Can’t Ignore Robotisation

(Devashish Mitra is Professor of Economics and Gerald B and Daphna Cramer Professor of Global Affairs at Syracuse University, New York. This is an opinion piece and the views expressed above are the author’s own.The Quint neither endorses nor is responsible for the same.)

(This story was first published on 4 August 2017. It is being reposted from The Quint’s archives as the new NITI Ayog vice-chairman Rajiv Kumar assumes office.)