Indian Express, 27 January 2007
One of the remarkable institutions in the global economics profession is the National Bureau of Economic Research (NBER) of the United States. NBER has no full time staff. It coordinates research programs across a set of roughly 600 "NBER associates" who have full time jobs at universities. This research program is widely viewed as producing the best economics of the world. The NBER community constitutes the intellectual core of the economics profession, and NBER working papers are the most respected working paper series in the world.
The rise of China and India in the world economy created an imperative for NBER to take more interest in understanding these countries. Correspondingly, India's transition into a modern market economy has increasingly meant that the recipes based on socialist economics do not work. The ideas that were mainstream in India from 1960 to 1990 no longer work; there is now a quest for new ideas. India's evolution into a market economy has meant that the uniqueness of India has diminished. Mainstream economics that works in other countries is increasingly important in India. The NBER community knows this `mainstream economics' the best.
Ten years ago, Martin Feldstein, Professor of Economics at Harvard University and President of NBER, visited India for the first time. Persuaded that this was a country that would one day be a major player in the world economy, Feldstein wanted to learn more. "Despite meeting some of the best Indian-born economists at MIT and Harvard, it was difficult to tell whether India was a socialist economy or a market economy," says Feldstein. Raghuram Rajan, Professor of Finance at Chicago University and Chief Economist of the IMF until recently, discussed the idea of conference with Rakesh Mohan, who was then the Director General of the National Council of Applied Economic Research (NCAER).
This led to an "NCAER-NBER Neemrana Conference", which has been taking place every year from 1999 onwards at Neemrana in Rajasthan. It has become famous as the best conference in Indian economics. It brings together a slice of the NBER community with top Indian policy makers and economists. This year the Neemrana conference was attended by P. Chidambaram, the Finance Minister, officials of the ministry of finance, top officials of the Planning Commission including Montek Singh Ahluwalia, the Deputy Chairman, members and heads of regulatory bodies and think-tanks, bankers, eminent economists and columnists.
For the Indians, it was a place to learn about new ideas and empirical research in economics. For the Americans, it was a place to understand India and keep up with the rapid and complex changes taking place in the country. From an Indian perspective, a particularly important feature of the conference is that it improves information and awareness about India in the eyes of key people who are in and out of the US policy process.
Chidambaram and Montek Singh Ahluwalia addressed the gathering on the first day of the conference. The discussion focussed on India's growth, reforms, risks and global economic imbalances. These included discussions about the direction in which the dollar would head, growth in the world economy and India's role in the Doha round. The role of foreign capital, investment, banking and capital markets and India's resurgent private sector were the focus of the discussion on macroeconomic reforms. Bimal Jalan, C. Rangarajan and Pratap Bhanu Mehta contributed to these discussions.
In recent decades, applied economic research has lagged in quality and quantity. As a result, policy making in India often suffers from low inputs from economics. The exposure to some of the best empirical research by academics in US universities often offers new insight and understanding. While there is little immediate impact, new ways of thinking, often based on the experience of other countries, help shape the way we think about economic policy in our own country.
For example, one idea presented in this conference, by Andrew Rose was that inflation targeting monetary policy is emerging as one of the most stable monetary frameworks in the world. While fixed exchange rate regimes are likely to break down, it is those central banks who let their exchange rate float, and target an inflation rate, that are best able to reduce financial fragility. Policy makers in India rarely get the time and opportunity to read research papers, or keep up with institutional innovations outside the country. At a time when there needs to be thinking about a stable monetary policy framework for India as an opening economy, this presentation was a valuable input into the thinking process for Indian monetary reforms.
These closed door meetings have come to provide Indian policy makers with a forum to meet and talk freely, off the record. Candid discussions about contemporary policy issues, contradictions and political difficulties take place. Suman Bery, the Director General of the NCAER said the conference facilitates a "high level conversation among informed and interested Indians, overheard by interested Americans".
The core group from the NBER, which attends all the meetings, consists of Jagadish Bhagwati, Raghuram Rajan, Mihir Desai and Martin Feldstein. In addition, eight different NBER researchers - drawn from all fields - get invited each year. In America, where there is no institution of the IAS, top economists frequently get recruited into decision-making positions in government. Many of those who were introduced to India through Neemrana have gone on to major public policy roles in the US. This is an asset for India.
Anne Krueger, who served as the First Deputy Managing Director of the IMF until recently, and her successor John Lipsky were both present at the conference. "It is a great opportunity to keep up with the developments in India" said Krueger, who has attended all Neemrana conferences from 1999 onwards.
"The lure of the charming Neemrana Fort Palace is a big factor", says Mihir Desai, who is among the organisers of the conference at the American end. The hotel, unlike five star hotels offers no room service, no room telephones, no televisions and no business centre and thus helps cut people off from the world and focus on the discussion at hand. This level of focus has unfortunately diminished when compared with 1999, owing to cell phone cover having reached Neemrana, and owing to improvements in the Delhi-Jaipur road which makes it possible for participants to flit in and out.
Each conference costs the NBER around $100,000. Close to a million dollars have already been spent on the Neemrana conferences. "Indian companies like ICICI and Infosys are now chipping in to help me meet some of the costs" says Feldstein.
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