Indian-origin economist Abhijit Banerjee is among the three professors to win the Nobel Prize for economics in 2019. Banerjee is a professor at the Massachusetts Institute of Technology. He along with his fellow MIT Professor Esther Duflo and Harvard Professor Michael Kremer have been awarded the Nobel for their ‘experimental approach to alleviating global poverty’.
Born in Kolkata, Banerjee attended South Point School and Presidency College in the city.
Speaking to CNBC-TV18 after the announcement, Banerjee said that the coveted award was recognition for the work that he and his colleagues have done for the past 20 years. Here is an edited excerpt.
What exactly was this award for?
It is for the work we have been doing for the last 20 years and the work involves trying to figure out why particular interventions work or don’t work or what works well and the way we do that is by organizing large-scale randomized trials, largescale experiments where you try out the programme. Here you see if it works, if it doesn’t work you try out something else, you tweak it till you find a solution. This style of doing work has now become the dominant way of doing work in the policy space and I think we were the people who pushed it when nobody else was doing and so this is recognition for that work - that sort of starting this machine in a sense.
I remember speaking with you on these topics about a year ago and you spoke to us at the EXIM Bank function on four or five issues in India. You spoke about education, health, creation of jobs, income transfers. At the moment you have the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) where there has been an income transfer. There is also the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). What is your advice to the Indian government, in terms of poverty alleviation what should be the key takeaways from your work?
I think the general takeaway is that you should make policies that work and not policies that are imagined to work. I think there is always a little bit of a willingness in India to announce a policy because they sound good or they have a political purpose.
The general message is you should carefully evaluate policies, understand whether the policy works or not and take it from there. So, that is a very simple message but it is one that probably has a fair amount of bite. Even now I think it is not that the policies are evaluated based on accepted criteria and looked at as an option. Pradhan Mantri says it, it happens. That style of thinking is partly what we are resisting.
Can you point to one or two programmes that are working well? Is the MGNREGA a good one for the government to persist? Is Ayushmann Bharat a good one? In your study, which are the programmes that are working?
The NREGA seems to be a rather solid success. In fact, the evidence is that majority of income gains from NREGA don’t come from NREGA itself but from the fact that it raises wages because people don’t have to work on shift jobs at low wages and that has been a very big part of poverty. The rural roads programmes have been very effective as well. They have made it much easier for people to migrate, to go where the jobs are. What has also been very useful is the Pradhan Mantri Gram Sadak Yojana (PMGSY). There is evidence that that has had large benefits.
At the moment what we are grappling with is that the pie itself is not growing much, 5 percent GDP when we last recorded the Q1 number, is that a worry, will it worsen the poverty situation?
I think it is a worry, it is a very serious concern. The general trickle down is going to slow down, partly. More importantly, one of the key channels of transmission of income from the urban growth centers to the rural places where income isn’t directly growing so much has come to real estate and real estate is right now in a crisis.
The unskilled labour jobs in India, a huge part of those are in real estate, in construction and once construction goes down, the transmission of urban growth to rural areas just stops because those are the main channels by which income is put in the hands of unskilled labourers who come to work for six months and go back to their village with some money. That channel is kind of stuttering right now because of the financial crisis that sort of interacts with the real estate sector after IL&FS and all that.
Your thoughts on a couple of programs that the government has announced, Ayushman Bharat and the farmer income transfer?
The farmer income transfer I think is a good idea. I think the net income of the farmers is not doing very well and it is not a huge transfer and it is sort of being cancelled out by the fact that the terms of trade have moved against agriculture quite severely. So, prices are lower in agriculture right now and as a result, partly because of the support price being kept down, the farmers are not better off. So, I think it is a sensible idea to move away from support prices and go towards giving cash to the farmers. However, I think it has to be more cash.
Final words of advice in terms of institutional changes. I remember one of the revolutionary ideas you said when you spoke to me last year is that we should close down government schools because government teachers are overpaid and children are not going there. The poor are preferring private education and therefore there should be education stamps. Any further thoughts on education?
I think that there are places where government schools work well. I certainly do not want to say that every government school should be shut down. But I do think that there are many government schools now which have 5-7 students. In Madhya Pradesh for example, they are consolidating schools that are shutting down but they are not firing teachers. At some level, we cannot afford to create an overpaid class of people who do not have any particular use in the system.
So, as we see an exit from the school system, I think we need to adjust to that. We need to create a school system that is based on the real preferences of school students and their parents. If they want to go to private schools and we cannot stop it, then we might as well adjust to that.
Finally, do you see any noticeable drop in the total number of people below the poverty line in India? There was a lot of argument when Suresh Tendulkar made his presentation with a lot of people worried about the amount of money he took as below the poverty line. What is the current status? Are we at least progressing in the right direction? Are the number of poor people at least declining?
I think till 2012-2013, it was clearly declining. I think the decline seems to have slowed since at least 2016. I do not know exactly what the numbers are because the new 2017-2018 National Service Scheme (NSS) is being studied as we speak and the data suggest that growth has slowed a lot in the rural economy and average consumption seems to have fallen.