Duflo, Rajan Named to Indian State’s Economic Advisory Panel

Former RBI Governor Raghuram Rajan and Nobel laureate Esther Duflo. (Source: Bloomberg)

Duflo, Rajan Named to Indian State’s Economic Advisory Panel

Tamil Nadu, India’s No. 2 province by gross state domestic product, will form an economic advisory panel that will tap the expertise of Nobel laureate Esther Duflo and former central bank Governor Raghuram Rajan, among others.

They will be joined by Arvind Subramanian, the former top economic adviser to the federal government, and Jean Dreze, a development economist, Tamil Nadu Governor Banwarilal Purohit told the state’s legislative assembly Monday. S. Narayan, a former federal finance secretary, will be the fifth member on the council.

Duflo of the Massachusetts Institute of Technology won the Nobel Prize in economics in 2019, along with Abhijit Banerjee and Michael Kremer “for their experimental approach to alleviating global poverty.” Rajan, who’s now at the University of Chicago’s Booth School of Business after leaving the Reserve Bank of India in 2016, is credited for championing the creation of a rate-setting panel and pushing to formalize an inflation targeting framework into law.

The appointments come as Indian states struggle for funds to fight the coronavirus pandemic and spur economic growth. Palanivel Thiaga Rajan, Tamil Nadu’s finance minister, told Bloomberg TV in an interview last month that he favors a debt recast to ease the province’s financial burden.

Redemption pressure on states, which normally raise funds selling plain vanilla bonds with 10-year maturity, has been increasing from the year ended March 2018, according to RBI’s Study of State Finances. That’s pushing them to borrow more to meet repayment commitments, triggering a vicious cycle.

Tamil Nadu’s fiscal health is a cause of concern and it will focus on bringing down its overall debt burden and expects the council’s recommendations will revitalize the state’s economy, Purohit said.

©2021 Bloomberg L.P.

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