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BW Businessworld

Master Of His Craft

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I.G. Patel was an intellectual who went into the practical world, an economist who made policy, and a man of great charm and wisdom. He was adviser in the finance ministry from the 1950s till the early 1970s; he left when Indira Gandhi brought in a corrupt minister of state. He returned when she was replaced by Morarji Desai, and was made governor of Reserve Bank. Then he went on to head the Indian Institute of Management, Ahmedabad, and London School of Economics. He was a stylish speaker and writer. Most of what he wrote is buried in government files, but there is still enough to fascinate and entertain us today. Khatkhate and Reddy have brought together 32 of his papers. 
 
I found Patel’s memoir of Arthur Cecil Pigou of particular interest. Patel, Pigou and Keynes were all in King’s College, Cambridge. When I went up in 1956, Pigou lived in a set of rooms on the first floor looking over Chetwynd Court. A tall, gaunt man, he was often seen walking on the lawns behind the chapel. But he had stopped teaching, so I never came to know him. My view of him was shaped by Keynes’s remarks in The General Theory; Keynes had taken Pigou’s Theory of Unemployment, written in 1933, as the authoritative version of classical theory, and demolished it. At that time, we were all Keynesians, and so we did not think much of Pigou. But Patel, who went up a dozen years before me, must have seen more of Pigou; he wrote a perceptive obituary. He quotes from Pigou’s obituary of Keynes, that Cambridge economists had become pedestrian and complacent, and that Keynes broke their dogmatic slumber. Had Keynes been less ready to hoist the flag of intellectual revolution, Pigou said, he would have avoided fruitless debate, but would have had less effect on public policy. I thought it was an unexpectedly generous tribute.
 
After his education in Cambridge, I.G. Patel was picked up by International Monetary Fund. One of the first studies he did there was on elasticity of demand for gold. The context is still relevant; Indians continue to bury their savings in gold even now. He fitted demand equations to India’s gold imports between the wars and worked out price elasticity. Lacking figures of national income, he used sugar consumption as a proxy. The results are of only historical interest, but one can see him meticulously testing various hypotheses, pointing out limitations of his results and falling back on common sense. From the Fund, he was borrowed by the Indian finance minister. The finance ministry saw discussions about how to use Indians’ hoards of gold to alleviate the balance of payments. There is a subtle note by him from 1958 where he considers policy alternatives and shows that none of them would make much difference.
 
I.G. Patel saw the political culture change from Nehruvian socialism to Indirian opportunism. He wanted no part of the new power structure; he left Delhi. He could have been the reformer of 1991 if he had so chosen, but he was not one to look back or be tempted. So he watched Manmohan Singh’s reforms from his home in Baroda. But he also reflected deeply on them. He reviewed the early reforms in the valedictory session of Assocham in September 1991. He was a bit riled that everyone was celebrating Dr Manmohan Singh’s reforms and excoriating the previous licence-permit raj. He said that the knowledge of economics in the government was no less or worse before the reforms; solutions given by economics were just as well known before, but it was the politicians who refused to accept them. It reminded me of 1991-93, when I was inducted into the government; as soon as the crisis was over, I was shunted out. Economists are always at the mercy of politicians. Anyway, I.G. Patel wasted no time crying over bad times; through thick and thin, he continued to observe objectively and analyse situations. This volume is a good witness of his analytical skills.
 
(This story was published in Businessworld Issue Dated 05-11-2012)