Abhijit Banerjee, the economist who warned India of note ban pain
Banerjee was also one of the advisors to Congress on the ambitious NYAY scheme, proposed ahead of 2019 polls.
Banerjee had said that should Congress-led UPA come to power, the NYAY will have to funded by new taxes given the country’s wide fiscal deficit.
Banerjee along with Esther Duflo and Michael Kremer have jointly been awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2019 "for their experimental approach to alleviating global poverty."
“The research conducted by this year’s Laureates has considerably improved our ability to fight global poverty. In just two decades, their new experiment-based approach has transformed development economics, which is now a flourishing field of research,” the Nobel Prize Committee said.
Banerjee had also criticised India’s currency note swap programme called demonetization saying that the pain would be much greater than was initially anticipated. Many feel the current economic stress has its roots in demonetisation.
“First, there was the potential cost of a massive liquidity crunch, in which the volume or number of economic transactions reduces due to insufficient cash holdings. The brunt of this cost was borne by the informal sector, where 85% or more of the Indian labour force is employed, as transactions here have been traditionally carried out in cash,” Banerjee said in a paper jointly authored with Harvard University’s Namrata Kala.
“Second, one of the stated motivations of the policy was to reduce corruption, yet the value of the highest-denomination bill was doubled, making it easier to pay people illegally with anonymity. Thus, demonetisation seemed more like a one-off penalty on those who were holding large quantities of cash at the time without affecting the future incentives for corruption,” the paper said.
In an article published as recently as in October, Banerjee and Duflo along with Emily Breza and Cynthia Kinnan, backed India's microfinance experiment, saying that short-term access to credit allows a significantly higher proportion of talented entrepreneurs to scale up their businesses. "In sum, it appears that there are indeed sizable benefits from microfinance for some people, but it takes time for these benefits to accumulate," they argued, following a empirical study done in Hyderabad, where NBFC-MFIs were banned through an Ordinance in 2010.
Educated at Jawaharlal Nehru University and Harvard University, where he received his Ph.D. in 1988, he founded the Abdul Latif Jameel Poverty Action Lab (J-PAL), which aims at reducing poverty by ensuring that public policy is informed by scientific and empirical evidence.
He and Esther Duflo -- both professors of Economics at MIT and are married, have jointly authored ‘Poor Economics’ to impress upon the effectiveness of solutions to global poverty using an evidence-based randomized control trial approach.
Michael Kremer, the other recipient of Nobel Prize in economics is a Harvard University professor.