The economy is not the most riveting of topics these days. Growth continues around a boring 1.75 per cent quarter after quarter, balance of payments is no longer a worry, and prices are not soaring. So I do not give it much thought. But the chief economic adviser recently issued a challenge to economists. According to him, economists do not debate enough on macroeconomy; and when they express themselves, they tend to agree with officials. It is easy to see why this upsets him. He is in the business of macroeconomy, and wants more feedback. It is boring to get views like his own; he can get them without listening to anyone. A less secure CEA would have read in others' agreement a tribute to the quality of his economics; but this CEA is not insecure enough. The problem for the common economist is data; while different parts of the government put out a lot of statistics, one has to look around in too many places, and the detail, quality and periodicity vary greatly. But the CEA gave a lot of charts in his talk; it is worth asking what they all mean taken together.

He began with inflation: consumer price inflation fell sharply after July last year and went below the 4 per cent medium-term target; "true core" inflation - that is, wholesale price inflation excluding food, fuel and transport - also fell. We have been used to inflation around 6-7 per cent; it seems to have come down to 3-4 per cent and stayed there. The turning point is not obvious, but it could be as early as 2013. Why did it come down? The most important reason in my view is a change in foodgrain purchase and distribution policy. Foodgrain shortages till the 1960s made the government very insecure; it hoarded foodgrains. After the green revolution, there was no reason for insecurity, but the government continued to hoard in the interest of farmers, the most important vote bank; it kept prices rising. But in recent years, foodgrain stocks exceeded 60 million tons; the cost of storing them and throwing away rotten grains went too high. The government tried to export grains, but its price support policy made them internationally uncompetitive. So finally it stopped hoarding more and more. This change in procurement policy is behind lower inflation. There have been two other, less important, factors. First, fracking brought down America's import dependence in oil and brought down prices; and the Rupee has appreciated in recent years. The sharp fall in inflation in recent months is also due to base effect.

Arvind Subramanian notes the appreciation of the Rupee. This too was due to a change in mindset. Traditionally, India has had a weak balance of payments, which made policymakers resort to frequent depreciation. But the reserves began to rise at the end of 2013 - initially because of NRIs' remittances, and later because of investment inflows after the pseudo-socialist Congress government gave way to the ostensibly capitalist BJP government. They rose from $280 billion to $350 billion in two years. That made life difficult for the Reserve Bank of India; it had to keep selling bonds to banks to remove the rise in currency that resulted from reserve accumulation and invest the reserves in money markets abroad at close-to-zero interest. So, beginning 2016, it stopped buying foreign exchange and let the Rupee appreciate. It has appreciated some 5-6 per cent since then; but surprisingly, exports have grown sharply in 2017. This is counter-intuitive, but we will have to wait for trade and payments statistics before we can tell why it happened.

In his conclusion, the CEA came back to inflation. It has come down and fallen below the official target, industrial growth is miserable, industrial enterprises are in a bad state, they are not repaying bank loans, banks have a huge bad debt problem. All this calls for expansionary macroeconomic policy. But the combined fiscal deficit of the Centre and the states as proportion of GDP has been falling; from 6.9 per cent of GDP in 2012-13 it fell to 6.2 per cent in 2016-17, and will go down further to 5.9 per cent this year. The Centre is the culprit; its deficit has fallen from 4.9 to 3.5 per cent between 2012-13 and 2016-17, whilst the states' deficit went up from 2 to 2.7 per cent. Public sector borrowings (covering the Centre, states and public enterprises) came down from 7.6 per cent to 7.3 per cent between those years. Share of government investment in GDP is roughly constant: 6 per cent in 2015-16, 6.6 and 6.3 per cent in the next two years. In other words, at a time when the economy requires a stimulus, the governments are not increasing their deficit. And the Reserve Bank's real repo rate has gone up or changed little depending which price index one deflates it with. So the Reserve Bank is also not stimulating the economy. Are not both following economic policies inappropriate to the macroeconomic situation?

In my view, the CEA is the chief economist of the Central government; he must believe government statistics. If he does, the economy is growing at fantastic rates; so what is he complaining about? And his view, that since inflation has come down, the Central government (yes, the one that he advises) must run deficits and reduce interest rates depends on the target inflation rate. True, inflation has fallen below the Reserve Bank's declared target. But it should consider whether its target is not too high. I myself would favour a zero per cent target. There should be no rising trend in prices. If people come to have faith in zero inflation, they will not be in a hurry to spend; their savings will go up. They will be prepared to hold cash; the government will be able to borrow from them at zero rate of interest. And the whole world will want to hold Rupees, and to invest in India. Foreigners will keep the economy growing; we can relax and consume our incomes. But yes, there is one thing the government must never do if it wants this to happen: it should take a vow never to demonetize, and keep its promise.

Subramanian has brought in some good thinking, but it is parochial and short-term. He spoke just days before China's grand meeting about One Belt One Road. The best response India could think of was to boycott the meeting. It will not make the slightest difference; the belt and the road will go around India. Roads and sea lanes are for everyone; they will not give China exclusive property in anything. If Subramanian had gone to the meeting, he would have learnt something, got some ideas, come across some national opportunities. What was the gain from the boycott? It was all loss. Even if we do not want to help China become a superpower - which it can become without our help - we have to learn how to become the minipower of the Indian Ocean. It cannot be done by going and praying at a temple in Sri Lanka; it requires a vision and a plan. That is what this government lacks.