Bangladesh's economic growth has remained reasonable: Economist Kaushik Basu

The integration of policy and research is crucial for improving decision-making and ensuring that policies are founded on the best available evidence in developing countries such as Bangladesh, said Dr Kaushik Basu, professor of economics at Cornell University, United States.

"The world of policy and the world of research is completely separate in most developing countries. But in most Western developed countries new policies are being made by researchers," he said at an event at the University of Dhaka on Friday.

Economists, current and former top economic policymakers of the Bangladesh government also spoke at the event titled "Kaushik Basu in the Discussion of Economics" organised by Banglar Pathshala.

Dr Shamsul Alam, state minister of planning was also present at the event chaired by Professor Rehman Sobhan, chairman of the Center for Policy Dialogue (CPD).

Dr Kausik Basu shared with the audience his experience as the chief economic adviser to the Indian government between 2009 and 2012.

"I was the 14th person to hold this position and all my predecessors were bureaucrats or got appointed to the position after performing various government duties for some years," he said.

"I was the only person who had been appointed for the post from the research and policy profession mainly due to the government's intention to implement ideas arising from research abroad," he added.

"There are certain lobbies and parties in the government and bureaucracy. It is very difficult to implement new ideas in the existing system," Kaushik Basu disclosed the hardship that he had faced during his tenure as India's chief economic adviser.

He said that the Indian government implemented some of his ideas and benefited.

"I sought support from the bureaucrats in the 1990s to set up the centre for development economics but they did not respond at first. But when they saw me sitting in the waiting room of the then finance minister Manmohan Singh for 20 minutes, they started supporting me," said Kaushik Basu.

He added policymakers need access to the latest and most relevant research findings to inform their decisions, while researchers need to understand the policy context to ensure that their findings are relevant and useful.

"It can also help to build trust and understanding between policymakers and researchers and ensure that research has a real-world impact."

Stating the example of the Indian economy, he said that the economic growth in India started to take off in 1993 following the gulf crisis in 1991 which dropped the forex reserve of India even below the import capacity of 13 days. The country overcame the problem with the support of the IMF.

Dr Kausik Basu, who also served as a chief economist of the World Bank, said that every crisis provides an opportunity for an economy. The current crisis that Bangladesh is facing in terms of forex reserves will not continue for a long time.

The problem in Bangladesh will not continue for a long time. The government has a provision to discuss the IMF reform agenda to overcome the problem, he added.

Speaking to reporters after the event, he said that growth has been disrupted worldwide due to the impact of Covid-19. However, Bangladesh's economic growth has remained reasonable.

He also said that many people are criticising the loan that Bangladesh has sought from the IMF. 

"But it is needless to say that there is a huge risk if the IMF is not approached timely, which we saw in the case of Sri Lanka."

When asked if there is any fault of policymakers in Bangladesh for the dollar crisis, this economist said, "The reserve in the country has increased a lot compared to what I saw in 2015.

"It is true that over the last two years, there has been some pressure. But it is happening all over the world. However, from 2015 to 2020, the reserves have increased continuously, that is, the capacity of Bangladesh has increased. The economy seems to be stabilised despite the fall in reserves," he said.

Regarding Bangladesh's tax GDP ratio, he said, "There is no need to reach the European level now. Their ratio is 24%. But achieving 14-15% in this region is very possible."

Participants said at the event that there is a significant disconnection among people engaged in research, policy-making and implementation stages in Bangladesh which leads to policy failures and generates a blame game between the politicians and bureaucrats.

"Bangabandhu formulated the planning commission within just 21 days of his return to the country after independence. The first five-year plan was introduced within one year of formulation of the planning commission," said Dr Shamsul Alam.

He also said that politicians led the country several times without any economic plan.

He said the finance division grabbed the Macro Economic Unit of the GED of the planning commission, which was liable to formulate fiscal projections in Bangladesh.

The state minister also blamed the lack of independence of the Bangladesh Bank to provide monetary decisions concerning interest rate, exchange rate, money supply and projection of inflation.

"I have raised the issue several times in front of the prime minister. But unfortunately, the then central bank governor refused the issue and said that the BB enjoys much autonomy," he said.

Dr Atiur Rahman, former governor of the Bangladesh Bank said at the event, "The finance ministry announces the inflation target with the national budget which is not a fiscal issue. 

Mustafa K Mujeri, former DG of the Bangladesh Institute of Development Studies (BIDS), said at the event that the politicians and bureaucrats denied introducing new policies based on research to ensure large reforms, to protect their interests.