An Interview with Dr. S. Mahendra Dev
Chairman, PM’s Economic Advisory Council, reflects on India’s developmental challenges, rural livelihoods, labour markets, inclusive growth pathways
Dr S. Mahendra Dev serves as the Chairman of the Economic Advisory Council to the Prime Minister (EAC-PM) and has previously held positions as Director and Vice Chancellor of the Indira Gandhi Institute of Development Research (IGIDR), Member of the Prime Minister’s Task Force on Employment, and Chairman of the Commission for Agricultural Costs and Prices (CACP), among others.
A respected economist working at the intersection of research and policymaking, Dr Dev brings a sharp, grounded understanding of India's developmental challenges - particularly in the areas of rural livelihoods, labour markets, and top-down welfare design.
In this conversation with Dr Dev, The Policy Edge team explores how India can build more inclusive growth pathways, the role of evidence in shaping social policy, and the way researchers and civil society can collaborate more effectively to support structural transformation.
You have written extensively on rural poverty and employment and advised successive governments on welfare and growth strategies. Looking at today’s policy landscape, where do you think India is making progress - and where are we still avoiding the hard questions around structural inequality?
In the first four decades of Indian independence, India had an average growth rate of 3.5% per annum, the so-called “Hindu rate of growth”, a term coined by Prof. Raj Krishna, one of my teachers at Delhi School of Economics. In the three decades after economic reforms, India recorded a growth rate of 6% to 6.5% per annum. We need an even higher growth rate to achieve ‘Viksit Bharat’. As we lost the first few decades, we now need to go faster.
Apart from growth, other development goals are inclusive growth and sustainability. India has made progress in reducing extreme poverty and consumption-based inequalities.
Employment creation is the most important element of inclusive growth. Two structural problems in India are: (a) structural transformation from agriculture to industry and services particularly in employment, and (b) inequalities in health and education.
There are, of course, income and wealth inequalities as well. These can be reduced through the creation of both quantity and quality of employment. India has an advantage over others in having more young workers. Structural transformation from agriculture to industry and services, over time, will further improve the quality of employment. The growth of MSMEs is also part of this agenda.
The approach has been to increase the share of formal sector employment while simultaneously raising the productivity of the informal sector. India needs jobs for low skilled, semi-skilled and high-skilled employees. Youth should get opportunities for both skilled and unskilled jobs, as unemployment is mostly among young and educated. Manufacturing and services are becoming more skill-intensive. Therefore, the push by the government to improve skills is an important step that raises workers’ employability.
One sector which can transform India is education and skilling which is being prioritised by the government. India has made progress in strengthening its skill infrastructure. Both central and state governments are putting a lot of emphasis through several programmes on raising the levels of vocational education and skills, so that there is no mismatch between education and employability.
Similarly, inequalities in health and education must be reduced over time. One of the goals of Viksit Bharat is to reduce these inequalities.
As Chairman of the EAC-PM, you engage with some of the most complex and welfare sensitive questions in the Indian economy. How do you ensure that independent economic thinking remains relevant in high-level policymaking? What role should academics and think tanks play in this space, beyond publishing reports?
High-level policy making at the national level generally keeps a country's interests in mind, while also cooperating globally whenever needed. Independent thinking that supports the country’s development, in terms of growth, inclusiveness and sustainability is appreciated in policy circles.
Regarding think tanks, John Maynard Keynes once said, “It is ideas, not vested interests, which are dangerous for good or evil”. It suggests that while powerful groups might resist change, the long-term impact of new ideas, whether beneficial or harmful, is ultimately more significant. Think tanks should provide good ideas through theoretical and evidence-based research, which will be useful for policy. This can be done by both strengthening existing areas of research and diversifying into new ones, in tune with evolving development challenges driven by changes in development paradigms, the economy, and society.
There is a need to expand the frontiers of knowledge in order to keep pace with the emerging challenges. The intellectual ambience of openness to ideas and plurality of perspectives must not only be preserved but further strengthened. In addition, think tanks can also offer suggestions on better implementation of policies.
From your leadership at CACP and IGIDR to your role today, you have bridged the worlds of field research, technical analysis, and public policy. What do you believe is missing in the training of young economists and implementation-level practitioners to understand policy complexity?
Public policy is complex and shaped by many socio-economic and political factors. Young economists and practitioners should understand this complexity. Apart from data, policy decisions also involve judgement, for example, in fixing interest rates by the RBI, minimum support prices by the CACP, tariffs by the government, or announcing welfare programmes. In order to grasp the complexity of policymaking, one must also understand the ground realities of social, economic, and political conditions. Young economists can engage with industry through their institutions and conduct field-level studies to better comprehend these realities.
You have long argued that growth and redistribution must go hand in hand. In this context, what kind of partnership do you believe is necessary between government, academia, and civil society to make India’s development agenda not only faster but fairer?
Growth and equity reinforce each other. Economic growth allows us to have a larger pie, which can be used for redistribution policies. On the other hand, equity helps in achieving sustainable growth by creating demand for growth.
First, they should understand the elements of inclusive growth. There are both inequalities of outcomes and of opportunities. This means disparities exist not only in the end results people achieve but also in the chances that they need to succeed. Employment, health, and education together play a crucial role in reducing inequalities in outcomes such as income, and in improving opportunities for sustainable growth. For example, quality employment provides stable, well-paid jobs that promote shared economic benefits. Similarly, access to good education and health services significantly influences people's future prospects and their ability to secure better employment and earnings.
Tax policies also play an important role in reducing inequality, in both income and wealth. Progressive taxation and redistribution mechanisms help balance disparities by supporting lower-income groups and funding social programs that further promote equality.
Many studies have shown that improving ‘state capacity’ and governance is important in raising people’s incomes and delivering public services like education and health. Therefore, achieving inclusive growth requires interaction among government, academia, industry and civil society. Each can contribute to the fairer society alongside faster growth. It is also the responsibility of citizens and civil society to improve public accountability.
Finally, it is widely recognised across the world that decentralisation, that is transferring power to local councils, is important for inclusive development. There is a need for deeper decentralisation to Panchayats and Municipal Councils. The interaction among Central and state governments, academia and civil society should extend to the local level to achieve growth with equity.
Views are personal.