The government has reconstituted the Economic Advisory Council to the Prime Minister (PMEAC or EAC-PM).
Bibek Debroy, who was appointed Chairman of the Council in 2017, continues in his post.
The PMEAC was set up “with a view to provide a sounding board for inculcating awareness in government on the different point of view on key economic issues”.
Its functions included analysing any issue, economic or otherwise, referred to it by the PM and advising him thereon.
It aimed at addressing issues of macroeconomic importance and presenting views thereon to the Prime Minister”, either on its own or upon reference; and presenting to the PM from time to time reports on “macroeconomic developments and issues with implications for economic policy”.
PM Indira Gandhi, who had returned to power in 1980, faced formidable economic challenges.
The global oil shock and drought had led to a decline in the national income, and soaring prices.
In this situation, Finance Minister R Venkataraman stressed to the PM the need to arrest the slide and set the economy on the path to stability and growth.
Indira decided to rope in Prof Sukhamoy Chakravarty, a man who had taught alongside Amartya Sen and Manmohan Singh at the Delhi School of Economics, and who had, in the mid-1970s, headed the Policy Perspective Division in the Planning Commission.
In the initial years of its existence, the members of the Council included the famed economist K N Raj, besides C Rangarajan, who would later become the Governor of the RBI.
Vijay Kelkar was the first Secretary of the PMEAC during 1982-83.
Chakravarty who briefed the Prime Minister occasionally on the state of the economy, continued in the post after Rajiv Gandhi succeeded Indira in 1984.
First case of reference
Around 1986-87 the government had opened up the economy a little and allowed liberal foreign borrowings while spending to boost growth.
The Council made a presentation to the PM flagging emerging faultlines, and warning of an emerging fiscal imbalance.
Rajiv acknowledged the input, and announced that the government had decided to accept the report of a committee appointed in 1985 by then RBI Governor Manmohan Singh to review the working of the monetary system and Budget deficit.
Manmohan Singh himself headed the Council briefly when Chandra Shekhar was Prime Minister, before moving on to become Advisor to the PM in the months leading to the balance of payments crisis of 1991.
Bimal Jalan, who was finance secretary in the V P Singh government and, for a while in the Chandra Shekhar government as well, was moved to head the Council.
When P V Narasimha Rao was Prime Minister, and Manmohan Singh his Finance Minister, the Council held only a few meetings.
The Vajpayee years
Things changed after Vajpayee became PM for the second time in 1998.
The economy was again in trouble after the Asian crisis, and the PMEAC was expanded with the Prime Minister himself at its head.
A 12-member Council for Trade and Industry was also appointed. Vajpayee’s PMEAC had heavyweights such as I G Patel, the former RBI Governor; P N Dhar, a former Secretary in Indira’s PMO; and noted economists.
At a meeting of the Council in July 2002, Vajpayee unveiled an economic agenda for 8% growth — featuring plans to provide 10 million job opportunities annually, re-target subsidies and spending.
Through this period, the Finance Ministry remained dominant in economic policymaking.
The Manmohan years
After he became PM in 2004, Manmohan Singh, conscious that he could no longer afford to focus on multiple economic issues, got his former RBI colleague Rangarajan to head the PMEAC.
The EAC by this time was more compact, with fewer than a half-dozen members. The Council was seen as the advisory group best equipped to provide independent advice to the PM.
During the 2004-14 decade, the Council often brought out its own review of the economy, besides reports on a range of issues.
Singh’s Council was the most influential in the over three-decade history of the institution.
It drew its strength, most importantly, from the confidence and trust that the economist PM had in the head of the Council.
Revival in 2017
One of the early decisions that the new government under PM Modi took was to dismantle the Planning Commission.
However, the PMEAC was not restructured under the new government.
The Council was later reconstituted during first Modi government, with Debroy, then a member of the NITI Aayog, as chairman.
The revived PMEAC had economists Surjit Bhalla, Rathin Roy, and Ashima Goyal as members, and former finance secretary Ratan Watal as Secretary.