Critique of the New Consensus Macroeconomics and Implications for India

The thought-provoking book presents alternative viewpoints to mainstream macroeconomic theory, questions conventional policy wisdom and suggests a systematic re-orientation of current macroeconomic and financial regulatory policies in India.

The New Consensus Macroeconomics (NCM), which established itself in the 1980s as mainstream macroeconomics, essentially represents an “uneasy truce” between two dominant schools of economic thought viz. New Classical and Neo-Keynesian economics. The NCM sets the tone for much of the macroeconomic (especially monetary) policy followed by the advanced economies in the period of the Great Moderation (1990–2005). The recent global crisis has posed a major challenge to the NCM as empirical models based on the NCM failed to anticipate the occurrence of the crisis and later its extent and severity.

The above considerations constitute the underpinnings of this book, which addresses the theoretical controversies within a general context and their policy implications for India. The authors’ analysis leads to a somewhat critical assessment of the financial sector policies followed in India since the initiation of reforms in 1991. This makes the book a valuable resource not only for researchers working in this area, but also for policy makers. 

“This book is an outcome of the highly scholarly and intellectually stimulating contribution of the author, presented in a succinct and lucid manner. … This book would rekindle the spirit of inquiry on new consensus macroeconomics, serves as a reference book to all those interested in the study of macroeconomics and policy. The book will be useful to scholars, academic in general, policy makers, regulators and bankers.” (Kamaiah Bandi and Rajendra N. Paramanik, Journal of Quantitative Economics, Vol. 17, 2019)

“The book is a unique and unparalleled treatment of a complex subject by an eminent economist, which is a must read for academicians, policy makers and financial market participants.  It reflects the author's acknowledged command over the theory and practice of economic policies globally, and his decades of involvement in research and policy in India in the areas of money and finance. The book should prove   of immense contemporary value in India, where money and finance are currently under stress.”

-          Dr. Y.V. Reddy, Former Governor, Reserve Bank of India

 “Following the Global Financial Crisis of 2008, the basic tenets of mainstream macroeconomics have been increasingly questioned. Dilip Nachane’s authoritative book provides an insightful survey of the debates in modern macroeconomics. The sweep of the book is remarkable, from Marxian and Austrian economics to theNew Consensus Macroeconomics. The book is a must-read for all scholars and students of economics”

-          Dr. Kunal Sen, Professor of Development Economics, University of Manchester, UK; and Director-Designate of UNU-WIDER. 

 “Professor Dilip Nachane has achieved a unique feat. He elucidates the emergence and the content of the New Consensus Macroeconomics, the post-crisis critiques of it from a spectrum of perspectives encompassing the Austrian, the Post-Keynesian, the Minskyan, and the Marxist, and the hard lessons learnt from the crisis by the policy makers.  Arguing the need for monetary and financial stability for economic growth and social welfare, he critically analyses the macroeconomic policies and the institutional and political economy aspects of financial liberalization for achieving this purpose, in the context of India.”

-          Prof. Vikas Chitre, Former director, Gokhale Institute of Politics & Economics, Pune, India

 “Prof. Nachane has written an extremely thought provoking book on Macroeconomics.  It is a masterly analysis of the post Keynesian developments.  The coverage is wide, almost encyclopedic.  He also traces meticulously the theoretical underpinnings of the various policy measures introduced particularly after 2008 crisis.  The jury is still out on what the ‘optimum’ level of ‘financialization’ is.  A must-read book for every serious student of economics. ” 

-          C. Rangarajan, Former Governor of Reserve Bank of India and Former Chairman, Economic Advisory Council to the Prime Minister

 “In Macroeconomics history has affected the evolution of economic thought which in turn has had a feedback on the course of history itself as this timely book reveals. Keynes broke with the Classics but Friedman later brought Classical principles back in. Dilip Nachane’s insightful book provides a perspective on these intellectual developments that were associated with the Great Moderation of business cycles and the Great Financial Crisis. It reviews this seemingly chaotic history, and critically examines the political economy of policies around financial intermediation and stability and the regulation of the financial sector.”

-          Prof. Errol D'Souza, Director, IIM-A(Ahmedabad)

“This is a book by a leading economist which is a master piece on macroeconomics – tracing the evolution of different schools of thought and the rationale behind them. It is a work of great scholarship and is thought provoking, which will be very useful even for a non-specialist.”

-          Dr. R. Barman, Chairman, National Statistical Commission, Government of India. 

“Written with clarity and insight, this book by a leading macroeconomist of India explains the historical context in which a consensus emerged within modern macroeconomic thought, and how that consensus changed history. A fascinating read, and a work of outstanding scholarship.” 

-          Prof. Tirthankar Roy Professor of Economic History, London School of Economics

Dilip Nachane is currently Chancellor, University of Manipur, Imphal, India; Professor Emeritus, IGIDR (Indira Gandhi Institute of Development Research), Mumbai, India; National Fellow, Indian Council of Social Science Research (ICSSR); Honorary Fellow, Institute of South Asian Studies (ISAS), National University of Singapore; and Honorary Fellow, Indian School of Political Economy, Pune, India. He has earlier served as Director, Department of Economics, University of Mumbai (1993–99); Vice Chancellor, IGIDR (2007–10); Visiting Professor, University of British Columbia, Vancouver, Canada (1988–89); Visiting Professor, University of Ulster, U.K. (1991–92); Hallsworth Fellow, University of Manchester, U.K. (1987–88); and Fulbright Fellow, University of Texas at Austin, USA (1982–83). He has served on several official committees such as Technical Advisory Committee on Monetary Policy, Reserve Bank of India (2005–11), and Member, Vijay Kelkar Committee on Regional Imbalances in Maharashtra (Govt. of Maharashtra, 2011 onwards). He was elected President of the Indian Econometric Society (TIES) 2002–03. He has been continuously listed in Marquis‘ International Who’s Who for the last 15 years. For his outstanding contributions to research and teaching of Economics in India, he received the UGC Pranavananda Saraswati Award for Best Teacher in Economics, 2004. He has published the following book with the Oxford University Press, ‘India Econometrics: Theoretical Foundations’ and ‘Empirical Perspectives’. He has also edited/co-edited 7 volumes including the ‘India Development Report 2011’. He is currently the Editor-in-Chief of the Journal of Quantitative Economics (Springer), and a Co-editor of Macroeconomics and Finance in Emerging Market Economies (Taylor and Francis).