Arvind Virmani: Economist who became a diplomat

Arvind Virmani has reached the restaurant early and texts me to say so.

Suffering the pangs of an absent host I hastily reply that I would be there shortly.

"No problem," he replies, "am recharging my phone battery at the lounge. And reading."

More than two decades of working for the government as a senior economist in different capacities including chief economic advisor and now a stint with the International Monetary Fund as executive director have not rubbed off on Virmani.

He still looks every inch the simple, absent-minded professor. We're meeting at Jade, a Chinese restaurant in Lutyens' Delhi, Virmani's choice, though I had offered two other options - a restaurant offering Bengali delicacies and another that prides itself on serving authentic Punjabi "dhaba" food.

I had thought Virmani would opt for the latter but he chose Chinese, a choice that surprised me given his roots in Delhi.

Virmani's parents moved to Delhi's Jhandewalan area after Partition. He was born a year later and grew up leading almost a dual life - going to St Columba's in the morning and playing with factory-workers' children who lived around his residence in the evening.

Once he turned 11, his father decided to send him to Doon School.

Virmani did not enjoy that shift.

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"I do not know why my father sent me away, my mother could not have taken that decision," he says ruefully.

As we are ushered into the dimly-lit restaurant, with light oriental music in the background, I ask him if Doon School helped him build the kind of network that would become useful later in life.

He appears a bit lost and then notes that he had only a few friends and one of them was from Calcutta.

He is obviously reluctant to name them, but when I persist he says, "Of course, one of my batchmates was Prannoy Roy" (of NDTV fame).

Virmani is not fastidious about food. His choices, too, are simple.

No alcohol, only fresh-lime soda, lemon coriander soup and six chicken and prawn dim sums.

I repeat the order for myself. The waiter looks pleased at the quick decisions and presents us with a plate of prawn-flavoured chips to which Virmani takes a great liking.

When the conversation resumes I ask him about life after Doon.

St Stephen's? No, Virmani corrects me. "You see, in those days electronics was the craze, so I got through the exam for the Indian Institute of Technology, Delhi. Unfortunately, I got textile engineering, I did not like that, so I moved to St Stephen's for a course in Physics," he said.

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His next halt was the California Institute of Technology and that is where the Economics bug bit him.

"I realised at Caltech that I would not enjoy sitting in the laboratory all day. I wanted to explore something in social sciences. So I decided to do a double major - one in Electronics and the other in Economics," he says.

The next stop was Harvard, where he enrolled himself for a PhD programme in Economics. His thesis advisor was the formidable Kenneth Arrow.

He returned to India around the end of Indira Gandhi's Emergency rule in 1977 and tried setting up a consultancy.

"That did not work, perhaps because I was not good at salesmanship," Virmani admits.

He had two job offers. One, he was shortlisted for Reader at the Delhi School of Economics and the other a job with the World Bank.

He opted for the latter and left the country again.

"I still remember Ashok Lahiri [who became the chief economic advisor a few years before Virmani got the same job in 2007] coming to our house and asking me if I would take up the D-School job.

"He was second on the panel of shortlisted candidates and if I went to the World Bank, he would get the Reader's position at the D-School. I told him that I was going to the World Bank and Lahiri got the D-School job," Virmani says.

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Virmani pours a generous dose of black vinegar sauce into the soup and continues his story.

"I returned to India in 1987. The Planning Commission had selected four senior economists and I was one of them," Virmani says.

Who were the others? Virmani says, "Rakesh Mohan was one of them, although he did not stay in the government for long."

That seems to be Virmani's unstated regret. He served the government from 1987 in senior positions in the finance ministry and the Planning Commission for more than two decades.

He worked on various economic policy papers during the 1990s that led to various reforms.

Yet, he seemed to suggest that he did not get the kind of recognition that anyone else in his position would have earned.

He does not say it, but hints that he became chief economic advisor much after he thought he should have got that position.

The dim sums arrive and we dig in, I ask him about the early days of economic reforms.

He recounts a fascinating story.

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"Two days before Manmohan Singh became the finance minister, I met him at a party and he asked me what needed to be done for the Indian economy. I asked him if I could give him a note on the subject. He asked me to go ahead and the very next day I presented him with that note," he recalls.

What did the note say? "Well much of what is now widely known - reforms in industrial policies and the exchange control regime, trade policy changes and tariff reductions," he says.

Virmani was in the finance ministry when economic reforms began in 1991.

He recalls a chance meeting with Montek Singh Ahluwalia, then the economic affairs secretary, just outside the latter's room in North Block.

Ahluwalia asked Virmani what he was doing.

Virmani said he was working on exchange control reforms. Ahluwalia got interested and asked him to give him a note.

That led to the formulation of the dual exchange rate policy or the liberalised exchange rate management system.

I ask Virmani if it is true that he is very close to Ahluwalia.

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He is not pleased with that question.

"I am a professional and my relationship with anyone in the government is as a professional," he says.

I change the subject. How open was the finance ministry during those days?

"Quite open," his face lights up. "For example, I remember opposing the proposal of fixing what I thought was a very low rate of duty on gold import. The matter was discussed and my view was rejected.

"In retrospect, I was proved wrong, but that shows the openness, which continued even later, when Chidambaram was finance minister," he says.

Was it very different with Chidambaram?

"He was such a meticulous minister and would come back with his comments on any note that reached him. I remember the proposal on tax cuts that went to him. It came back in less than a day with clear instructions on what was possible and what needed more clarity," he says.

Dessert has arrived - plain vanilla ice cream with lychees.

I ask him about his stint as chief economic advisor and point out how he included more data and information in the annual survey documents.

Virmani plays it down.

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"But more than that, I introduced the system of producing policy papers from within the department for discussion and debate," he says with unconcealed pride.

I am not satisfied and ask why is it that the government has failed to either build a new team of economists within the system or attract fresh talent from the outside.

Virmani agrees but does not offer a reason. We both order jasmine tea as a digestive and chat about his current assignment.

Was the IMF posting a surprise? "Yes, I was surprised. One afternoon, the finance minister called and asked if I would be interested in going to the IMF as executive director.

"An IMF posting was not on my mind. I told him I had to check with my wife, who had a practice in New Delhi as a radiologist. But she insisted that I take up the job," Virmani says.

The IMF job offer obviously made him feel good, as did the extension of his job as the chief economic advisor by a few months.

The first few months at the IMF headquarters in Washington were difficult.

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"I was learning the art of economic diplomacy. The IMF bureaucracy started calling me an academic at the job. But in the last few months, I have brought about a change in the way they look at me," he says.

How did the Dominique Strauss-Kahn affair hit the IMF? Virmani shows that he indeed has learnt diplomacy.

"DSK's record speaks for itself. He is highly regarded for the manner in which he dealt with the 2008 crisis," he says, making it obvious that he does not want to answer difficult questions.

I persist as we leave the restaurant. Why did India support Christine Lagarde's candidature so late in the day? Virmani plays with a straight bat again.

"Please remember, India's position on why a member of the emerging economies should be considered for the IMF chief's job was widely appreciated," he says.

As I see him off at the lobby, I realise that Virmani has made one more smooth transition - from engineer to economist and now to diplomat.