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Vijaya Pushkarna
Vijaya Pushkarna

NEW DELHI

Tact and insight: How the CEA got a one-year extension in office

arvind-subra-arvind-jain (File) Chief Economic Advisor Arvind Subramanian | Arvind Jain
  • His interactions with the media are reminiscent of a huge class room, with Prof Subramanian at the helm. In the post-budget conference, for instance, he told the assembled journos that he will check newspapers to see who got their facts right

When Prime Minister Narendra Modi decided to wipe out 86 per cent of India's currency, was Arvind Subramanian kept in the loop? This was a question that was increasingly asked of the chief economic advisor (CEA), after the fateful night of November 8, 2016. There was no question that Prime Minister Narendra Modi played his cards very close to his chest; after all, demonetisation was widely proclaimed as a master stroke against black money and fake currency, which the government believed to be the financial backbone of cross-border terrorism.

Every time the question arose, the CEA, whose advice forms the bedrock of the government's macroeconomic policy, would neatly sidestep. "Why do you want to deprive my memoir of any commercial value?” he once asked lightly, in July 2017, at a college in the national capital.

That must have been music to the ears of the PMO, as well as the finance ministry, who prefer that brilliant minds like Arvind Subramanian and former RBI governor Raghuram Rajan restrict their speeches to the subject they handle.

But it will be wrong to conclude that his tactfulness alone is responsible for the recent one-year extension in office (his three-year term ends next month). A senior fellow at the Peterson Institute for International Economics, the CEA transformed the way the finance ministry took stock of the economy, in the course of its annual Economic Survey. He flagged issues which will have long-term consequences. Moreover, he made the Economic Survey a very readable piece of sarkari publication.

Even the Sangh Parivar, known for their animosity towards foreign-educated academics, have no issues with the CEA's Indian credentials. In the Economic Survey 2015-16, there was a chapter—The Chakravyuha Challenge. Invoking a legend from the Mahabharata mythology, Subramanian described the ability to enter the economy, but not exit, without adverse consequences. The CEA observed that the economy has moved from “socialism with limited entry to marketism without exit”, and points out that impeded exit carries substantial fiscal, economic, and political costs.

Arvind-Subramanian-CEA.jpg.image.975.568 (File) Chief Economic Advisor Arvind Subramanian

It was Dr Subramanian who highlighted the volume of subsidies that went to the rich, calling it “bounties for the well-off”—touching on railway fares for air-conditioned and first class travellers, subsidised LPG and more. Subsequently, the country saw the subsidies on LPG dropping and the train fares going up for the higher categories.

Looking beyond financial jargon, he makes sure that humanitarian aspects are not overlooked. Ahead of this year's budget, he pointed out that, while India has come a long way in terms of economic reforms and performance, “there is a journey ahead to achieve both dynamism and social justice”.

His interactions with the media are reminiscent of a huge class room, with Prof Subramanian at the helm. In the post-budget conference, for instance, he told the assembled journos that he will check newspapers to see who got their facts right. And he would pull up those who had not, he joked.

He has constantly pitched for the real estate and power sector to be brought under the GST.

Though the CEA has preferred to keep his personal story on demonetisation for his memoir, in the 2016-17 Economic Survey, there is a take that is visibly his. "The experience, thus far, of demonetisation is instructive. From one perspective, it has been a redistributive device to transfer illicit wealth from the rich to the rest, via the government...If subsidies were an inefficient way of redistributing toward the poor, demonetisation could be seen as an inefficient way of redistributing away from the rich”.  

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