Arvind Subramanian quits as CEA: The economic advisor who showed a mirror to the govt on economy

Many in the government, particularly, in the North block, will miss Arvind Subramanian, the chief economic advisor (CEA) who just announced his decision to quit the position. The finance ministry, which is currently struggling to repair a faltering economy, is losing a troubleshooter, who held a mirror to the government on crucial policy decisions and often acted as a corrective force. Despite being a part of the government machinery, Subramanian refused to become a mouth piece of the government’s policies, which top economists are typically reduced to when they take up high-level government jobs. On most occasions, Subramanian spoke his mind on key issues and called out to all experts do the same. In May 2017, delivering the VKRV Rao lecture in Bengaluru, Subramanian said assessments made by economic commentators and bankers are not often independent and they tend to endorse the ‘right side of power’. [caption id=“attachment_4326481” align=“alignleft” width=“380”]  File photo of Arvind Subramanian. Reuters[/caption] “My claim is that experts often hold back their objective assessment. Instead, they censor themselves, and in public fora are insufficiently critical and independent of officialdom — whether the officials are in Mumbai or Delhi,” the CEA said, adding, “To the extent they offer criticism, it is watered down to the point of being unidentifiable as criticism." But, to be sure, Subramanian himself too played on the safer side on certain contentious issues. Beef ban, for instance, when the CEA publicly said he could not speak on the issue because he could lose his job. “You know that if I answer this question I will lose my job. But thank you nevertheless for asking the question," Subramanian had said while interacting with students of the Mumbai University in 2016. Like Raghuram Rajan, the former Reserve Bank of India (RBI) governor, who had to encounter wrath of BJP leader Subramanian Swamy’s sustained campaign ultimately leading to his exit from the RBI, Subramanian too had his run-ins with Swamy in 2016. But what saved Subramanian from Swamy’s wrath was that unlike Rajan, he enjoyed the support of top leadership in the government. Swamy wanted Subramanian sacked, but didn’t succeed. In a tweet on 22 June, 2016, Swamy said Subramanian encouraged US Congress to act against India to defend the interests of US Pharmaceutical companies.

Who said to US Cong on 13/3/13 the US should act against India to defend US Pharmaceuticals interests? Arvind Subramanian MoF !! Sack him!!!

— Subramanian Swamy (@Swamy39) June 22, 2016

In another tweet on the same day, Swamy also said it is Subramanian who encouraged “Congi” to become rigid on GST (Goods and Services Tax) clauses, apparently referring to CEA panel recommendations on GST.

Guess who encouraged Congi to become rigid on GST clauses ? Jaitely's economic adviser Arvind Subramanian of Washington DC

— Subramanian Swamy (@Swamy39) June 22, 2016

More from Business

Hyundai India’s Rs 27,870 crore IPO oversubscribed by 2.28X, largely driven by institutional investors How Indian fintech startups are driving Malaysia’s UPI-like digital payments revolution

Subramanian played the role of a troubleshooter on occasions when the Centre got stuck in economic puzzles. For instance, it was a panel under Subramanian who, in December 2015, offered a practical solution to iron out the political differences between the BJP and Congress on the Goods and Services Tax (GST) rate issue. The CEA panel recommendations perfectly aligned with two of the critical demands of the Congress party — 18 percent standard GST rate and scrapping of 1 percent inter-state trade tax. The panel also suggested a three-rate structure. A concessional rate of 12 percent for public goods that concerns the deprived or weaker sections, a standard rate of 17-18 percent that would concern majority of items and a rate of 40 percent for luxury items and tobacco, aerated drinks and pan masala, etc. It is another matter that the government didn’t quite go by his recommendations and instead went ahead with a five slab structure. Subramanian didn’t quite sing the government tune on demonetisation and digitalisation. While he welcomed the long-term benefits, he also highlighted the problem areas. “Digitalisation is not a panacea, nor is cash all bad. Public policy must balance benefits and costs of both forms of payments. Second, the transition to digitalisation must be gradual, take full account of the digitally deprived, respect rather than dictate choice and be inclusive rather than controlled," said Subramanian in Economic Survey 2017. Remember, this comment had come in January 2017 just when the government had begun its pitch for major digitalisation drive as a key objective of demonetisation. On demonetisation, Subramanian was probably the only voice in the government who warned against its ill-effects on cash-intensive sectors such as agriculture, real estate and jewellery. “Recorded GDP will understate the impact on the informal sector because informal manufacturing is estimated using formal sector indicators,” the CEA said in the Economic survey. Subramanian’s term was set to expire in September; he would be the third high profile global economist after Raghuram Rajan and Arvind Panagaria who chose to leave India, citing personal reasons. At a critical juncture where Indian economy is now, the Narendra Modi government will have to now look for someone to fill his shoes.