Krishnamurthy Subramanian: Candour of Krishnamurthy Subramanian: Inside the mind of the new CEA – The Economic Times

The new CEA has defended note ban, praised BJP’s record in crime control, attacked dynastic policies.
The new chief economic adviser at the Ministry of Finance is not the one to mince words. Krishnamurthy Subramanian has some original, provocative and innovative views which he doesn’t mind airing openly. Subramanian, after all, obtained his PhD under former RBI governor Raghuram Rajan, another outspoken professor who landed high-profile government jobs.

Subramanian has defended demonetisation, praised BJP’s record in crime control, attacked dynastic policies and appreciated Raghuram Rajan’s contribution as RBI governor. Below are his views on various subjects he expressed in his newspaper columns in the past few years:

On demonetisation
Subramanian is one of the few economists who defended demonetisation whole-heartedly. Days after the controversial step was announced, he said demonetisation would be revolutionary in India’s fight against corruption. “Many of us grew up despising politicians for feathering their own nests, compromising on issues of national importance and dragging their feet on bold decisions. Against this backdrop, the demonetisation effort launched Tuesday night is a refreshing change. In a rare instance, the government has taken an action that resonates well with the sentiment among common, law-abiding citizens on the one hand, and with recommendations from several experts on the other,” he wrote in a column in TOI.

A few weeks later, in a column in Mint, Subramanian said opposition politicians advocating the difficulties faced by the poor were being disingenuous in pushing their claims for political gains. He used data from the National Sample Survey Organization’s survey to argue his point.
“First, the poor are unlikely to have substantial savings stored in Rs500 and Rs1,000 notes. Second, the bottom half of the population ends up spending almost their entire earnings on consumption. Third, only two weeks have passed since the demonetisation was launched on 9 November. Therefore, the weekly earnings of the bottom half of India’s income earners provide us the estimate of the cash that the poor would have in their kitty, which they would have to exchange in a nearby bank or post office. Finally, since the survey was conducted in 2011-12, we inflate the earnings by the average rate of inflation per annum during the period from financial years 2011-12 to 2016-17. This is likely to overstate the earnings of the bottom half of the population because, unlike salaried individuals and other richer sections of society, the earnings are unlikely to get adjusted for inflation in a consistent manner. However, the overestimation of earnings would only reinforce the bias against the inference that the poor are likely to have visited a bank branch at most once to exchange their earnings,” he wrote.

BJP better than SP and BSP in fighting crime 
Writing in TOI in November 2016, a few months before the assembly elections in Uttar Pradesh, Subramanian proved with data collected by his team that the last BJP government in the state was better at controlling crime. “UP has had governments by either BSP or SP since May 2002, which was the last incidence when UP had a state government led by BJP. Total violent crime in UP fell dramatically from 1999 to 2003 at the rate of 16% per annum. This period coincided with the time when BJP was in power in the state. However, since 2003 when either BSP or SP have been in power, violent crimes in UP have increased significantly at the rate of over 7% per annum. In comparison, Bihar which is the closest to UP in its record in crimes, registered increase in violent crimes at 3% per annum,” he wrote. He concluded that voters in UP must be concerned about law and order deteriorating under both SP and BSP when they decided to cast their vote in the upcoming election.

On pseudo-socialism in labour policies
Writing on a trade union strike in September 2016 in TOI, Subramanian argued against governments pandering to trade unions.
“The trade unions represent 15% of the workforce that works in the organised sector and is therefore substantially more privileged than the 85% majority that works in the unorganised sector. The trade unions represent the privileged minority that gets several benefits such as leave, retirement benefits, insurance that the silent majority can only dream of,” he wrote.
“In spirit, politicians catering to this voluble minority are no different from politicians pandering to the religious minority. When such pandering on religious lines is denounced as pseudo-secularism, why shouldn’t similar catering to an economically privileged minority be described as pseudo-socialism? Why is criticism of such pseudo-socialism not even on the agenda of any political party?” he wrote.

On Gandhi dynasty’s legacy of debt
In an article criticising the Gandhi dynasty in TOI in July 2016, Subramanian does not hold back his words:
““The Dynasty” is ready to roll its last throw of the dice with Priyanka Gandhi being drafted to play a leading role in Congress’s UP campaign. Given her husband Robert Vadra’s shenanigans during the UPA regime, UP voters must ask: Should we foster a local Benazir Bhutto with Robert Vadra playing the “Mr 10 percent” equivalent of Asif Ali Zardari? However, because this move is an attempt by The Dynasty to perpetuate itself, we need to ask an even more fundamental question: What does loyalty to The Dynasty get the nation? What is the legacy of umpteen years of rule by The Dynasty?,” he writes.
Comparing Gandhi dynasty governments with non-dynasty ones such as that of PV Narsimha Rao, Subramanian wrote, “After analysing a plethora of economic indicators, we discovered that the elephant in the room relates to subsidies. Governments run by The Dynasty doled out subsidies and other transfers to the tune of Rs 689,600 crore every year, as opposed to Rs 183,300 crore by non-dynastic governments. These figures are in real terms deflated to 2011 levels. And this is not because there was necessarily more money to dole out during the time of the governments run by The Dynasty. Subsidies doled out by them amounted to 9.2% of GDP, almost double that doled out by non-dynastic governments (5.3%).”

Defending Raghuram Rajan
In a in June 2016 column in TOI, Subramanian fiercely defended his teacher and then RBI governor Raghuram Rajan when he was being criticised widely. “After all, India was deemed part of the “fragile five” when he started his innings. During his three-year tenure, not only did he get us out of the fragile five, but he also reduced inflation from 11% to 5% while simultaneously enabling an increase in growth from 5% to 8%. Are we surprised that the vested interests still trash him for choking economic growth!” he wrote.
Comparing him with star cricketer Sachin Tendulkar, Subramanian wrote, “The highlight of RGR’s innings was to shake the system from its stifling cronyism by fostering competition through the licensing of 23 new banks, on the one hand, and calling the “heads I win, tails you lose” bluff of this country’s promoters, on the other hand. No one before RGR attempted to create a database of large borrowers along the lines of the credit bureau for retail borrowers. After all, how can anyone break crony banking if bank X does not know when giving a loan to Mr Dubious Promoter that he already owes bank Y a tonne of money.”

On using data to detect money-laundering
“GoI needs to set up a commission with the mandate and the personnel to demand data from any department; put the disparate data sets together; and analyse them to gain insights. Take the use of data mining to detect money laundering. The use of international trade to move money, undetected, from one country to another is one of the oldest tricks in the book.,” he wrote in a column in ET in January 2017, right after demonetisation.

On bad bank
“A well-structured bad bank would enable the existing banks to renew their focus on their long-term core operations without the ongoing distraction of troubled assets. Free of the troubled assets, the existing banks can expect restored investor and market confidence. This will in turn enable them to raise capital more easily and at more affordable rates. Bureaucrats and policymakers must grasp the benefits inherent in structuring the bad bank as a private equity fund with less than 50% government equity,” he wrote in a column in ET in 2016.

via Krishnamurthy Subramanian: Candour of Krishnamurthy Subramanian: Inside the mind of the new CEA – The Economic Times

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