SynopsisChief economic advisor Krishnamurthy Subramanian does not see the repeal of the farm laws as a setback to the government’s reforms agenda. In an interview with Shrimi Choudhary, Subramanian talks about his stint with the government that ends this month and the reforms during his tenure. Edited excerpts:
Chief economic advisor Krishnamurthy Subramanian does not see the repeal of the farm laws as a setback to the government’s reforms agenda. In an interview with Shrimi Choudhary, Subramanian talks about his stint with the government that ends this month and the reforms during his tenure. Edited excerpts:
Will repeal of the three farm laws be a setback for the sector?
Clearly, these reforms were brought in to increase productivity and add value to the agriculture sector. So those reforms were important. But I would say that there is no need to extrapolate beyond the agriculture sector. Not only in India, but across the world, agriculture generates emotions in a democracy. So, what applies for the agri sector may not apply to other sectors.
Does it make sense to legislate MSP?
There are several sources of inefficiencies that stem from minimum support prices, which have to be paid by the taxpayer. I think that is something that has to be kept in mind.
What are your views on regulating cryptocurrency?
I think we have to make a distinction between crypto as an asset and crypto as a currency. Also, if a financial innovation is a zero-sum game and does not benefit the real economy that much, it has to be thought about very carefully.
What is your outlook for inflation, is it concerning considering commodity prices are going up?
We have been able to keep the inflation range-bound and it has been less than 5% in the last several months. I do anticipate that in the next few months it will also be in the monetary policy range (2%-6%).
Primarily, India anticipated that the pandemic will create supply-side disruptions and therefore implemented supply-side measures. The budgeted capital expenditure, which builds assets and enhances supply, is likely to happen. Also, the formal sector firms have not been that impacted and can therefore ramp up supply to meet demand. As the government’s response took into account both supply and demand to keep inflation in control, monetary policy can continue to be supportive in the Indian context, unlike that globally.
Do you think that the Reserve Bank of India should change its accommodative stance?
I’ve laid out the conceptual arguments that must be taken into account. Overall, because fiscal policy and reforms have worked on expanding supply, I don’t anticipate inflation to go beyond the range.
“India should be able to meet fiscal deficit target… If LIC IPO goes through and other deals in pipeline happen, disinvestment could reach close to plan”
— SubramanianIt’s quite unlikely that the government will meet its disinvestment target. Your views?
If the LIC IPO goes through and the deals which are in the pipeline happen, we could reach close to the target. But DIPAM (Department of Investment and Public Asset Management) has been able to complete some difficult transactions like Air India. Even though it may not bring in much revenue, it is an important step in the overall push for privatisation.
Do you see any threat from the new Covid-19 variant to the economy?
The difference between the first and the second waves versus now is the fact that very large sections of the population have been vaccinated. There are multiple lines of defence that have been lined up now. The first line of defence is the vaccination itself, which will help in reducing the health impact. The second line of defence — if the first line of defence is not adequate — is that we’ve actually learned how to manage the trade-off between lives and livelihoods much better.
So, we would be able to handle the economic impact well. Though at this point in time it is too early to say, I don’t anticipate too much of an impact given our progress in vaccination.
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