CEA SUBRAMANIAN GETS A YEAR’S EXTENSION

Chief Economic Advisor ( CEA) Arvind Subramanian ( pictured) will continue in his current role for at least a year beyond his tenure, which ends on October 16, Finance Minister Arun Jaitley said on Saturday.

This ended weeks of speculation on Subramanian’s future in the government; there were reports that he would quit before his tenure was over.

A senior official said the discussions regarding Subramanian’s tenure had been going on for some time now, and he had briefly considered not continuing for a second term because of personal commitments.

A senior fellow at the Peterson Institute for International Economics, Subramanian was appointed CEA in October 2014. After his extension was confirmed on Saturday, he said, “India is a country where there is never a shortage of issues... It is true that growth slowdown poses an extra challenge. I think that this is a good opportunity for me personally, to try and contribute to the debate and the solutions.''

He also said the economy was facing multiple headwinds and there was a need to attack them on various fronts. “We have seen growth slowing down and investment not picking up. We have to attack this problem on many fronts — exchange rate, public investments — while maintaining macroeconomic stability.”

Asked about the appreciation of the rupee, he said, “All countries struggle with this challenge. Different countries take measures based on their trade-offs and objectives. What the RBI (Reserve Bank of India) has been doing is to stem appreciation of the rupee.” The appreciation in the rupee-dollar exchange rate, between January and April this year, has impacted both exports and imports, he added. Over the years, his Economic Surveys have stood out for starting debates and discussions on a number of issues, including targeted government services through the “JAM trinity” (Jan Dhan-Aadhaar-mobile), a state-owned “bad” bank to take over ~7 lakh crore of toxic assets in the banking system, and Universal Basic Income for the poor. The CEA has also been a member of a high-profile panel tasked with recommending a medium-term fiscal road map. The Fiscal Responsibility and Budget Management panel had recommended a fiscal deficit target of 2.5 per cent of gross domestic product (GDP), revenue deficit of 0.8 per cent, and a combined Centre-state debt ceiling of 60 per cent of GDP for the fiscal year 2022-23. Other recommendations include setting up of a fiscal council and giving the government tightly defined escape clauses to deviate from the road map. Subramanian had authored a lengthy dissent note to the committee’s recommendations, suggesting the focus of policymakers should be on reducing primary deficit rather than fiscal deficit. The other members of the panel drafted a rejoinder to Subramanian’s dissent note. The government is examining the report.

He has also been one of the most vocal critics of the RBI’s six-member Monetary Policy Committee, and its inflation modelling. The second part of his 2016-17 Economic Survey released in August said there was a “considerable” case for monetary policy easing, given that retail inflation was at historic lows and there was a wide divergence between headline numbers and inflation targets. The Survey said in the past 14 quarters, inflation had been overestimated by more than a 100 basis points in six quarters, with an average error of 180 basis points. This was, however, not as stringent a critique as in the past.

The Survey had been considerably delayed as some in the topmost rung of government had objected to Subramanian’s strong criticism of the MPC’s inflation modelling and monetary policy decisions. In June, Subramanian had reacted quite strongly when the MPC held rates. “In recent times, seldom have economic conditions and the outlook warranted substantial monetary policy easing.”