Arvind Subramanian’s term as CEA extended by one year, says Arun Jaitley

On Thursday, amid media reports of an early resignation of Subramanian before his term comes to an end in October, the finance ministry had dismissed them and said he will continue to hold the charge. A section of media had reported that the CEA is considering resigning before his term ends in October. The extension of Subramanian comes at a time when the government is working on measures to support economic growth, after GDP growth fell to 5.7 per cent in April-June — the lowest in at least five quarters. Also, his extension can be perceived as a signal that the government wants to retain its core economic policy team with the 2018 Union Budget going to be the last full Budget of the NDA before the 2019 general elections.

Subramanian has, over the last three years, brought new ideas in public discourse such as the JAM trinity: Jan Dhan, Aadhaar and Mobile. He was closely involved in drafting the Goods and Services Tax Act and had also authored the ‘Report on the Revenue Neutral Rate and Structure of Rates for the GST’ in December 2015.

He has often questioned high interest rates at a time of low inflation and slowing growth. In June, in response to RBI’s decision to keep interest rates unchanged, he had said there was a “plausible alternative macroeconomic assessment”. In the second volume of the Economic Survey released in August, he had said, “the conclusion is inescapable that the scope for monetary easing is considerable, more than that suggested by comparison with neutral interest rates.”

In the second volume of Economic Survey for 2016-17, Subramanian had warned that meeting the upper end of the 6.75-7.5 per cent GDP growth forecast for 2017-18 will be a “challenge”. The second volume of the Survey had also noted that various factors such as launch of the GST, positive impacts of demonetisation, in-principle decision to privatise Air India along with further rationalisation of energy subsidies and actions to address the Twin Balance Sheet challenge contribute to optimism in the economy.

In the first volume of the Survey, released in February, he had captured a range of political economy issues at the heart of a changing India. Like the finding, based on rail passenger traffic, that annual migration within India touched 9 million, much higher than previously estimated. Last October, he chose Sabarmati to flag the idea of a “universal basic income” scheme. He dwelt on it at length in the Economic Survey too, suggesting that it could replace the 1,000-odd benefit or subsidy schemes that are currently in place.

Subramanian had also pushed for higher spends by the government at a time when the private sector was reluctant to invest, and advocated the setting up of a state-owned asset reconstruction company to take care of the mounting bad loans problem. The office of the CEA had remained vacant for over a year after Raghuram Rajan was appointed Reserve Bank of India Governor in September 2013. Subramanian was appointed as the CEA in October 2014 for a three-year tenure.