Economist Unbound

Economist Unbound

Free from the responsibilities of office, Arvind Subramanian, former chief economic advisor to the government, has produced an insider’s account of the chakravyuh of policy-making in India.

book review, arvind subramanian, economist, former economic advisor, indian express
Arvind Subramanian. (Express Archive)

The National Democratic Alliance government came to power in 2014. The Prime Minister had no difficulty in making up the Cabinet: there were many more hopefuls than he could accommodate. But then, he discovered that he had to appoint members of the Planning Commission. His memories of it were terrible: he could still hear the shrill voice of its deputy chairman haranguing chief ministers, him amongst them, for hours. So, he decided to abolish the Planning Commission. But its rooms had to be filled somehow. So he invented Niti Ayog, and appointed a few faithfuls to it. But then he had to find a deputy chairman, and the finance minister needed a chief economic advisor. He asked for a list of possible economists. Alphabetically arranged, it was headed by two Arvinds. One was put in the corner room of Niti Aayog, whilst the other was made chief economic advisor.

This is my version; it stands corrected by Arvind Subramanian. Apparently, he was admiring the ruins of Machu Picchu in 2015 when he got a call offering him the chief advisorship. He rushed to Delhi, met the finance minister and the principal secretary, and waited. His appointment was reported by the press. Then nothing happened. He kept waiting, week after week. Finally, he got the job after two and a half months.

I had also noted the lack of connection between his economic surveys and his ministry’s budgets, and inferred that the finance minister had no use for his economics. According to Arvind, the finance minister gave him leeway and let him do whatever he felt like; he made dozens of friends in the ministries and engaged dozens of economists, and produced the best economic surveys. He had a whale of a time. I was also concerned that he had had enough of the Indian government and would want to put India behind him. Four days before he left, I had lunch with him; as we parted, I told him, “You will get busy with other things now, but don’t forget India.” He didn’t; he has just written a riveting book adding to his surveys.

In this book, he has taken up a number of subjects that he thought about but did not cover sufficiently in the surveys. He expounds his view that India is exceptional: that it became a democracy without passing through intermediate feudal regimes, and that it continues to grow without industrialising, as all advanced economies did. He calls this precocious development. India adopted expensive policies such as subsidies and a large public enterprise sector which it has got stuck with; he calls this the chakravyuh view of India. It has created anti-corruption agencies which discourage the exercise of discretion by the executive (He might have added that the NDA government has devolved powers excessively to states, which are incapable of exercising them). India’s Supreme Court also interferes unduly in policymaking. The result is policy paralysis.


There is a similar failure to deal with bad debts of government banks, for which Arvind blames the Reserve Bank of India (that was before the finance minister turned it into a department of his ministry and sent a retired secretary to rule it; I wonder whom Arvind would blame for that). He thinks that demonetisation was surprisingly popular and that it did not destabilise the economy as expected; he asks why.

Subramanian gives a blow-by-blow account of his deep involvement in the design and introduction of the Goods and Services Tax, which faced serious hurdles ever since it was thought about 15 years ago, and, finally, passed because of a lucky conjuncture of circumstances, which he describes. He thinks the battle is still not won and hopes that states will not wreck the design. He campaigned against fertiliser subsidies and minimum support prices and lauds the prime minister for moving from these commodity-based policies to subsidisation of the poor. He often took issue with the RBI and argued publicly against its policies. I think this was a better alternative than the finance minister’s recent annexation of the RBI.

I think Arvind Subramanian was the best thing that happened to the Finance Ministry in decades; his surveys are better than any I have read, including my own. I was sorry he left suddenly, and hoped he would come back. He does not plan to do so in the foreseeable future. But being a Hindu, he thinks he has many lives more, and will come back in another life. This is not good enough for me, for he must, as a good Hindu, give credence to other religions; it is perfectly possible that one of them is right and there is no rebirth. Hence, it is desirable that he should take an earlier opportunity to return to India, and meanwhile, to continue to take an interest in and write about the Indian economy. He will have no more influence on it than he did when he was chief economic advisor, but his fans will at least have great non-fiction to read.

Ashok V Desai is a former chief consultant with the finance ministry (1991-93), Government of India. But he’d rather be identified as “an extinguished economist and aspiring wordsmith”