Krishnamurthy Subramanian, an associate professor of finance at the Hyderabad-based Indian School of Business (ISB), will be the next chief economic adviser (CEA) in the finance ministry.
Subramanian, who is also the executive director with the Centre For Analytical Finance at ISB, will fill the position lying vacant since Arvind Subramanian quit in late July. He is appointed for a period of three years or until further orders, whichever is earlier, according to an official statement on Friday. A PhD in financial economics from the Booth School of Business, University of Chicago, and an alumnus of IIM Calcutta as well as IIT Kanpur, Subramanian is an expert in banking, corporate governance and economic policy.
He was a member of the expert panel on corporate governance headed by Uday Kotak and the PJ Nayak committee on governance of bank boards.
Subramanian comes at a critical time when the interim Budget is less than two months away and a poll-bound government is seeking to balance populism with the imperative to keep fiscal deficit from breaching the target.
The stressed asset crisis continues to plague state-run banks and there has been a flare-up of tension between the Reserve Bank of India (RBI) and the finance ministry on a range of contentious issues, including governance structure at the central bank, its surplus transfer to the government and capital adequacy norms for banks, especially the weak ones. Non-bank lenders–who drove lending in the past two years–are facing a liquidity crunch and 11 of the 21 state-run banks are officially stressed. While meaningful private investments are still elusive, private consumption, which was holding up the economic growth in recent years, is faltering. The rupee is still ruling at close to 71 to a dollar, oil prices remain sticky despite recent softening and foreign portfolio investors have turned net sellers in equities in 2018.
Interestingly, the tension between the central bank and the finance ministry came out in the open in October after a scathing speech on the independence of central banks by RBI deputy governor Viral Acharya, with whom Subramanian has produced some research paper on subjects, including bankruptcy codes and innovation.
Subramanian also serves as a member of Sebi’s standing committees on alternative investment policy, primary markets, secondary markets and research.
The last CEA, Arvind Subramanian, had infused new vitality to the economic surveys and recommended many crucial policy prescriptions on issues ranging from the goods and services tax to garments. He had to cut short his tenure in July to “return to a life of researching, writing, teaching, and reflecting”, after having served around four years in that position.