Fixing the Indian state is beyond Brahma, Vishnu, Shiva and all the gods put together: Arvind Subramanian

By: | Published: March 5, 2017 3:48 AM

This edition of the Express Adda, held at One Golden Mile, New Delhi, hosted Chief Economic Adviser Arvind Subramanian.

Chief Economic Adviser Arvind Subramanian (centre) with The Indian Express Deputy Editor (Rural Affairs and Agriculture) Harish Damodaran (left) and National Affairs Editor P Vaidyanathan Iyer.

This edition of the Express Adda, held at One Golden Mile, New Delhi, hosted Chief Economic Adviser Arvind Subramanian. In a discussion moderated by National Affairs Editor P Vaidyanathan Iyer and Deputy Editor (Rural Affairs and Agriculture) Harish Damodaran, Subramanian took questions on demonetisation—whether he was aware of the decision and if it had hit the informal sector — and on the need to increase the formalisation of the economy. Excerpts from the chat:

Harish Damodaran: Let’s talk about demonetisation first. To start off, were you in the loop at all? This is a question that will be asked by many people.

I think, in some ways, it’s history and, as time goes by, it becomes less interesting to know who was or was not in the loop. It was a decision taken by a select group of people and we’ve all had to follow up on it and analyse it. But this is the response that I would give when I was asked this question and I’m going to repeat it. I think it was a Buddhist saying that “speak only when you can improve upon the silence”. To paraphrase it in terms of demonetisation, “speak only if you can improve the clamour and cacophony”. When we wrote the Economic Survey chapter on demonetisation, it gave us time to work through the entire complexity of the issue. My understanding of this on Day One was different from my understanding when we finally wrote the demonetisation chapter. I’m glad I was silent for such a long time because of what I might have said and regretted later.

Kuldip Singh, Judicial Member, Income Tax Appellate Tribunal (left) with Rajesh Malhotra, Addl DG, Press Information Bureau.

Damodaran: So, the government didn’t seek the advice of the chief economic adviser?

Let me say that this is a government which is extremely receptive to the ideas of the chief economic adviser. Whether it is adhered to in 100 per cent of cases or 99 per cent of cases is an open question.

Damodaran: In the Economic Survey chapter on demonetisation, your prognosis of growth following it is not very sanguine or bullish. Isn’t it different from the government’s as well as the RBI’s views?

In this post-truth world that we live in, one response is how do you cope with this post-truth. Surely, another response must be that we resist this post-truth. It was really important for at least the team that we come out with a completely fair and balanced assessment. That’s what we tried to do but I also felt that if we didn’t do this, we’d be letting down the public at large. I think the government too deserves a lot of credit for allowing this to be published. In fact, today the pre-eminent financial journalist in the world, Martin Wolf, has written an article on demonetisation where he basically draws upon the survey. I think even the finance minister read it and found it a very balanced assessment. At least, in hindsight, we made the right choices in what we said and how we described it.

Lorenzo Angeloni, Ambassador of Italy (left), and Francesco Pensabene, Trade Commissioner, Embassy of Italy.

P Vaidyanathan Iyer: Martin Wolf also points out that if a democratically elected leader can dare to do something like demonetisation and deprive people of a large percentage of their currency, he would dare to do anything. If this could have been announced, people could have faced less hardship.

There are two or three things you are talking about. One is, did we need to maintain secrecy in the first place? Certainly, if you go back and read the Wangchu committee report, which wrote about this in1971. I think around the world they feel that, if you really want to strike at this, some amount of secrecy is needed. The second thing you spoke about was, is it necessary to make clear how much money has come back into the banking system and how much is going to be returned. My sense is there is now an extreme caution about ensuring that the numbers we finally put out are accurate. I can understand some of the caution but, now that the need for secrecy has faded, I think the more transparency we have, the better it will be.

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Iyer: In your Economic Survey, you also mentioned the impact of demonetisation on the informal and unorganised sector. Do you see small or medium entrepreneurs going out of business?

There has been hardship — there is no question. People in the informal sector have been hurt, livelihoods have been affected and incomes have come down. That is because this was largely related to the lack of cash and liquidity. It, therefore, follows that, once that cash and liquidity come back into the system, there should be no long-term effects from that.

Photos: Neeraj Priyadarshi, Tashi Tobgyal,Praveen Khanna, Abhinav Saha.

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