Given Arvind Subramanian’s lack of enthusiasm for demonetisation, his unease with the manner in which the GST structure evolved, or even the guarded way in he chose to respond to the ban on cattle slaughter and its social impact—if social policies, he said, “drive (down the) terminal value (of livestock) precipitously … that could make livestock farming less profitable”—it is easy to conclude the chief economic adviser (CEA) had been marginalised and had a limited role in policy formulation. That, however, would be missing the wood for the trees, for though there is little doubt Subramanian’s views didn’t have as much traction as he would have liked, his role in key policies was significant, much like that of the CEAs in the 1990s when India’s first tryst with economic reforms began. It was Subramanian’s report on what the GST’s revenue-neutral-rate should be that, as finance minister Arun Jaitley said, was the base document for the negotiations between the central and state governments. And when powerful state governments like Gujarat—which had the backing of the prime minister—demanded a 1% tax to compensate for the removal of the CST, it was the CEA who argued that this would result in a 4-5% cascading tax which would make it more attractive to import goods instead of making them in India. Along with Arbind Modi, who then headed risk assessment in the income tax department, the CEA wrote an op-ed article explaining how even seemingly equitable solutions—excise exemption for local goods and no CVD on imports—could lead to significant tax disadvantages for local industry.
Similarly, when the government floundered over changes in labour laws, due to the opposition from trade unions, along with the textiles secretary, it was Subramanian that came up with an acceptable solution that later became the template for incremental labour reforms in other sectors. And while many in the government didn’t care for Subramanian’s liberal views, it was him they turned to when RBI continued its hawkish stance—it was the CEA that showed how RBI continued to overestimate inflation by huge margins over the last few years.
Subramanian’s USP was not just his ability to spot trends or to substantiate them with lots of data and analytics, but to back them with eloquent writing, and more. So, he wrote powerful op-eds, like one in the Financial Times, arguing that the Western position on coal was ‘carbon imperialism’, explained why the idyllic picture on the solar revolution had got it completely wrong, examined what drove India’s migration patterns and the lessons that should be drawn from this, explained how the NPA crisis was far from over at a time when most said believed it had played itself out, and he was the first to formally articulate the government’s JAM vision. Not surprising then, his new-style Economic Surveys—as opposed to the hitherto dull and uninspiring ones—became teaching material in some colleges and universities; the ever-enthusiastic CEA even converted some of this into an online course on contemporary themes in India’s development.
Losing a CEA, especially one as bright as Subramanian, is problematic for any government, but more so for one that is in its last year—at a time when the pressure to be populist and embark upon, say, farm loan waivers, will be high, his wise counsel will be missed. This is not to say that he always got it right—he pushed for a “bad bank”, but the NCLT process seems to be working much better, warts and all, and his forecast of a $50 ceiling to oil prices seems naïve today. In his three-and-a-half-years, though, he was more right than wrong, a powerful voice for reform, with the intellectual capability to understand how various moves would eventually play out.