Former chief financial adviser Arvind Subramanian is in India to release his book, ‘Of Counsel: The Challenges of the Modi-Jaitley Economy’. He spoke to TOI on a number of problems. Excerpts:
Your description of demonetisation calling it massive, draconian has stoked a controversy. Why did you select those phrases?
How do you describe 86% reduction in money? Draconian is a connotation of being severe and it was once meant to be daring and severe. If you're taking away 86% (money) nobody would you name it mild, or comfortable? The vital level there, which all of you gave the impression to have neglected, is what I used to be announcing was once that there's a large puzzle right here. I'm implying almost opposite of what people are announcing. The puzzle is that the motion, severe, extreme, draconian, whatever you need to name it (was once taken) however impact on GDP was once muted.
What is your own view of demonetisation?
I wish to ask more vital questions about demonetisation as financial policy and politics of taking motion. What must we be told from demonetisation? To me it is a part of a world phenomenon. Why do folks it seems that vote in opposition to their safe pastime? In the USA why do white male citizens vote for Trump and the Republicans? This was once one of those extreme case of that because in case you believed, as all people do, a lot of hardship was once imposed at the casual sector. If that was once the case why was once it almost rewarded via the similar folks (within the UP elections)? To me it says if the prices are vast based totally, it’s more straightforward to take that motion than if the prices are imposed on a couple of. So, it is more challenging to take on narrow vested pursuits, wealthy farmers, unions however it kind of feels like it is more straightforward to impose hardship on a lot of folks and we need to get into the center of that. So, that was once the political puzzle, the industrial puzzle is it that we don’t know how money works. Is it that we are completely mis-measuring GDP? Is it that in truth the Indian economic system may be very resilient that in tactics we don’t know? That’s why I feel those are the questions that we will have to understand.
The question that everyone has been asking since demonetisation. Did the federal government consult you?
I say within the book this is not a kiss and tell memoir. I say within the book that all that is for gossip columnists, Twitter trolls and TV anchors with multi-screen TV pundits, who say not more than two folks on the identical time!
As an economist would you suggest demonetisation to another nation very similar to India?
It’s all context specific. It’s one thing that nations have to come to a decision for themselves.
How do you view this ongoing fight between the federal government and RBI?
By definition the objectives are different. So, there needs to be disagreement and creative tension. But all that needs to be in opposition to a deeper background of consider, communique and independence. I used to speak out in opposition to Raghu (Rajan). I needed to discuss up to be able to move the controversy. I used to be more than happy that I did that however I may just do it since the fundamental understanding was once there. You can disagree with folks whom you admire. They (RBI) have extensively done an excellent task however within the closing seven-eight years, the financial device oversight has been a major concern. Then, there has been the IL&FS factor. Suddenly, immediately, a Rs 90,000 crore blow hits you and nobody is aware of. We simply need to get back to the drafting board and say look all people have been complicit in various sides of this and the way we will be able to move ahead. We need to suppose significantly about reform, which is privatisation (of banks).
On the Prompt Correction Action framework (for susceptible banks) I'm very much of the view that this can be a very sound strategy to discover a solution – it’s like a YV Reddy roughly solution. The new factor that I'm calling now could be the asset quality review of the NBFCs. While I've criticised the RBI for oversight, the asset quality review did play a very helpful role. Ever since 2012-13 we've all identified the NPA drawback is much larger than folks were claiming it to be. My red meat with RBI is why didn’t it get started previous? The government has to allow the PCA framework to proceed, we need to suppose more significantly about public asset development agency (PARA), the Bank Nationalisation Act and what we do with the power (sector).
What are your views at the transfer of extra RBI reserves to the federal government?
RBI must put the cash only for recapitalisation of public sector banks, conditional on the entire reforms being undertaken, in a different way it is money down the black hole. I began the excess reserves view a couple of years. I'm lovely assured that it is Rs 4-4.five lakh crore. It’s a moderately large quantity. It must no longer be used for basic financing of the deficit because that will be raiding the RBI and it must be done cooperatively. The government needs to be careful. Politicising the board, the rest that roughly chips away at that elementary autonomy, independence that are supposed to be maintained however similarly I feel that at the part of RBI, independence does no longer imply no session, no cooperation, no communique.
Do you suppose the federal government did the best factor via threatening the RBI of invoking Section 7?
This is kind of, no less than at a belief level, you're getting into territory where folks suppose some fundamental arrangements are being tampered with and institutions are being encroached upon. It’s no longer in somebody’s pastime to head down that road and the federal government has drawn back.
What’s your advice to your successor, Krishnamurthy Subramanian?
First, perfect wishes. It’s the most efficient task I've ever done or will ever do. Build groups, forge relationships with everybody in government. Be completely independent-minded in considering, definitely the finance minister wants to listen to independent views. We must no longer compromise at the quality of research. Having a good courting with the finance minister — having his consider and confidence and ear. In terms of problems, the financial device is his play, agriculture is going to be an actual problem and protecting a very prime quality of macroeconomic analysis is essential, the current account, oil, stay observe of all this.
Your description of demonetisation calling it massive, draconian has stoked a controversy. Why did you select those phrases?
How do you describe 86% reduction in money? Draconian is a connotation of being severe and it was once meant to be daring and severe. If you're taking away 86% (money) nobody would you name it mild, or comfortable? The vital level there, which all of you gave the impression to have neglected, is what I used to be announcing was once that there's a large puzzle right here. I'm implying almost opposite of what people are announcing. The puzzle is that the motion, severe, extreme, draconian, whatever you need to name it (was once taken) however impact on GDP was once muted.
What is your own view of demonetisation?
I wish to ask more vital questions about demonetisation as financial policy and politics of taking motion. What must we be told from demonetisation? To me it is a part of a world phenomenon. Why do folks it seems that vote in opposition to their safe pastime? In the USA why do white male citizens vote for Trump and the Republicans? This was once one of those extreme case of that because in case you believed, as all people do, a lot of hardship was once imposed at the casual sector. If that was once the case why was once it almost rewarded via the similar folks (within the UP elections)? To me it says if the prices are vast based totally, it’s more straightforward to take that motion than if the prices are imposed on a couple of. So, it is more challenging to take on narrow vested pursuits, wealthy farmers, unions however it kind of feels like it is more straightforward to impose hardship on a lot of folks and we need to get into the center of that. So, that was once the political puzzle, the industrial puzzle is it that we don’t know how money works. Is it that we are completely mis-measuring GDP? Is it that in truth the Indian economic system may be very resilient that in tactics we don’t know? That’s why I feel those are the questions that we will have to understand.
The question that everyone has been asking since demonetisation. Did the federal government consult you?
I say within the book this is not a kiss and tell memoir. I say within the book that all that is for gossip columnists, Twitter trolls and TV anchors with multi-screen TV pundits, who say not more than two folks on the identical time!
As an economist would you suggest demonetisation to another nation very similar to India?
It’s all context specific. It’s one thing that nations have to come to a decision for themselves.
How do you view this ongoing fight between the federal government and RBI?
By definition the objectives are different. So, there needs to be disagreement and creative tension. But all that needs to be in opposition to a deeper background of consider, communique and independence. I used to speak out in opposition to Raghu (Rajan). I needed to discuss up to be able to move the controversy. I used to be more than happy that I did that however I may just do it since the fundamental understanding was once there. You can disagree with folks whom you admire. They (RBI) have extensively done an excellent task however within the closing seven-eight years, the financial device oversight has been a major concern. Then, there has been the IL&FS factor. Suddenly, immediately, a Rs 90,000 crore blow hits you and nobody is aware of. We simply need to get back to the drafting board and say look all people have been complicit in various sides of this and the way we will be able to move ahead. We need to suppose significantly about reform, which is privatisation (of banks).
On the Prompt Correction Action framework (for susceptible banks) I'm very much of the view that this can be a very sound strategy to discover a solution – it’s like a YV Reddy roughly solution. The new factor that I'm calling now could be the asset quality review of the NBFCs. While I've criticised the RBI for oversight, the asset quality review did play a very helpful role. Ever since 2012-13 we've all identified the NPA drawback is much larger than folks were claiming it to be. My red meat with RBI is why didn’t it get started previous? The government has to allow the PCA framework to proceed, we need to suppose more significantly about public asset development agency (PARA), the Bank Nationalisation Act and what we do with the power (sector).
What are your views at the transfer of extra RBI reserves to the federal government?
RBI must put the cash only for recapitalisation of public sector banks, conditional on the entire reforms being undertaken, in a different way it is money down the black hole. I began the excess reserves view a couple of years. I'm lovely assured that it is Rs 4-4.five lakh crore. It’s a moderately large quantity. It must no longer be used for basic financing of the deficit because that will be raiding the RBI and it must be done cooperatively. The government needs to be careful. Politicising the board, the rest that roughly chips away at that elementary autonomy, independence that are supposed to be maintained however similarly I feel that at the part of RBI, independence does no longer imply no session, no cooperation, no communique.
Do you suppose the federal government did the best factor via threatening the RBI of invoking Section 7?
This is kind of, no less than at a belief level, you're getting into territory where folks suppose some fundamental arrangements are being tampered with and institutions are being encroached upon. It’s no longer in somebody’s pastime to head down that road and the federal government has drawn back.
What’s your advice to your successor, Krishnamurthy Subramanian?
First, perfect wishes. It’s the most efficient task I've ever done or will ever do. Build groups, forge relationships with everybody in government. Be completely independent-minded in considering, definitely the finance minister wants to listen to independent views. We must no longer compromise at the quality of research. Having a good courting with the finance minister — having his consider and confidence and ear. In terms of problems, the financial device is his play, agriculture is going to be an actual problem and protecting a very prime quality of macroeconomic analysis is essential, the current account, oil, stay observe of all this.
Making RBI board-driven won’t resolve differences: Ex-CEA
![Making RBI board-driven won’t resolve differences: Ex-CEA]()
Reviewed by Kailash
on
December 09, 2018
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