Book review: Of Counsel by Arvind Subramanian

Arvind Subramanian was Chief Economic Adviser (CEA) to the Government of India from 2014 to 2018 when some major events relating to economic policy-making and governance happened in the country. They included demonetisation of high-value currency notes, which badly hit the economy and continues to impact it, and the implementation of the Goods and Services Tax (GST), which was faulty and imperfect. There were also controversies like those relating to the government’s demand for the Reserve Bank of India’s excess capital and the twin balance-sheet problem of banks.

In this book, which Subramanian wrote after he resigned, he writes on all these issues. He has also written about a range of other issues like the need to transform India’s agriculture, the adoption of a new climate change policy, and the opportunity to take advantage of the country’s demographic dividend. The book is an account of his experiences in office, and it is more descriptive and analytical than personal.

Subramanian has been criticised for expressing views that he probably did not express when he was with the government. A major event that happened during his tenure was demonetisation, and he was not consulted on it. It was a political decision, and if at all Prime Minister Narendra Modi got any advice on its possible adverse economic consequences, he would have discarded it. Arvind Subramanian, in any case, thinks that demonetisation was popular with people and it did not disrupt the economy as much as expected, though it was “a massive, draconian economic shock.” His reading begs many questions. There is much empirical and analytical data available now that show that the economy is yet to recover from the shock.

He had a more active role in the design and implementation of the GST, and he gives a detailed account of it. GST had been discussed in the country for about 15 years and it was politics that had hindered its implementation. It was finally implemented because suddenly there emerged some circumstances, mainly political, that made it possible. But he thinks that the country does not fully realise how big an achievement GST implementation was. It needs to be improved because it suffers from many weaknesses like exemption of many items from its purview. But he has no doubt that it was a successful experiment in cooperative federalism and will alter the Indian economy for the better in future.

Other themes and topics include a precocious development model for the country, its stigmatised capitalism, inefficient fertiliser subsidy, agriculture policy, poverty alleviation programmes and an energy policy in the context of climate change.

Subramanian has well considered views on each of these and he puts them forward, well supported by data and logic. He displays an economist’s analytical skills and has many insights, and he is aware of the social and historical contexts from where these ideas cannot be separated. But there is no need to have a knowledge of economics to understand the arguments, and the book addresses the lay reader. For those who need charts and graphs, they are there, too.

Subramanian thinks poverty-alleviation plans have not been effective because the BPL identification is not very efficient. He favours a version of the universal basic income idea and thinks that the subsidy cost of 4% of the GDP can be channelled into income support using the Jan Dhan-Aadhaar-Mobile (JAM) route. Others have also made the proposal in different forms. The Congress party’s Nyuntam Aay Yojna (NYAY) has its roots in this idea. He uses the word carbon imperialism, which he has coined, to castigate advanced countries that have used their coal resources to become rich but now dissuade coal-rich developing countries from doing the same thing. He thinks India should use as much of its abundant coal as possible in the next few years and move to renewable energy only later. There is a detailed discussion on many aspects of energy use and its tariffs, and he thinks some of his ideas may have been useful for the power ministry. He also makes a case for using the RBI’s excess capital to extinguish government debt, which will lead to a saving of up to Rs 30,000 to Rs 45,000 annually on the fiscal front.

Subramanian thinks India has become a democracy bypassing intermediate stages like feudalism, and he calls it precocious development. He calls the system of expensive subsidies and the public-sector enterprise system as the chakravyuh view of India.

He believes globalisation is good, but is against what he calls hyper-globalisation. India should try to keep globalisation alive, and its rapid growth will depend on an outward-oriented strategy with focus on exports.

Subramanian says that he has tried to create a record of his years in office, and the focus of the book is on policy debates. Economists should focus on economics, he says, and he has done that. He says the happy (or dirty) secret about the Chief Economic Adviser’s job is that not much is required of him. The only requirement is to produce an annual economic survey. Subramanian is considered to have produced some of the best economic surveys the country has seen. This book can also be considered as another survey — intelligent, informed and well-written.