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Arvind Subramanian officially resigns on July 26 and will head to the Kennedy School of Government at Harvard University, where he will take up his teaching duties. Between meetings, Subramanian sits with
TOI to talk about his visit to India, his relationship with the bureaucracy and the RBI, and broader reforms that need to be pushed.
Extracts :
What was your experience with bureaucracy?
This is the most exciting work I've ever done. Once I leave, I will have symptoms of psychological withdrawal. Much of the work involved knowing how to navigate or work with the bureaucracy. There were two parts to that. One was to work with the Indian Economic Service, they provide all the political contributions. So, how do you build teams using the Indian Economic Service but also using outside talent so that members of the economic service and foreigners can work together. The second part worked with colleagues from the Ministry of Finance and other parts of the government. Frankly, it was a rewarding and rewarding experience. I've been fortunate to have a lot of good relationships with colleagues from the department and from outside, not just people from my level or my secretariat, but all the way through.
May be in my next avatar when I come back, I would like to be the chief economic adviser of the central government and chief economic advisor to all state governments. I hope that I will build enough karma to be able to enjoy it in my next avatar.
The banking sector is considered an area where the government has not done enough to address the problem. Your Opinion …
The Bankruptcy and Insolvency Code (BAC) is a major achievement. The resolution begins to occur in a way that has never happened before. The government has also invested a lot of money in the recapitalization. Remember my four R's – recognition, resolution, recapitalization and reforms. On reforms, we must do more. The reforms concern both weak banks and strong banks. We need to think about how to improve governance, strengthen private sector participation. I think there should be more private sector banks and probably fewer banks. A sound system is where we have three to five public sector banks, three to four private sector banks and one or two foreign banks.
Do you still consider that RBI has not done enough to switch to the rates?
Now, I agree with what they did. They raised interest rates – absolutely right to do it because the world has changed. When I had called for lower rates, inflation was low, the international climate was settled, GDP and investment were slowing down. Just the right circumstances to act on politics. Now, inflation is rising, oil prices are rising, the external environment is difficult. So when the facts change, policies change.
Did you feel downcast when your government disavowed your statement against the RBI?
No, not everything. There were 12 to 15 months when the RBI was behind the inflation curve on lowering rates. I also supported my point of view by saying that the inflation projections of the RBI were completely out of sync. I did not feel disinherited by the government because the government said that the CEA has an independent role, that it could align with the government line, but that it has the right to express one's point of view. As an insider, perhaps, they have denied me, but then they say that he is also a stranger, let him speak like a stranger.
The relationship between RBI and the government seems to be a delicate matter …
By definition, there will be friction because the objectives are different, the mandates are different, sometimes the personalities are different. If there is not some tension, things are not going well. The only thing is how it is solved. It should never be inappropriate.
Certainly with Raghu (Raghuram Rajan), we were co-authors, friends, I felt a certain amount of intellectual sparring that we both could take. He could criticize me and say that Arvind does not know the money economy and I can say that Raghu you are completely wrong on the issue of central bank and excess reserves. If you are mature, you can afford to do it. There must be a lot of cooperation on issues like banking and financial stability. The whole notion of RBI's independence is a lot more nuanced about it.
You spoke about your relationship with Raghuram Rajan. Do you have a similar relationship with Urjit Patel?
This will be context specific. I tell Raghu that, the only person who knows anybody better than his wife, is a co-author. So, I know Raghu better than his wife and Raghu knows me better than my wife. All our vanities, all our insecurities, we know each other very well. We wrote articles together.
Was demonetization necessary?
The fact that money has come back is not an argument to say that those who have black money have not been punished. Was it true or false? Was it useful or not? You may have to leave that to historians, three or four years, to make an appropriate badessment.
On the debate between economists Swadeshi vs. Videshi …
The country needs all the talent it can have. Skill, talent should be the criterion for any job. I am convinced that this question Swadeshi, Videshi is not relevant. I can certainly speak for Raghu and myself, we do not need to embellish our resumes.
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