RAGURAM Vs ARVIND SUBRAMANIAM - A SMART MOVE ?

RAGURAM

ARVIND SUBRAMANIAN

NEW DELHI: With Prime Minister Narendra Modi's new government promising to ramp up economic growth, an economist based in the United States has emerged as the most likely candidate to serve as its chief economic adviser.

The appointment of the economist, Arvind Subramanian, would encourage those pushing for pro-market changes.

Subramanian, an Indian is a fellow at the Peterson Institute for International Economics in Washington.He has also served at the International Monetary fund and at the General Agreement on Tariffs and Trade, a predecessor of the World Trade Organization.

In the nearly three months since Modi was sworn in, Subramanian has urged the new leader to make a sharper break from the policies of the previous government, criticizing Modi's first budget for representing continuity when "the need of the hour was change."

Subramanian endorsed Modi's campaign message that India needed a period of renewed growth, but wrote in a blog post for the Peterson Institute last month that the budget's substance and policy actions "were not equal to the goal." In another post, Subramanian questioned India's decision to block a World Trade Organization deal over provisions that would limit government stocks of grain.

"India looks obstructionist" by opposing the agreement, he wrote, "especially for the new government, led by Prime Minister Narendra Modi, which is trying to project an image of being investor- and market-friendly."

He added, "India should worry as well about appearing isolated in its current position, with China, Brazil and Russia - the band of BRIC brothers as it were - and many other emerging market countries clearly distancing themselves from New Delhi."

If appointed, Subramanian would serve a three-year term as top adviser to Finance Minister Arun Jaitley. The position has been vacant since last fall, when Raghuram G. Rajan - another former IMF economist - became governor of the Reserve Bank of India, the country's central bank.

Modi, the longtime leader of the state of Gujarat, won a commanding victory in large part by promising to restore high economic growth to India. Some supporters had hoped he would use his mandate to push through politically risky changes, like restructuring subsidies for fuel and food and lifting caps on foreign direct investment in important sectors like defense. Instead, Modi's early moves in economic policy have been relatively cautious.

One notable change, announced in Modi's Independence Day speech on Aug. 15, was the elimination of the Planning Commission, a body created in 1950 by Jawaharlal Nehru to emulate Soviet-style five-year plans. But so far, Modi has said little about what will replace the commission, and it is unclear whether the change will have a liberalizing effect.

Soumya Kanti Ghosh, chief economic adviser at the State Bank of India, said investors would probably be encouraged by the appointment of Subramanian. Because the country's chief economic adviser acts as a conduit between the government and the central bank, Subramanian's common background with Rajan could prove a benefit, Ghosh said.

                                                                                                                                                              Acknowledgements: ET