Why CEA Krishnamurthy Subramanian wants to remain an independent voice

Banking sector reform is obviously something I care about. Also, as an engineer turned economist I think about technological solutions to economic problems, he said

In the Mahabharata, Arjuna and Dronacharya were in opposite camps. They fulfilled what they felt was their dharma. But that does not mean any love or respect was lost between the two”. That’s Krishnamurthy Subramanian, India’s chief economic advisor, responding to our query on his views that have at times differed sharply with Raghuram Rajan, his teacher at the Chicago Booth School of Business. Subramanian says he has differed with his mentor on “some policies”, but that doesn’t take away anything from the relationship.
 
Though he refuses to go into specifics, it is well known that while Rajan, the former Reserve Bank of India governor, has been publicly critical of demonetisation, Subramanian has been quite vocal in its support — even before he got the CEA’s job. The reference to the Mahabharata shows Subramanian, 47, has taken enough inspiration from his favourite game cricket to handle everything with a straight bat.

 
We are at Café Lota in Delhi’s Pragati Maidan and the waiter serves palak patta chat and aam panna, which are excellent. Subramanian goes back to cricket to answer our next query about his experience as CEA so far. Apart from the predictable “opportunity to contribute to the nation is a unique privilege” etc, Subramanian says, Harsha Bhogle is one of the few commentators who hasn’t played test cricket, but when someone asked him what his role was, the reply was: “From the commentary box, my role is to make Sunil Gavaskar look better”.
 

The CEA’s role in the North Block is similar, he says. “Policy action is taken by the line ministry, and my job is to make their actions look better with my inputs. As CEA, I can be a public face without being at the forefront of every issue.” He isn’t finished yet, and adds “remaining an independent voice without looking for limelight” is what he prefers.

 
Café Lota has an earthy, spacious feel. Subramanian didn’t have any particular preference of a venue and his only condition was that he didn’t want continental food. It being a weekday, and in fact the day on which the Supreme Court struck down the Reserve Bank of India’s February 12 circular, it was understandable why Subramanian was 20 minutes late for our appointment. He still apologised profusely, as we took our seats at a table next to a massive air cooler.
 
The conversation slips into an easy mix of English and Bangla. Subramanian is fluent in several languages, and picked up Bangla from his days at the Indian Institute of Management, Calcutta. “You can pick up any language provided you are willing to make a fool of yourself,” Subramanian says, explaining how his Bengali friends encouraged him to learn but also laughed at him for his then-bad pronunciation.

 
The ambience perhaps reminds him of his growing up years in Bilaspur and Durg. He was the first person in his family to go to college (his brother followed suit) as his father, a railway clerk who later became a gazetted officer, had a large family to take care of and could not study beyond high school. “My father borrowed from money lenders for our higher education and also had to take care of his two widowed sisters. So, much later, when I told him about my appointment to the Bandhan Bank board and explained how microfinance worked, my dad quipped that life had indeed come a full circle,” a visibly emotional Subramanian says. He is sad that his father wasn’t around when he got the job of the CEA. 

 
Subramanian, whose family is still in Hyderabad as his daughter is finishing her class 12 and preparing for entrance exams, says that his son, in class 9, did not quite understand the import of his new job and wasn’t initially keen on him moving to Delhi. He and his classmates understood the importance only after his pictures were flashed across television screens and front pages of newspapers. “One of his friends came over the next day and asked me to make sure the income tax rates are brought down,” Subramanian says. His boyish face is all smiles.
 
A strict vegetarian, he orders paneer pasanda with pudina parantha for the main course. We opt for prawn mappas, a Kerala dish with plain rice, and chicken mokul, a creamy, cashew-based Rajasthani dish which pairs surprisingly well with appam.

 
The food is delicious, and the conversation shifts to the issue of cash transfers and how Indian polity across the spectrum is embracing the idea.  Subramanian says universal basic income and minimum income guarantee models have their benefits as well as shortcomings. “The reality is that if you provide UBI as a top-up instead of substituting, the fiscal costs will be prohibitive. If you are providing a targeted minimum income guarantee, then it depends on the quality of data. You can target well only if you have high quality data”. He is of the view that a minimum income guarantee scheme may incentivise people to under-report their income. “Hence you have to frame the policy only after a thorough cost-benefit analysis.”

 
For dessert, we order apple jalebi with coconut rabri and bhapa doi cheesecake. That proves to be quite a mouthful, but Subramanian is clearly enjoying it and is in a mood to talk. Is he unhappy that the government hasn’t implemented a number of PJ Nayak committee recommendations (he was a member of the committee)? And that a number of intermediate steps were not taken by the government in the area of banking sector reforms?
 
While writing the report, he says, the committee members recognised that even if the recommendations were implemented in spirit, it would be okay. A key thing the Nayak panel recommended was that commercial decisions of banks should not be interfered with. That has been achieved as phone banking has stopped. “Telling a bank what commercial decisions it should take is like instructing Virat Kohli how to bat,” pat comes another cricketing reference.

 
He says he has already started working on the Economic Survey, which is due around the time the new government presents its Budget. Every CEA picks up certain themes close to his heart and writes extensively about them. What are Subramanian’s pet themes? “Banking sector reform is obviously something I care about. Also, as an engineer turned economist I think about technological solutions to economic problems. One area is using analytics to sharpen decision making.” Subramanian gives the example of the agricultural sector, where he believes the problem is not on the production side but on the marketing side. He thinks technology can play a big role in price discovery.

 
Another theme Subramanian wants to work on is bringing behaviourial economics into policy making. “There is already a successful example there, that of Swachh Bharat, which has led to changing mindsets. My kids never litter, but we used to litter since it was acceptable. Another example is the “Give It Up” campaign which led to change in behaviour of the average person.” All this would surely be music to the ears of the government he works for.
 
As we wind up, we ask whether he was unsure about taking up the role of CEA so close to the general elections. What if the government changes? He admits he did think about it, but took it up as a responsibility that came his way. “When an opportunity like this comes, to think of what can happen in the future would be admitting a fear of failure,” he says, and proceeds to give an example.

 
When he went to Chicago Booth for his PhD course, he was asked to make a presentation in front of his peer group and teachers. He can never forget the first question from the audience just when he was about to start speaking: “Mr Subramanian, can you tell me why I should spend the next one hour listening to you?” The question made him “nervous”, but his response must have been convincing enough for the gentleman to stay back for the entire presentation. As we make our way to the car park, Subramanian says he has not let himself bother about the fear of failure — ever.