INSUBCONTINENT EXCLUSIVE:
numbers, former Chief Economic Advisor Arvind Subramanian has said the puzzle thrown up by the note ban has a dual aspect - whether its
impact as seen in the GDP (gross domestic product) numbers reflects a resilient economy, and whether the growth figures pose questions about
the official data collection process itself
"the big puzzle" of 86 per cent reduction in cash after the notes ban leading to a "much less" impact on the economy.In an interaction with
news agency IANS, Mr Subramanian, currently teaching at Harvard Kennedy School, and here for the launch of his book, referred to the chapter
'The Two Puzzles of Demonetisation -- Political and Economic'."Through my new book, I am drawing attention to the puzzle, the big puzzle of
86 per cent reduction in cash after demonetisation, and yet the impact on the economy was much less," he said."The puzzles essentially
spring from the fact of why the measure was politically successful, and why GDP was affected in such smaller measure Is it because we're not
measuring GDP correctly, not measuring the informal sector, or is it the underlying resilience in the economy" he said."In the six quarters
before demonetisation, growth averaged 8 per cent and in the seven quarters after, it averaged about 6.8 per cent (with a four-quarter
window, the relevant numbers are 8.1 per cent before and 6.2 per cent after)," Mr Subramanian writes in his book."The key to this would lie
in a comprehensive understanding of both the polity and economy of India, about how people vote, for instance."He referred to the ongoing
controversy on the NITI Aayog's presence at the release of the GDP back series data by the Central Statistics Office (CSO) with a change
task and technical experts should do the jobinstitutions that don't have technical expertise should not be involved in this," he
said."Economists would naturally raise questions when the parameters vary so much and yet growth remains similar
It is not so much about credibility of the data as about the data generating process itself and of the institutions that carry it out," he
added.Asked whether he was a participant in the decision-making process on demonetisation, the former chief economic advisor said: "As I've
said in the book, it is not a kiss and tell memoirthat is for gossip columnists."Asked about the recent tiff between the government and the
Reserve Bank of India (RBI), Mr Subramanian said the autonomy of the central bank must be protected because the country will benefit by
having strong institutions."I have myself advocated that RBI should play a pro-active role, but its surplus funds should not go towards
routine financing of spending and deficit financing -- that would amount to raiding the RBI," he said.The government's differences with the
RBI centres on four issues -- the former wants liquidity support to head off any credit freeze risk, a relaxation in capital requirements
for lenders, relaxing the Prompt Corrective Action rules for banks struggling with accumulated NPAs (non-performing assets), or bad loans,
and support for micro, small and medium enterprises.Central to the liquidity issue was the government's demand that the RBI hand over its
surplus reserves by making changes to the "economic capital framework".On the RBI board, which has a majority of government nominees, he
said: "I think that part of maintaining a real autonomy is not to politicise the board
The board should not be politicised
Not only it must not be done, it must not be seen to be done either."On the other puzzle of domestic divergences in development, he said the
reasons could be historical in the form of the unequal impact of British colonialism in different regions of the country.For the latest News
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