With eye on budget, Modi govt appoints Krishnamurthy Subramanian its CEA

Arvind Subramanian left the finance ministry as the Chief Economic Adviser (CEA) on June 20. For almost six months, the crucial post of the CEA was lying vacant. With less than two months to go for the Union Budget 2019, the Narendra Modi government appointed Krishnamurthy Subramanian as its CEA after long deliberations.

Krishnamurthy Subramanian is associate professor and executive director (Centre for Analytical Finance) of Indian School of Business, Hyderabad. His appointment as the CEA to the government would be for a period of three years.

The new CEA has his task cut out as his appointment comes barely 50 days before the government has to present the Economic Survey. The government would like to present its economic outlook ahead of the 2019 polls in the absence of a full budget.

The finance ministry has already entered the "quarantine period" for preparing the budget in which entry of outsiders has been curtailed for outsiders.

The Raghuram Rajan Connection

This was the second time in the last few years that the post of CEA was vacant for a long time. After Raghuram Rajan moved from the office of CEA to take over the post of RBI governor, the post was lying vacant for almost a year from September 2013 till October 2014.

Like Raghuram Rajan, Subramanian has a Chicago-Booth connect as he holds a PhD from There. Coincidentally, his MBA and PhD in Financial Economics was under the guidance of Professor Luigi Zingales and Professor Raghuram Rajan.

Interestingly, while his predecessor Arvind subramanium recently attacked the November 8 2016 note ban exercise as "draconian", Krishnamurthy Subramanian has been a strong supporter of the move.

Through several writings and publications he has defended demonetisation, which even Raghuram Rajan had virtually called "a speed breaker for growth".

Strong Supporter of Demonetisation

As early as November 25, 2016, Krishnamurthy Subramanian had written in an economic opinion piece: "Following the demonetisation move, bank unions have withdrawn their strike for a couple of months till normalcy returns."

"Many common people are silently exchanging their honestly earned money in banks and post offices. In stark contrast, most political parties are up in arms, making it about the politics of black money."

"Demonetisation, however, represents a possible tectonic shift in India's politics: from the naked politics of votebuying to the subtler one of clientelism. Political parties that wish to remain in contention in the future need to heed this shift. Otherwise, they risk sinking into oblivion."

Critical of Dynastic Politics

Krishnamurthy Subramanian has been actively writing strong opinion pieces on political trends. In July 2016, he coauthored a write-up which was a tough critique against the play of dynasty in Indian politics and UPA chairperson Sonia Gandhi's son in law Robert Vadra.

He wrote, "The Dynasty" is ready to roll its "last throw of the dice with Priyanka Gandhi being drafted to play a leading role in Congress's UP to play a leading role in Congress's UP campaign."

"Given her husband Robert Vadra's shenanigans during the UPA regime, UP voters must ask: Should we foster a local Benazir Bhutto with Robert Vadra playing the "Mr 10 percent" equivalent of Asif Ali Zardari?"

Tough Job At Hand

Krishnamurthy Subramanian is considered one of the world's leading banking experts. He is an IIT-IIM alumnus. At a time when the government's focus is to improve the balance sheets and stability of public sector banks and is locked in a tussle with the RBI over these issues.

Appointment of Krishnamurthy Subramanian is being seen as a consolidation attempt by the Narendra Modi government. His other expertise lies in corporate governance and economic policy.

His profile on the ISB website says that he also served as a member of Sebi's standing committees on alternative investment policy, primary markets, secondary markets and research. He is also on the boards of Bandhan Bank Ltd, the National Institute of Bank Management and the RBI Academy.

Before joining ISB Hyderabad, Krishnamurthy Subramanian served on the finance faculty at Goizueta Business School at Emory University in the US. He has worked as a consultant with JPMorgan Chase Co in New York and was in a management role in the elite derivatives research group at ICICI Ltd.