Chief Economic Adviser to the Government of India, Arvind Subramanian called for an office of Chief Economic Adviser in every State to generate ideas and policies.
He was delivering the Silver Jubilee lecture at the international conference on Social Statistics in India being organised by ADRI on Sunday. The session was chaired by Hari Menon, Director, Policy and Poverty Alleviation, Bill & Melinda Gates Foundation.
Subramanian, who was recently in news for being attacked by the BJP MP Subramaniam Swamy, said he has brought about change in Economic Survey “physically and content-wise” to make the economy run. The method was simple research analysis to highlight key economic policies, he added.
The Chief Economic Adviser said, while the country has left behind the licence-quota permit raj and is opening up to Foreign Direct Investment in greater number of sectors, what has come to afflict the economy, is the “exit problem”.
He meant that loss-making firms and entities found it difficult to exit and gave the example of the fertiliser sector. “This is a major area of reforms. The inefficient firms are not even employment-intensive and so it's easy for them to shut down. There is a need to readjust and recalibrate exit,” he said.
He said India presented a picture of a highly Balkanized country with respect to power tariffs and tax rates. Showing data for power tariffs for agriculture and tax rates in the States, he said, “We should be one economic India”.
He said he was excited about the clothing sector to bring in growth and social transformation. The sector, he said, was much more labour-intensive than sectors like auto and steel and had the potential to empower women by creating jobs for them. He cited Bangladesh to prove his point and said that there, the fertility rate declined with enhanced productivity in the garment sector. He also said this was one of the areas where shrinking share by the Chinese can be cornered by Indian firms.
While saying India had very few tax payers and that in as many as seven areas — kerosene, railway, electricity, lPG, gold, aviation and turbine fuel and small savings, the top 40% of the population, were subsidised to the extent of Rs76,000 crore, he called for spending and to generating more.
He said that the Government had three pending agenda — GST, Strategic Disinvestment and Twin Balance Sheets.
On inequality, he said the debate in the West might be misleading in the Indian context. What the Indian economy needs, is the agenda in education, health and employment among others, he said.
Replying to a question from the audience on poor tax to GDP ratio, he agreed that we need to catch up and hoped GST would give some buoyancy to it.
To another question of rise in pulse prices, he said the country needed to make production of pulses profitable by offering incentives.
Subramanian also touched upon Brexit, calling it a landmark event, a major shock, in the history of the world after the Cold War. He said, It is a setback for the international citizen, globalisation and that what was a great social experiment, is now being reversed.” As for its economic repercussions on India, he said, “The country has strong fundamentals to withstand the negative fallout.”