Last week, the Finance Ministry’s top economist, Arvind Subramanian, decided to put in his papers and move back to the US to resume his academic career. The move set tongues wagging, as Subramanian’s extended stint in the Finance Ministry was to run until mid-2019. But, unlike the controversial exit of the high-profile Raghuram Rajan, Subramanian made it clear that his exit was due to family reasons.
The role of the Chief Economic Advisor gained prominence after Kaushik Basu took over the position in 2009, during the second term of the UPA government. Though Subramanian is rightly praised for bringing intellectual gravitas to the Economic Survey , that process had started under Basu.
Subramanian is credited with bringing in many fresh economic ideas; though it is a different story that the government chose to ignore most of them. The concept of JAM — Jan Dhan-Aadhaar-Mobile — and their synergies was pushed by Subramanian and found extensive discussion in his first Economic Survey .
Arguments for universal basic income
But it was the chapter on Universal Basic Income in the 2016-17 Survey that generated a lot of buzz. Of course, the concept itself is going through a bit of a review in Finland, where it was first introduced on a pilot basis. In this chapter, Subramanian starts out having ‘a conversation’ with Mahatma Gandhi to push his argument for a Universal Basic Income and how that would help eradicate poverty. He says, “It could be to the twenty-first century what civil and political rights were to the twentieth. It is premised on the idea that a just society needs to guarantee to each individual a minimum income that they can count on…”
Making a political economy argument, he goes on to say that, “Universal Basic Income liberates citizens from paternalistic and clientelistic relationships with the state”. Subramanian argues that a universal basic income does not reduce incentives to work and also produces evidence for that. And since the income is universal, the problem of selection of beneficiaries and of the deserving being left out are also addressed.
Critics warned against replacing the various welfare schemes targeted at the poor with a universal basic income. Their argument was that a UBI could, at best, be a supplement to existing welfare schemes. Subramanian also analysed the fiscal implications of such income or how much it would cost the government.
Despite his impassioned plea, the government quietly put this proposal on the back-burner. In fact, one wonders whether the government was ever interested in this proposal in the first place.
Gender parity
In the 2017-18 Economic Survey there is an interesting Chapter titled ‘ Gender and son meta-preference – Is development an antidote? ’ Here he says that in 14 of the 17 indicators on women’s empowerment, India has improved over the last 10-15 years. But there three crucial indicators where India still lags behind are — employment, use of reversible contraception and son preference. In fact, these three indicators also seem impervious to economic development. Many studies have shown that incidence of son preference and illegal, sex-selective abortions increase with incomes. So a rise in incomes, education and economic development do not guarantee social development and gender equality.
Subramanian argues that the North-Eastern States have consistently out-performed the rest of the country in gender equality and holds them up as role models. The hinterland still lags behind but surprisingly “some Southern States do less well than their development levels would suggest”.
Subramanian also discusses the interesting concept of “meta-preference” for sons, where parents keep having children till “they get the desired level of sons”. This also leads to the question of “unwanted girls” — “girls whose parents wanted a boy, but instead had a girl”. Subramanian estimated this number to be at 21 million.
Subramanian and the Government
Though Subramanian’s contribution to JAM and GST — on which he headed a panel suggesting a three-tier rate, where most goods and services would be taxed at a “revenue-neutral” 17-18 per cent — his views and suggestions on the social sector have received less attention. Interestingly, even his suggestions on GST where not taken on board by the government, which went in for a messy and unwieldy five-slab rate for the GST.
On the government’s most controversial economic decision — demonetisation — it is very evident that Subramanian was kept in the dark. Though he did not openly criticise this move, he distanced himself from it, unlike some other top government officials who went out of their way to support it.
Now that Subramanian will soon be ensconced in the world of western academia, can we expect a candid book in the next few months on his four-year stint at the Finance Ministry?