Former CEA’s book echoes views of Opposition on GST, note ban

Our Bureau New Delhi | Updated on November 29, 2018 Published on November 29, 2018

Arvind Subramanian

‘Of Counsel: The Challenges of the Modi-Jaitley Economy,’ to be released soon

Adding credibility to the Opposition’s campaign that the economy is being mismanaged during the Narendra Modi regime, former chief economic advisor Arvind Subramanian penned a book making public his criticism of the implementation of demonetisation and the GST. The book, titled ‘Of Counsel: The Challenges of the Modi-Jaitley Economy,’ will be released soon. Penguin Random House has published the book.

“Leaving aside the prurient ‘who knew what when’ questions and demonetisation’s rights and wrongs, the questions that puzzled me then, and continue to puzzle me now, relate to the measure’s impact,” Subramanian wrote in the introduction of the book.

He said in the book that demonetisation was a massive, draconian, monetary shock that “in one fell swoop, 86 per cent of the currency in circulation was withdrawn”. In a chapter titled, ‘The Two Puzzles of Demonetization: Political and Economic’, he said he does not think that anyone disputes that demonetisation slowed growth. “Rather, the debate has been about the size of the effect, whether it was 2 percentage points, or much less. After all, many other factors affected growth in this period, especially higher real interest rates, GST implementation and rising oil prices,” he wrote. “I do not have a strongly backed empirical view apart from the fact that the welfare costs especially on the informal sector were substantial,” the book said.

GST, a second shock

On the GST too, Subramanian reiterated many of his views which were different from that of the Finance Ministry. “I wonder also whether the implementation of GST was handicapped by being the second shock that had to be imposed on the system, especially on small traders in the informal sector. To be sure, implementation could have been significantly better but the GST’s public reception was surely contaminated by demonetisation having preceded it,” he wrote.

In a chapter titled, ‘The Great Structural Transformation (GST)’, he said it must be accepted that the GST suffers from weaknesses largely related to the exemption of so many items from its scope: alcohol, petroleum, electricity, land and real estate, health and education. “But warts and all, the GST has been a great achievement and worth pursuing, not least because of being a daring experiment in the implementation of cooperative federalism. But in order to minimise the damage from these warts, at least the structure of rates on those products that are not excluded from the GST should be low, simple and efficient,” he wrote.


Published on November 29, 2018
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