After finance ministry stint, K V Subramanian starts new innings as IMF ED

Chief Economic Advisors usually return to academia after their time in the finance ministry, as Arvind Subramanian did. However, there are exceptions. Raghuram Rajan became the Reserve Bank of India Governor after his time in North Block, and Kaushik Basu became the World Bank Chief Economist.

Manmohan Singh has clearly been an outlier in this trend, rising up within the government from CEA to Finance Secretary to RBI Governor to Finance Minister and eventually Prime Minister.

Now the immediate past CEA, Krishnamurthy Subramanian, is on his way to charting another course. On Thursday, the Modi government appointed Subramanian as the next Executive Director representing India at the International Monetary Fund. Subramanian’s three-year tenure as India’s top representative at the multilateral institution begins on November 1, and he will replace the current incumbent – economist Surjit Bhalla.

The India ED also represents Bangladesh, Bhutan and Sri Lanka, along with another appointee from one of these countries.

Subramanian stepped down in December 2021 and did return to academia. He took up his earlier post at professor (finance) at the Indian School of Business, and used to often say that academics is where he felt most at home. But eventually, this influential role at the IMF came calling.

As CEA before V Anantha Nageswaran, Subramanian drafted three Economic Surveys - 2018-19, 2019-20 and 2020-21.

Subramanian had batted for a counter-cyclical fiscal policy in the 2020-21 survey and paved the way for record government spending and fiscal expansion as important tools in the fight against the economic slowdown due to Covid-19.

He had recommended a massive increase in healthcare spending in light of the Covid-19 pandemic and regulator for the sector, and criticised credit ratings agencies by saying their assessment of India did not match its fundamentals.

In his last survey, Subramanian had slammed ‘asleep at the wheels’ bank boards and auditors for the non-performing asset (NPA) crisis, suggested that the RBI should penalise auditors wherever ever-greening of toxic loans happen, and had recommended another round of bank recapitalisation.

After the Covid-19 pandemic flat-lined the economy, Subramanian had famously predicted that India will witness a ‘V-shaped recovery’. This set off a furious debate among economists and public policy experts with many predicted that recovery will rather be ‘K-shaped’ in that while many sectors will see strong recovery, income and class inequality will also increase.

Across his surveys, Subramanian has advocated relaxing of fiscal consolidation targets in order to push growth, what is traditionally known as a ‘counter-cyclical’ fiscal policy. In the 2019-20 survey, he tried to quantify what an average person would pay for a ‘thali’ of food across the country. Subramanian has also been a big proponent of behavioral economics.

 Subramanian has been a strong supporter of the centre’s 2016 demonetisation exercise.

Subramanian grew up in an Indian Railways family in Bhilai, Chhattisgarh, did his masters in business administration from IIM Kolkata and holds a PhD from University of Chicago Booth School of Business, where he counts Rajan as one of his mentors. He was an epitome of a middle class boy who made it big through academic excellence.

A deeply religious person, vegetarian and a teetotaler, Subramanian has had stints in JPMorgan Chase, ICICI Bank and Tata Consultancy Services and has been part of various panels formed by RBI and market regulator Securities and Exchange Board of India.