Krishnamurthy Subramanian, the new Chief Economic Advisor (CEA) to the Government of India, first caught the attention of the Narendra Modi government when he, as an ISB professor, stoutly defended demonetization in various opeds. An IIT-IIM alumnus who also counts Raghuram Rajan as one of his mentors, Subramanian stands by his belief even when challenged with data and anecdotal evidence. In a conversation with BW Businessworld’s Suman K. Jha, the CEA defends the Modi government’s economic report card, offering rare insights.
How do you look at the economy’s evolution since this government came to power?
The overall economy has done really well. Based on the second revised estimates, the average GDP growth over the last five years has been 7.5 percent — which is the highest for any government since liberalization. And that growth has happened in an environment where the world economy has not been doing well. There are headwinds against globalization which have affected exports.
This growth has been built to a large extent on domestic consumption. This is not just based on the revised GDP series etc. If you use the data in the ASI, which basically goes back to 1981 and therefore it is an unbroken series and you look at the growth in the gross value added, in real terms that growth has been 7.5 percent. This data is available only till 2016-17, so once more ASI data comes up this can be checked.
Secondly, look at inflation. It’s a very pernicious tax that poor people pay. So, in 2014 the rates of inflation were 10-plus percent. In contrast, the latest inflation numbers are 2-3 percent. Overall, the average rate of inflation has been about 4.5 percent over the past five years. Now this matters a lot if you think about the quality of life of a common citizen.
If you look at inflation around 2014, the real rates of interest were negative. So you had around 8 percent nominal rate of interest and 10.5 percent inflation, or minus 2.5 percent real rates of interest. So we were putting in money and finding its value depreciating in terms of purchasing power. In contrast now, if you look at the nominal rate of interest which is 7 percent and if you take 4.5 percent as its average rate of inflation, you are looking at around 2.5 percent real rate of interest.
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Sign In
Is Leadership Without Hierarchies Possible?
LEADERSHIP IN THE current era is more challenging than ever before.
The Rise and Evolution of Coffee Culture in India
AS A BANGALORE native, South Indian filter ‘Kaapi’ has always been a significant part of our tradition.
The Daily Ground Goes Desi
Success in Tier-2 and Tier-3 cities hinges on several key factors, with one of the most important being the ability to offer high-quality products at an accessible price point
Cracking The Indian Code
TARUN JAIN, CEO of Tim Hortons India believes in creating an experience at cafes by blending global quality, local flavours and affordability
Making Coffee the New Chai in India
Affordable, great-tasting coffee made fast-abCoffee is reshaping how India drinks coffee
Scripting A New Era Of Coffee In India
From a bootstrapped startup to international expansion, NOTHING BEFORE COFFEE is brewing its way to the top by challenging the giants of the coffee industry with innovation, personalisation, and sustainability
"Driven By A Younger Demographic, Coffee Culture Is On The Upswing"
SUNIL D'SOUZA, Managing Director and CEO of Tata Consumer Products, discusses the company's strategic growth in India's booming coffee market, focusing on premiumisation, innovation, and expanding consumer experiences both at home and in cafés, in this exclusive conversation with BW Businessworld's Tarannum Manjul
Fresh Brew, Big Ambitions
From startups to stores, Beanly's Samayesh Khanna and Rahul Jain elevate India's coffee culture by making freshly brewed coffee a daily delight
"On Track To Become India's Top Café Chain"
In an exclusive interview, RAJAT AGRAWAL, CEO of Barista Coffee, shared insights on the company's current market position, expansion strategies, and its response to growing competition
"Ensuring A Seamless Coffee Experience Outside The Cafe Is The Next Big Thing To Watch Out For"
In an exclusive conversation with BW Businessworld's Resham Suhail, Third Wave Coffee CEO RAJAT LUTHRA and its Co-founder AYUSH BATHWAL delve on how they are navigating the competitive landscape, going beyond retail and tapping changing consumer preferences