The man who told the world `Why China’s dominance is a sure thing’ and rated the Modi Government with 3 straight As along with a dismal D, Arvind Subramanian, Senior Fellow at the Peterson Institute for International Economics, will be India's new Chief Economic Advisor.
Report Card For Modi
A year before the Indian elections which swept Modi to power, Subramanian in an essay `Precious Experiment’ written in a book `Reimagining India', said “strong leaders, who will deliver good governance and reforms, like Gujarat chief minister Narendra Modi” were part of the reason to maintain faith in India’s economic possibilities. He also pointed out that at that point of time, in comparison to neighbor China, India suffered from relative less effective state capacity, an indirect but easily understood criticism of the Manmohan Singh regime.
Not surprisingly, just about 45 days after Modi took over, Subramanian published a `Provisional Scorecard for Recent Modi Government Measures’, where he gave three straight As to the Modi regime for tackling inflation, encouraging states to liberalise free movement of fruits and vegetables, and partially rolling back restrictive labour laws. He however gave the Government a poor `D’ rating for raising sugar subsidies and increasing duty on sugar imports in a bid to appease the powerful Uttar Pradesh and Maharashtra based sugar lobby.
The Government’s decision to raise duty on imported sugar to 25 per cent announced on Friday 22 August coincided with news leaking out that he will be the new Chief. One wonders how the economist reacted to the cause of his `D' grade rating becoming a reality.
The Inevitable Superpower
Subramanian, whom the influential Foreign Policy magazine included in its annual global list of `Top 100 Thinkers’ for 2011, is considered an unconventional yet brilliant economist whose seminal book `Eclipse: Living in the Shadows of China’s Economic Dominance’ which challenged the conventional belief that US would remain the global leader well into the rest of the century at best and at worst share the power-play with China at worst. He did this by coming up with an index of dominance based on GDP, trade and the extent to which a country is a net creditor to the rest of the world, to figure out relative standing of the largest economies between 1870 and 2030.
His startling finding was that even on a conservative estimate, the world was going to be a unipolar one, dominated not by the US, but by China, whose relative rise would fuelled partly by American decline and partly by its own economic ascendancy. The US debt to GDP ratio, for instance, would have crossed 100 per cent, while China which already holds 50 per cent of US paper, would have accumulated far greater credit holdings. In an interview he gave to the magazine wired, Subramanian said: “I see China’s Renminbi replacing the dollar as a global reserve currency in 10 to 15 years.”
The Stephanian, who had gone on to study at IIM Ahmedabad, before doing his doctorate in economics from Oxford, pointed out in a preview piece in the influential Council for Foreign Affairs’s publication – Foreign Affairs - that it was control over the levers of credit, which allowed the US to use the IMF, in the words of Mickey Kantor, US Trade Representative under Bill Clinton, as "a battering ram," to open up Asian markets, including India, which in time would give China global dominance.
Even before that, the USA had used the threat to hold back credit to get the ageing Super-power of that time - Great Britain - to withdraw troops from the Suez canal in 1956. A bitter Harold Macmillan, who, as the British chancellor of the exchequer, presided over humiliating stages of the crisis, would later recall that it was "the last gasp of a declining power." Macmillan has been quoted as having said then "perhaps in 200 years the United States would know how we felt."
Subramanian's contention is that despite having a fairly low per capita income, China had already started using credit and trade to influence global power-play. Among other things by convincing African countries where it invests heavily to shut down Taiwanese embassies. It has similarly forced European and US firms to part with technology to allow them to access to its market and America's time feel the hurt was coming sooner than Macmillan had predicted.
His controversial book won him many detractors, but also admirers among the best brains in the world. Legendary former US Secretary Henry Kissinger, Stanford professor and influential author of `End of World’, Francis Fukuyama and Pulitzer prize winner Liaquat Ahamed are among those who gushed about his thesis.
Indian Perestroika
Subramanian who has worked for the GATT and IMF in previous incarnations, in another startling paper, vindicated what many of President Pranab Mukherjee aides when he was finance minister in the Indira Gandhi Government, have long touted - the real `Indian perestroika’ happened in the 1980s and not in the 1990s.
He pointed out in a paper, "Hindu Growth" to Productivity Surge: The Mystery of the Indian Growth Transition’, co-authored with Princeton economist Dani Rodrik, that it was India’s decision to cut corporate tax rates, lift price controls and opening up the market to imports, which spurred firms to become more competitive.
His implicit argument was that the `pro-market’ reforms brought about Dr Manmohan Singh which brought in a surge of foreign investment would not have been possible without the `pro-business’ steps of the 1980s which made domestic business competitive, in effect ran counter to current economic wisdom.
It is now to be seen whether he continues with the 1990s pro-market reforms or strives to bring back some of the 1980s pro-business measures to prop up Indian manufacturing which has been tottering in the wake of the global meltdown and greater ascendance of Chinese manufacturing muscle.
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| Arvind Subramanian & his book `Eclipse' |
Report Card For Modi
A year before the Indian elections which swept Modi to power, Subramanian in an essay `Precious Experiment’ written in a book `Reimagining India', said “strong leaders, who will deliver good governance and reforms, like Gujarat chief minister Narendra Modi” were part of the reason to maintain faith in India’s economic possibilities. He also pointed out that at that point of time, in comparison to neighbor China, India suffered from relative less effective state capacity, an indirect but easily understood criticism of the Manmohan Singh regime.
Not surprisingly, just about 45 days after Modi took over, Subramanian published a `Provisional Scorecard for Recent Modi Government Measures’, where he gave three straight As to the Modi regime for tackling inflation, encouraging states to liberalise free movement of fruits and vegetables, and partially rolling back restrictive labour laws. He however gave the Government a poor `D’ rating for raising sugar subsidies and increasing duty on sugar imports in a bid to appease the powerful Uttar Pradesh and Maharashtra based sugar lobby.
The Government’s decision to raise duty on imported sugar to 25 per cent announced on Friday 22 August coincided with news leaking out that he will be the new Chief. One wonders how the economist reacted to the cause of his `D' grade rating becoming a reality.
The Inevitable Superpower
Subramanian, whom the influential Foreign Policy magazine included in its annual global list of `Top 100 Thinkers’ for 2011, is considered an unconventional yet brilliant economist whose seminal book `Eclipse: Living in the Shadows of China’s Economic Dominance’ which challenged the conventional belief that US would remain the global leader well into the rest of the century at best and at worst share the power-play with China at worst. He did this by coming up with an index of dominance based on GDP, trade and the extent to which a country is a net creditor to the rest of the world, to figure out relative standing of the largest economies between 1870 and 2030.
His startling finding was that even on a conservative estimate, the world was going to be a unipolar one, dominated not by the US, but by China, whose relative rise would fuelled partly by American decline and partly by its own economic ascendancy. The US debt to GDP ratio, for instance, would have crossed 100 per cent, while China which already holds 50 per cent of US paper, would have accumulated far greater credit holdings. In an interview he gave to the magazine wired, Subramanian said: “I see China’s Renminbi replacing the dollar as a global reserve currency in 10 to 15 years.”
 |
| `China's Star Over Africa' |
The Stephanian, who had gone on to study at IIM Ahmedabad, before doing his doctorate in economics from Oxford, pointed out in a preview piece in the influential Council for Foreign Affairs’s publication – Foreign Affairs - that it was control over the levers of credit, which allowed the US to use the IMF, in the words of Mickey Kantor, US Trade Representative under Bill Clinton, as "a battering ram," to open up Asian markets, including India, which in time would give China global dominance.
Even before that, the USA had used the threat to hold back credit to get the ageing Super-power of that time - Great Britain - to withdraw troops from the Suez canal in 1956. A bitter Harold Macmillan, who, as the British chancellor of the exchequer, presided over humiliating stages of the crisis, would later recall that it was "the last gasp of a declining power." Macmillan has been quoted as having said then "perhaps in 200 years the United States would know how we felt."
Subramanian's contention is that despite having a fairly low per capita income, China had already started using credit and trade to influence global power-play. Among other things by convincing African countries where it invests heavily to shut down Taiwanese embassies. It has similarly forced European and US firms to part with technology to allow them to access to its market and America's time feel the hurt was coming sooner than Macmillan had predicted.
His controversial book won him many detractors, but also admirers among the best brains in the world. Legendary former US Secretary Henry Kissinger, Stanford professor and influential author of `End of World’, Francis Fukuyama and Pulitzer prize winner Liaquat Ahamed are among those who gushed about his thesis.
Indian Perestroika
Subramanian who has worked for the GATT and IMF in previous incarnations, in another startling paper, vindicated what many of President Pranab Mukherjee aides when he was finance minister in the Indira Gandhi Government, have long touted - the real `Indian perestroika’ happened in the 1980s and not in the 1990s.
He pointed out in a paper, "Hindu Growth" to Productivity Surge: The Mystery of the Indian Growth Transition’, co-authored with Princeton economist Dani Rodrik, that it was India’s decision to cut corporate tax rates, lift price controls and opening up the market to imports, which spurred firms to become more competitive.
His implicit argument was that the `pro-market’ reforms brought about Dr Manmohan Singh which brought in a surge of foreign investment would not have been possible without the `pro-business’ steps of the 1980s which made domestic business competitive, in effect ran counter to current economic wisdom.
It is now to be seen whether he continues with the 1990s pro-market reforms or strives to bring back some of the 1980s pro-business measures to prop up Indian manufacturing which has been tottering in the wake of the global meltdown and greater ascendance of Chinese manufacturing muscle.
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