Krishnamurthy Subramanian Appointed As The Next Chief Economic Adviser

India has named Krishnamurthy Subramanian, an associate professor at Indian School of Business and a banking expert, as the country’s next chief economic adviser.

The Appointments Committee of Cabinet approved the proposal to appoint Subramanian for three years, according to a statement by the Department of Personnel and Training. He will succeed Arvind Subramanian, who stepped down in June 2018 after cutting short an extended term citing personal reasons.

A PhD from Chicago-Booth and an alumnus of Indian Institute of Technology, Kanpur and Indian Institute of Management, Calcutta, Subramanian’s expertise lies in banking, corporate governance and economic policy, according to his profile on the website of ISB, Hyderabad.

He has been part of expert committees on corporate governance for the Securities and Exchange Board of India and on bank governance for the Reserve Bank of India. He serves as a member of SEBI’s Standing Committees on Alternative Investment Policy, Primary Markets, Secondary Markets and Research.

He serves on the boards of Bandhan Bank Ltd., the National Institute of Bank Management, and the RBI Academy.

CEA With A Banking Touch

Subramanian comes to the CEA office with a strong understanding of the banking sector troubles being faced by India.

In 2015, he co-authored a paper with now RBI deputy governor Viral Acharya on the health of India’s public sector banks.

The paper noted that unless Indian public sector banks raise “significant capital in the next five years”, their balance sheets would have to “shrink alarmingly” to stay compliant with Basel-III standards. The paper went on to say that public sector banks pose a significantly greater systemic risk when compared to private sector banks.

This scenario is playing out to a T.

Subramanian was also a member of the 2014 P.J. Nayak led committee on bank governance. The committee had made wide ranging recommendations including the setting up of an independent ‘Banks Board Bureau’ and a ‘Bank Investment Company’ to help distance the government from the functioning of public sector banks. The recommendations of the committee, still widely cited, have only been accepted in bits and pieces.

In a September 2018 interview with BloombergQuint, soon after a three-way merger between Bank of Baroda, Dena Bank and Vijaya Bank was announced, Subramanian said that mergers don’t solve the problem of asset quality plaguing the sector. Subramanian had explained that India remains an under-banked market and greater levels of competition would still benefit the economy. He had added that governance reforms across PSU banks are essential to ensure that large capital infusions from the government into these banks pay the necessary dividends.

Writing in BloombergQuint earlier in the year, Subramanian had also argued that public sector banks have become clones of each other, often making the same mistakes. “If organisational and governance aspects that created the cloning among PSBs are not removed, the same set of issues are likely to get repeated,” he wrote.

Away from banking, in the early days, Subramanian supported demonetisation. In a Nov. 11, 2016 article in the Times of India, he countered the view that bringing in a higher denomination note of Rs 2000 would lead to more black money. At the time he called demonetisation a refreshing change. Writing in the Mint newspaper on Nov. 23, 2016 he argued that data suggests that complaints of hardship faced by the poor in exchanging currency notes was exaggerated. To be sure, his views on the controversial government policy since then are not clear.