Should Nirmala Sitharaman Be Removed As Finance Minister

TITLE: Should Nirmala Sitharaman be removed as Finance Minister? CHANNEL: The Wire DATE: 2026-05-28 ---TRANSCRIPT--- Hi, I’m Karan Taper. Over the last few years, I hope you’ve been watching my program, The Interview on the Wire. During that period, I’ve interviewed doctors, politicians, businessmen, scientists, authors, and even the occasional noble laurette. For me, it’s been exciting. I hope it’s been enjoyable for you. But these, as you know, are tough times. And if this program is going to remain bold, independent, and sometimes even defiant, then I think we need your support. At the end of the day, it’s a truism, but editorially independence is best defended by the viewers. So, if you would like this program to remain the way it is, forthright, outspoken, and interesting, then would you consider supporting us? All you have to do is to click on the description at the bottom. But more than anything else, I hope you will continue to watch the interview. Your viewership means an awful lot to me. Hello and welcome to a special interview for the wire. Is the state of the Indian economy near crisis? Is weak private investment the key problem? Despite the government’s well-intentioned reforms, are its deeper instincts and habits putting off investors? And is the solution changing personnel at ministerial, technocratic, and bureaucratic levels? Does that in fact mean it’s time to replace Nirmala Sith Raman as finance minister? Those are the views of my guest, former chief economic adviser and senior fellow at the Petersonen Institute for International Economics, Arvin Subramanan. Dr. Subramanyan joins us live from Boston. Arvin Subramanyan, in an oped that you wrote for the Indian Express on Tuesday, you described the state of the Indian economy as near crisis. Can you start by explaining what brings you to this conclusion?

Well, uh, two things. Uh I think uh uh Karan in the short run India has faced a massive uh shock uh to its not just energy but to the foreign exchange more broadly. Um oil prices have gone up, natural gas availability is down. Uh ura prices have gone up. Um uh uh our exports to the Gulf have been affected. So in the short run we have uh you know pressures on the balance of payments and that’s been reflected in the decline of the rupee uh since the war began. So that’s the short-term uh challenge and it’s pretty serious because India imports uh a lot of energy and energy prices have doubled. The second problem is more structural uh because we forget that uh the rupee decline um uh uh began well before the war began i.e. uh you know if you the numbers that we present in a business standard article say suggest that uh you know in the years preceding the war the rupee declined by about 20% and this was amongst the worst performing currencies uh apart from Turkey uh despite massive intervention by the RBI which was also amongst the highest so that’s suggesting that investors even before the war had doubts about uh the Indian economy and the long run performance of the Indian economy. Let’s take up that point about investors having doubts about the Indian economy. You say weak private investment is the key problem for the Indian economy. You add the behavior of the rupee indicates that investors are losing confidence in the Indian economy and the truth as you know is that private investment has been weak for some considerable time. What is it that afflicts private investment? Why is it weak and why has it been weak for such a considerable time? Yeah, I I think uh first of all, I think we should uh uh ask Karan um investor doubts about the long run, you know, structural challenge, you know, the inability of the Indian economy to create jobs, uh for example, uh and raise investment, uh raise exports. Um I think that uh part of it was due to you know whatever external circumstances that afflicted uh all countries but a part of it is due to what’s been happening at home as well. I guess you know the two points to make here are uh there are kind of long run doubts about the Indian development model in the following sense that you know on manufacturing there was this big China plus one opportunity that presented itself and apart from Apple and the electronic sector we have not been able to take advantage of that and of course the Trump tariffs and the geopolitical uncertainty have uh raised have aggravated those doubts. Services have done very well actually in the last uh uh you know seven eight years partly because global capability centers have done very well. But then the question is you know is this sustainable going forward given artificial intelligence and the fact that our particular services model uh is perhaps more vulnerable to AI jobs being replaced by AI. So, so the whole you know manufacturing not as done as we should have successful services potentially under threat from AI and other things. So the question looms you know where is the you know growth going to come from and it’s in that context that we have to see that perhaps it’s this that’s uh you know has rendered private investment quite weak for a long time. What we show for example is private investment today, corporate public investment, how many companies, you know, big and small companies invest is just about more than half what it was at the peak in the early 2000s and it’s been on a steady decline apart from a brief blip postcoid when investment did surge and it has been coming down. So, so which comes to your question as to why and you know many commentators in response to the current crisis have said uh or not crisis the you know the tumar that’s happening have said that oh uh you know even some of the you know uh those who uh support the government have said uh we should u do more reform. Uh the problem with that uh uh you know call to arms or call to reform is that to be fair to the government it’s done a lot of reform. Uh you know it rationalized the GST. It implemented and rationalized the labor laws. Uh you know uh it’s uh opened up to foreign direct investment and most impressively it negotiated a free trade agreement in the European Union and has you know is negotiating something with the with the United States. So you can’t really accuse the government of not having reformed. It has reformed. And so the question is why haven’t these reforms borne fruit for for some considerable time? A and so the answer is something deeper. And what we uh I say and we say in our pieces is that you know reforms affect the costs of doing business on paper policy actions. However, I think what investors care about is the risks of doing business on the ground day in and day out. What they feel on the ground, what happens to them on the ground and there we think there are things some deep instincts of the government that maybe are uh you know uh put off investors to some extent. Absolutely. In a very important sense that is a very critical part of the articles you’ve written. You say what the real problem is what you call the deeper instincts of the government. You’re referring to the favorite treatment of a few large corporate houses. You’re referring to favoring BJP rule states over opposition ones. You talk about weaponizing the state’s coercive apparatus to target opponents. And finally overzealous and arbitrary implementation of tax laws. Can you explain to the audience why this has put private investors of both Indian private investors and foreign private investors? You know uh uh take for example uh if if you’re a small or medium business and you want to you know enter or you are in an existing business and then if you find that uh you know the bigger actors uh get more favorable uh you know treatment uh for example uh then I I think that uh you know it really affects uh uh investment down the road. Let me give you a very concrete example here. You know, in the last few year uh years until recently, um the government suddenly imposed quality control orders uh which meant that uh you know access and and this is an example that comes from the textile sector. The access of you know regular small and medium exporters who are exporting t-shirts, jeans for example, their access to cheap man-made fiber imports which is the essential ingredient for producing jeans and t-shirts and so on. Suddenly uh those uh raw materials did not were not available or became very expensive. Now these orders were clearly imposed you know uh uh in line with the preferences of some very large domestic industrial houses. A and so this is a very good example of when you favor one uh you know some people especially the large u and the irony in this was you favored the uh the the large houses by imposing these quality control orders essentially to protect their production of man-made fibers polyester etc which is a very capital inensive activity. So you protect a capital inensive activity and the downstream activity of selling uh jeans and t-shirts is very labor intensive and their cost of production go up and therefore their exports go down. Uh so this is a a a telling example of how when you tilt the playing field in favor of the large you affect investment and exports of the small and medium uh enterprises down the line who were in fact producing highly labor inensive competitive exports for sale to global markets. This is a very telling clear example which explains to the audience why the deeper instincts of the government militate against the economic interests of a lot of people. I take it the other examples that you offer of what you call deeper instincts of the government work the same way. I’m talking of favoring BJP rule states over opposition ones, weaponizing the state’s coercive apparatus to target opponents and overzealous and arbitrary implementation of tax laws. They all work against the economic interest of the country. Yeah. Now, and I think you know these are not what uh we’ve pointed out is not new. for example, the the overzealous tax administration and you know arbitrary tax demands. I mean that’s been true for such a long time and it hasn’t improved uh you know recently as well and you know several people have pointed this out not just me that you know uh o overbearing overzealous tax and the puzzle is why the government with all its political power you know is not able to actually get to the heart of this you know what is it that’s leading to overzeal tax administration and of course I think we should be honest here the the weaponization of the state coercive apparatus that favors some over the other is also something that’s I think very uh difficult for investors uh to I think to uh invest because remember these investments are especially in manufacturing are long run investments and you want certainty over a long period of time a really I think uh creates hazard and uncertainty now your solution is stark and simple I’m going to quote quote you from your Indian Express article. Changing personnel at ministerial, technocratic and bureaucratic levels is one perhaps the only way the government could signal a departure from these instincts and habits. And I’m going to ask you bluntly you are aren’t you saying that Nirmala Rama needs to be replaced as finance minister the finance secretary needs to be replaced the economic adviser the chief economic adviser needs to be replaced. That’s what you mean when you talk about changing personnel at ministerial, technocratic and bureaucratic levels? No. Uh not at all. Uh uh Karan, see uh this is not about any particular individual, right? The the call for you know fresh faces and new personnel uh is twofold. The reason is to one is we’re in the midst of you know a difficult economic situation challenge and there is a sense of drift and of events overtaking decision makers rather than decision makers being on top of events and that’s kind of a a a common I mean that’s a widely held perception which is contributing to this you know anxiety about the economy. So, so that’s something you know it’s like when Mario Draghi uh uh came into power and said we’ll do whatever it takes it revived the fortunes of the Euro zone partly because uh he was not because of the message but also because of who he was a credible interlocutor and I think we need strong open uh you know non-defensive interlocutors to deal with uh situations that has such as these. That’s the first point I mean why we need fresh personnel. The other point I think is related to what we just discussed. If it’s not just a matter of you know policy reform doing reform you know uh you could say that you know there’s no way you should have a change in personnel because these are the people who undertaken the policy reform to be fair to them. The if the problem is about deeper instincts and habits and staleness of ideas then we just need you know uh uh uh fresh faces who will deliver that because we do need changes in habits and ideas uh and so on and that’s and and also to your point uh this is you know cuts across centers of decision making uh in India it’s not just ministry of finance or not even the ministry of finance the government has to decide over the all the uh ministries and uh institutions that determine policy and implementation of policy they have to take a call if they think that you know they do need fresh bases uh then I think that’s a call for them to take but not in terms of any particular individual you know who are we to assess can I interrupt that three four times in that answer you’ve made the point that we do need fresh faces for a variety of different reasons and you argued it very convincingly When you talk about changing personnel at ministerial level, I’ll simply concentrate on that. Changing personnel at ministerial level, you’re not presumably talking about the minister of state for finance. You’re not talking about the tourism minister. You’re clearly talking about the finance minister. I know you haven’t named her, but it’s pretty obvious that’s who you’re talking about. No, I see I I think you know it’s not helpful to target individuals current. I mean the point is that you know economic decisionm uh across the board needs to be revamped uh and whether it can happen with the existing finance minister without her that’s a call for the government to make uh it’s not my call my point is more that you know uh collectively uh there is uh a need for change uh and which particular individual should remain or go and how the overall uh uh remember there’s not just one center of decision m economic decision making uh in India there are many others as you know you know there are institutions uh uh all over and so the government has to take an overall provided it believes that I accept the point you’re making that you haven’t named it and I also accept the point that there’s not just one center of decision making because in fact your full sentence and I’m quoting it again says changing personnel at ministerial technocratic and bureaucratic levels. Now when you talk about technocratic levels, you have to be I presume talking about the finance secretary, not joint secretaries and directors. When you talk about the technocratic level, you have to be talking about the chief economic adviser. No. No. Uh I I I absolutely uh do not accept that you know uh any particular I’m not referring to any particular individual. I think there are people in government who are doing a good job and maybe you know they need to get more prominence. Uh uh so it’s not about any uh one person currently that’s uh you know that’s not a call for outsiders to make the outsider like me says look if you look at the collectivity of outsiders often say that time has come to change the finance minister it’s usually outsiders who make that point the government is the last to concede. No, the the government has to recognize that you know things need to change for the reasons and you know what the article argues is why do we do we need a change of personnel and absolutely and that’s the important point we do need a change of personnel and we need a change of personnel at the ministerial bureaucratic and technocratic levels you haven’t named the personnel who should be changed I grant that but the finger points pretty closely and I’ll only say this for the last time I won’t carry on the finger points pretty closely at the finance minister, the finance secretary and the chief economic adviser. Otherwise, what’s the point of changing their underlings and their subordinates? No, it obviously I’m saying it should be at senior level, but it’s not uh you know at the finance ministry or whatever and I absolutely do not accept your interpretation of what I have said Karen. Let me make that clear. This is a point about collective decision making and movement as a whole. I I’ll accept what you say. I’ll simply put it like this. The audience hearing you, the audience reading you will say what Karan interpreted him to be saying is what he actually meant. But for some reason he’s shying away from it. No no no not at all. It it is about collective decision making and you know and there are multiple centers of power and we know in India you know uh multiple centers of power uh not obvious which is the most important decision-making center as well. So you know so that’s another thing which you know only insiders know better. most important decision making center points even higher than the finance minister and I won’t name the person you’re pointing at but it’s pretty obviously the person at the top who appoints the finance minister no I I I think it’s just you know we we need change government has to decide uh you know uh how those and who those changes have to be uh okay against this background let me raise with you some of the points made by Surjit Bala who also was writing in the Indian Express exactly a week ago. First of all, he says the claim that India is the fastest growing major economy is simply not true. He says from 2014 when the BJP first came to power, India’s rank in terms of GDP growth is ninth. In terms of per capita GDP growth, it’s eighth. In terms of per capita growth in US dollars, it’s 16th. way below the claim that we are the fastest growing major economy. Do you accept the point he makes? I mean I I mean I’m sure Suljit has done his you know calculations right and so he must be you know that that must be right. I mean he’s uh to say otherwise would be to doubt his his arithmetic. So I think those numbers are right. But Karan I I would just say that uh uh you know we’ve done a previous show on India’s numbers as well and all this is assuming that these numbers are you know accurately measured. Um you know uh my own view and my co-authors we’ve argued that you know even those numbers are uh are uh you know maybe need to be revised downwards to some extent. So, so, so the broader point is I think that uh the sense that Surjit is trying to convey is correct that you know the kind of triumphalism that uh you know uh we’re the best fastest etc. I I think we need slightly we need a perspective on that and I think that’s the broader point. I think the actual numbers are uh you know one shouldn’t quibble about but I think the broader point that uh we are not doing as well as the headline numbers indicate or the the the triumphalism the of the narrative I think that is the key point absolutely you’re drawing attention to the triumphalism of the Indian narrative and pointing out it needs to be put in prop proper perspective in fact it needs to be substantially brought down because Bala also points out that Bangladesh is first in terms of US dollar growth at 8.3%. Ethiopia is second at 7.2%. India is 16th at just 4.7% and that means that we are not leaders in the global south. We’re not even leaders in South Asia. Bangladesh is considerably ahead of us. I mean the numbers are what they are and you know I mean uh you can interpret them as they are as you want to current but I think the broader point is that India is not amongst uh uh you know the fastest growing economies of the world or of South Asia you know over that period of time. A second point made by Sujit Bala is that India has moved from being one of the fragile five economies in 2013 to becoming one of two just fragile economies in 2026 alongside Turkey. There are just two fragile economies today. India is one of them. Turkey is the other. Would you accept that? Um I I think that needs that claim is a bit I think bold and and and and u excessive perhaps even because you know the point is that you know on the one hand we say that the uh triumphalism narrative is off but on the other hand you know the broader parameters of the economy have not been bad. India’s had low inflation. The financial sector is in is in decent shape. growth is not spectacular but not bad. So, so remember that’s why the puzzle uh in all this is that uh India is not a basket case and India is not like it was uh during the fragile five episode in 2015. Uh so that’s why uh so characterizing India as uniquely fragile along with Turkey I don’t think is quite right. Let me come to somewhere where perhaps you would agree with Sujit Bala more closely. Bala says India’s response to this crisis is to apply band-aids instead of performing the surgery needed to make investment in India by Indian and foreigners alike more attractive. He says, and I’m quoting him, investors are deeply uncertain about government policy. Isn’t that fairly similar to your concern about what you call the government’s bad instincts and habits? Isn’t this the point at which both of you seem to come on the same page? Exactly. I think this absolute convergence and Surjut in fact has a good example to back this up. He talks about India having allowed all the bilateral investment treaties to lapse a and not having I think uh uh uh negotiated fresh investment treaties has added to that sense of investor anxiety. So on that on that whole deeper point about investor anxiety I I think we’re on the same page. I I think there may be some differences on I I don’t know what Sujit’s views are but uh but on that key point I think investor anxiety and all that’s been done to create that or uh reinforce that uh I think we’re on the same page. Now both you and Sujit Bala have been very close to the Modi government. You were chief economic adviser for four years. Bala was executive director at the IMF and also a member of the prime minister’s economic advisory council. Do you believe the government will listen to the two of you? Uh I’m sure they’re listening to Surjit Balah. There’s I I I think that uh you know u uh he’s he’s argued this very uh cogently and eloquently. Uh I I I think I’m sure they will uh listen to uh if not to me. I mean I’m not sure whether they’ll listen to me but they’ll certainly listen to Surjit. Uh and I think that’s a good thing and uh you know that’s what we need. We need voices you know Surjit and others uh to to make the case you know calmly cogently uh and in a way that’s plausible and uh I think you see I do think inside government there are people who are very sensible very competent and who will take this very seriously and who probably have been aware of the problem even before Surjit or I wrote these pieces uh so I think uh uh you know uh internally I’m sure people are aware of the challenges uh that lie ahead. One possible reason why the government may be more willing to listen to Sujit Bhala than to you is because your solution will look to them like a very radical solution. Changing personnel at ministerial, technocratic and bureaucratic levels even without naming who those individuals are may not be an easy thing for the government to do because it’s very committed to them. And when you change personnel, you’re admitting that something has gone fundamentally wrong, which is why you need new faces. That’s why your advice may be more difficult for them to swallow. Possibly, Karin, possibly. See, but current I I think there’s a kind of broader point to make here about, you know, the beauty about democracy, right? It’s it’s churn you know you get churn you know more or less whatever but that element of churn is also important at at at the level of governance you know bureaucracy etc because you know people do get uh stale ideas do get stale you know uh habits do get entrusted and entrenched uh and you know uh a a wise leader will recognize that and and say look you know Even if we didn’t have the crisis, you know, it’s something actually by the way um this kind of need for fresh ideas uh a and uh uh that you know we were uh ideas were becoming stale and habits getting entrusted is something actually I said almost two years ago. So this would be true even before uh I think the current crisis that you know more broadly democracies and governance systems need churn and fresh blood constantly uh because there is a serious risk uh that you know you lapse into old habits and especially if those habits as we’ve discussed are adding to investor anxiety I I think those need to be addressed. Dr. So Roman, the advice that you’re now giving goes very dangerously against the fundamental interests of the government with the claim that we need new ideas, new faces, we need churn, we need new people to push. That could apply just as much to a prime minister who’s been there 12 years. Remember, very few heads of government last for that long because they get tired, because they get set in their ways, because you need fresh blood and new ideas. 12 years is a long time. Many could interpret you to be suggesting we need a new man at the top as well. No, no. Uh the people have I mean you know that’s about you know democracies people you know uh uh get the final say on that but I think enlightened leaders are capable of seeing that staleness uh uh can creep in habits can get entrenched uh and enlightened leaders can recognize the need for change internally as well. Absolutely. You end your Indian Express oped with the following sentence. I’m going to quote it. The truth is that this leopard has to change its spots or else the Indian economy will continue praying the price. If the personnel changes that you have so eloquently called for do not happen, how serious will be the price the Indian economy pays? Yeah, I mean I think we are facing challenges. We faced challenges for some time. Uh those will continue if if we don’t you know especially you know the private investment those numbers and the chart that we produced in a in a companion business standard piece uh has you know and by the way this is the the low and declining private investment has been the focus of discussions in India for a long time. uh you know that several uh uh you know government officials have come out and said we have done we the government have done enough now it’s the turn of the private sector to kind of step up to the plate as it were. So the recognition that we need more private investment uh is there already and and therefore uh you know the question is uh is the diagnosis right? Is it the fault of the private sector or is it as you know uh we’ve argued also because some habits of the government need to change. I think that’s the open question. We think uh you know habits need to change. That’s the sense in which we say people need to change as well. Yeah. Uh I I think uh deeply entrenched habits new ideas or scale ideas for for that to happen I think uh some change of personnel is required. So that’s the sense in which we say you know the leopard must change its spots. Absolutely. We’ve come to a very neat conclusion and I thank you for that. The Indian leopard needs to change its spots. The faces that we look at when we look at the ministerial bureaucratic and technocratic hierarchy need to be new fresh ones. I thank you Dr. Subramanyam for the time you’ve given me. I thank you for this fascinating analysis and understanding of what you call the near crisis facing the Indian economy. Take care. Stay safe. Thanks. Hi, I’m Karan Harper. Over the last few years, I hope you’ve been watching my program the interview on the wire. During that period, I’ve interviewed doctors, politicians, businessmen, scientists, authors, and even the occasional noble laurette. For me, it’s been exciting. I hope it’s been enjoyable for you. But these, as you know, are tough times. And if this program is going to remain bold, independent, and sometimes even defiant, then I think we need your support. At the end of the day, it’s a truism, but editorially dependence is best defended by the viewers. So, if you would like this program to remain the way it is, forthright, outspoken, and interesting, then would you consider supporting us? All you have to do is to click on the description at the bottom. But more than anything else, I hope you will continue to watch the interview. Your viewership means an awful lot to me.