Appointment of Arvind Subramanian as chief economic adviser hits Modi hurdle

India's Prime Minister Narendra Modi speaks at Madison Square Garden in New York, during his visit to the United States, September 28, 2014.

BY FRANK JACK DANIEL-Thu Oct 2, 2014 

(Reuters) - Prime Minister Narendra Modi has not decided whether to appoint U.S.-based economist Arvind Subramanian as the government's chief economic adviser, a senior government source told Reuters, in a delay that may impact policy and budget preparations.

Subramanian, a senior fellow at the Peterson Institute for International Economics, was informally recommended to the post by Finance Minister Arun Jaitley more than a month ago but Modi still wants to discuss the appointment, the source said.

Jaitley was admitted to a private hospital in New Delhi on Sept. 1 for gastric bypass surgery to treat a long-standing diabetic condition. He was re-admitted to hospital last week and has yet to be discharged.

"It was still under consultation between the finance minister and the prime minister. Then the finance minister got sick," the source said.

Nationalist leader Modi has unleashed a slew of measures aimed at making India a more attractive place to do business, but has disappointed some backers who had hoped he would take more decisive action to promote a recovery.

Other senior advisory positions remain unfilled, including in the prime minister's office, leading some of Modi's reform-minded followers to worry about a lack of economic heavyweights in the administration.

The post of chief economic adviser is a high-profile position that was last filled by another internationally renowned academic long based in the United States, former International Monetary Fund chief economist Raghuram Rajan, who is now India's central bank governor.

Traditionally, the chief adviser is responsible for producing the annual Economic Survey - a document on the state of economy that underpins the drafting of the budget - and a mid-year economic update that is presented to parliament.

Jaitley's first full-year budget is due in February.

The government is also discussing whether to change the remit of the economic adviser to include wider responsibilities, another source said.

Last month, Modi closed the Planning Commission, a lingering vestige of India's early attempt to mimic the Soviet command economy. Now the government is considering whether to make the role of economic adviser part of an institution to replace the Planning Commission, the second source said.

"There is a consensus that we need economic advisers in the finance ministry and the government. The appointment of chief economic adviser is also linked to the restructured planning commission itself that could be manned by a few advisers," the second source said. He said a decision was imminent.

Subramanian was educated in India and Britain and went on to serve at the IMF and at the forerunner to the World Trade Organization, before taking senior academic posts at Harvard and Johns Hopkins universities in the United States.

Recently, he criticised the Indian government's decision to derail a WTO deal struck last year to streamline trade procedures by tying it to a separate controversy over food subsidies.

He also criticised Jaitley's maiden budget in July for being too optimistic in its revenue forecasts, saying it had failed to come clean on its fiscal accounting, and that it lacked timelines for passing crucial tax and subsidy reforms.

(Additional reporting by Manoj Kumar; Editing by Kim Coghill)