‘NPA a hard problem... many years we had extended pretence’

Was he in loop on note ban? Subramanian quotes Buddhist maxim: ‘Speak only when you can improve upon the silence’

THE LARGE pile up of non-performing assets of state-owned banks is a “very hard” problem and the government has been in some ways little behind the curve, Chief Economic Advisor Arvind Subramanian said. The total bad debts of PSU banks was Rs 4,76,816 crore on March 31, 2016 and is expected to rise.

“It is a very hard problem which should not be underestimated. Essentially, nowhere in the world, it is easy to say that I will forgive the debts of the private sector because you create moral hazard, you say what kind of assistance is this, crony capitalism without accountability?” Subramanian was the guest at Express Adda here Wednesday.

According to the CEA, an essential part of solving the NPA issue “has to be to write down the debts” of many large companies but that’s easier said than done. “It’s going to require resources to get us out of this but sometimes getting the resources is the easier part of the problem. Making those hard decisions to write down debt — it’s difficult for any political system to do,” he said.

Subramanian also admitted that the urgency and the seriousness of the NPA problem was not signaled when it was initially recognised. “We were in some ways a little bit behind the curve... probably there’s an inbuilt incentive in the system to not reveal the true extent of the problem. So for many years, we have had this extended pretence flowing on. Then of course, we also partly thought that if growth were to pick up, it would kind of, they say a rising tide

Neeraj Priyadarshi Arvind Subramanian at the Express Adda.