India names demonetisation supporter as chief economic adviser

By Alasdair Pal

NEW DELHI (Reuters) - India's government appointed a new chief economic adviser on Friday, naming a U.S.-trained professor who praised the country's shock decision to remove most of its banknotes from circulation.

Krishnamurthy Subramanian, a professor from the Indian School of Business, will serve a three-year term in the country's finance ministry. His predecessor, Arvind Subramanian, abruptly left the post for personal reasons in June.

While studying for his doctorate at the University of Chicago, Subramanian was supervised by Raghuram Rajan, a former International Monetary Fund chief economist who served as governor of the Reserve Bank of India for three years until late 2016.

Shortly after Prime Minister Narendra Modi's controversial decision in 2016 to withdraw most of the country's banknotes from circulation overnight, Subramanian defended the measure, which had been aimed at hitting money launderers and tax evaders.

He co-authored an article in a business newspaper, the Mint, that described criticism as the result of "exaggerated claims of disingenuous politicians who profess to be fighting for the poor".

There is an ongoing struggle for influence between economic liberals and more protectionist minded advisors, and both Arvind Subramanian and Rajan have criticised government policies after leaving their posts.

During recent weeks a row erupted between central bankers, who fear the RBI is at risk of losing autonomy, and officials in Modi's Hindu nationalist government.

(Reporting by Alasdair Pal; Editing by Sanjeev Miglani & Simon Cameron-Moore)