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Before you listen to this episode of The Scene and the Unseen, I have a recommendation for
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Do check out Pulliya Baazi, hosted by Saurabh Chandra and Pranay Kutasane, two really good
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Kickass podcast in Hindi.
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History moves in strange, often unfathomable ways.
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There's this old cliched illustration of chaos theory that involves a butterfly flapping
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its wings, setting off a chain of events that cause a storm thousands of miles away.
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Now imagine if you could do a forensic examination of the storm and identify the flapping of
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the butterfly's wings as its root cause.
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Sounds impossible, right?
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After all, the weather is such a complex beast.
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Well, the economy of a nation, especially one as large as India, is also madly complicated.
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And yet it can sometimes be possible to trace the complex rumblings of this massive beast
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to root causes that interestingly lie completely outside the domain of economics.
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It shows you the role of happenstance and luck in human affairs.
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It should lead us all towards humility.
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Welcome to The Scene and the Unseen.
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My guest today is the journalist Pooja Mehra, who's been writing about economics and covering
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the government for over 17 years now.
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Pooja has been the economics editor of The Hindu and has won the Ramnath Goenka Excellence
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in Journalism award in 2008 and 2009.
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And she's just released a fascinating book called India's Lost Decade, which chronicles
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a 10 years between 2008 and 2018 and describes how those were years of lost potential for
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us in which a series of bad decisions by multiple prime ministers and multiple finance ministers
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harmed the Indian economy and by extension millions of Indians, especially the poor.
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I've admired Pooja's writing on economics for a long time and I picked up the book expecting
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a really good read on economics.
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But it's a lot more than that.
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Firstly, the thrust of the book is the impact of politics on economics and is filled with
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Secondly, the book is packed with human drama.
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Of the sort, the likes of Shakespeare would have turned into multiple plays.
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Like my god, this book is tales of so many petty resentments, grand ambitions, mad delusions,
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petal interrogants and a series of human follies that are all the rational acts of flawed humans.
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It's fascinating and I was delighted when Pooja agreed to come and chat with me about
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Just one thing though, our conversation was recorded over Skype over iffy connections.
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The sound quality is sometimes dubious and calls keep dropping.
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The subject is so fascinating that I think it was worth the trouble and I think you'll
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But before we get to the conversation, a quick commercial break.
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This episode of The Seen and the Unseen is brought to you by Storytel.
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Storytel is an audiobook platform which you can listen to on your Android or iOS app.
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They have thousands of audiobooks that you can listen to on your mobile, including hundreds
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And you can also get a 30 day free trial if you hop on over to Storytel.com slash IVM.
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I actually use Storytel myself regularly, so as long as I sponsor the show, I'm going
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to recommend one book a week that I love.
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The book I'm recommending today is a book called Back When We Were Grown Ups by Ann
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Now one of the interesting things about dialogue in books is that it is very different from
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how we speak in real life.
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In real life, we don't speak in a linear structure.
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One person finishes, then the other person starts.
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But often one over the other, two people speaking at the same time, thoughts colliding.
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To my mind, no fiction writer captures real life dialogues better than the brilliant Ann
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Tyler, many of whose books are available on Storytel.
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Back When We Were Grown Ups is a personal favourite though, so do check it out.
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And remember, you get a 30 day free trial only at Storytel.com slash IVM.
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Pooja, welcome to The Scene in the Unseen.
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Thanks for having me over.
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Pooja, before we start talking about your book, The Lost Decade, tell me something about
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How did you get interested in economics and how did you become an economic journalist?
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Okay, so it's by accident, I did not make a conscious decision to either study economics
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When I was in school, I actually first I wanted to be a lawyer and then I wanted to join the
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And those are the two options I was very keen on.
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But my family dissuaded me from both in not a very, I mean, you know, very light conversations,
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no serious discussions, but mostly they would be like, no, you may not like that.
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You know, those are tough jobs and all that.
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And so I hadn't really given much thought to what I wanted to do.
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And my cousin, who's a big influence on me, took up economics.
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And he's one year ahead of me and he took up economics and just because he had taken
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up economics, I also applied for economics, although I was a science student.
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And I got through in Kamla Nehru College, which tends to have very high cutoffs and
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is considered a good college in Delhi University for economics, after Stephen's LSR and SRC
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seats considered quite good.
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And I didn't want to let go of that seat.
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So, you know, so sort of following in the footsteps of my cousin, I took up economics.
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And I found that a year after he finished his first year of economics, and by the time
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I had already joined, he decided he didn't like economics and he switched over to physics.
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He restarted his graduation doing physics, but I carried on with economics.
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I was beginning to enjoy the subject.
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I had a good set of friends in college and all that.
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And I finished graduation and there was a lot of sort of peer pressure.
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Everybody was sitting for their CAT exam and people were considering where to do their
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And there's this one friend of mine in college who, you know, one day told me that a couple
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of days later, she was planning to go to the North Campus where she wanted to apply for
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the entrance exam for Delhi School of Economics for a master's in economics.
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And she was looking, you know, for basically somebody to go along with her.
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And if I was interested, and I said that, you know, if you're applying for a master's
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I mean, we both went and applied, we sat for the entrance exam and she never made it and
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And so I joined the Delhi School of Economics and I found it really, really difficult.
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They really expect you to work very hard.
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And most of my batch mates started preparing for their, you know, they wanted to do their
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PhDs overseas and I could tell that I would not be able to work that hard.
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And therefore I put in my request in the placement cell for placements.
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Now, this is the year 2000 where the economy was not doing very well and there were very
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few job offers and therefore relative to the number of students and therefore they had
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The rule was that, you know, if you get a job offer after sitting for an interview and you
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don't accept it, then you have to wait for everybody else to get placed and only then
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you can apply for another interview.
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And my first job offer came from a newspaper, Business Standard.
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And therefore the choice for me was whether to accept that or to not accept that and risk
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not getting any other job at all because I have to wait for everybody else to get placed.
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And that's how I joined Business Standard Financial Paper and that's how I sort of came
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to business journalism.
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There is nobody in my family who is a journalist and I had never thought of journalism as a
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And I landed in business journalism and I quite liked it.
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I had good colleagues and very good bosses and editors and I've just stayed on.
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So that's how I came to economic journalism.
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Well, thank God for us you stayed on.
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And it's interesting how, you know, when you describe the role of happenstance in your
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life and reading your book, it struck me as we'll discuss later how happenstance and events
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that seem unconnected with economics actually played such a big role in what subsequently
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So tell me, you know, when you were starting off getting into economics, doing journalism
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and all of that, who were the thinkers who influenced you?
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Like, what were the kind of books that had an influence on you?
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And importantly, over the period of time, from the time you studied economics in college
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to, let's say, today, how have your thoughts on economics per se evolved?
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So, you know, unlike how it is in JNU and Delhi School of Economics, the way they teach
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you economics is very different.
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There's an influence of market economics led thinking and consciously or unconsciously
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you there are these giants, you know, there and especially because I was in college before
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So the big influences at that point in time on campus, in the school and therefore on
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me, were people like Dr. Manmohan Singh, you know, Montek Singhalovalia.
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So their reputation at that point was a little different than what it is now.
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And there was a scholarship in college named after Dr. Manmohan Singh and Professor Kaushik
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Basu and people like that, you know, and our teachers were very clear that, you know, the
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market economy is the way to go forward and we didn't have textbooks for every topic.
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We had a series of readings, so, you know, few paras from various writers, most of them
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international economists, very few Indian writers we had in our course curriculum material.
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So at that point in time in college, most of my reading on economics was limited to
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what was prescribed in course.
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Thereafter, after I joined the, you know, business standard, I found that a lot of what
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was taught in class, especially because I had macroeconomics and public finance as my
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optional papers, a lot of that I was beginning to see how it plays out, you know, in the
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real economy and all the various manifestations of it.
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And honestly, I did not read much of anything in the first few years of my career related
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So I didn't at that point read, you know, Amartya Sen or Raghuram Rajan when his book
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I read all of that quite late and I don't think, you know, other than what I had learned
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in class, I don't think I had too many influences in terms of what I had read.
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By the time I started reading all these big names, I myself had well formed ideas about
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what goes on in the economy based on what I was taught in class and how I'd seen it
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play out, you know, in the real economy in India.
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So, you know, before we start talking about the last decade, which is really about the
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last 10 years and how we sort of lost the way, you know, turned it back a little bit
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and then lost the way again, I'd like you to set a little bit of context in terms of,
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you know, I often as someone who grew up in the 80s and the 90s, I often take it for granted
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that my shared experiences are shared by everyone.
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But I often forget that 60% of India today was born after the liberalization of 91.
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And that's such an important turning point in our economy.
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So can you sort of give me a sense of what our economy was like, say, from independence
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What were the sort of guiding philosophies and how that changed in 91?
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In fact, Amit, I myself, I feel, you know, when I speak to youngsters, I feel exactly
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the same that they have no idea how life was, you know, before 1991 or for those of us,
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you know, who are older, who are like past 35.
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And so to speak of it in terms of everyday life, you'd recall that an example that is
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often given is, you know, you wanted to buy a car, you could afford to buy a car and your
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choices were limited to one or two brands.
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The quality did not matter because the quantity was so less.
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And even for those few cars that were manufactured every year, there was a long list of people
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in waiting to buy them.
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And therefore anything, you know, would go.
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Now in 1947, the two phases before 1991 and after 1991, I think the average person in
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India seems to be the forgotten or doesn't realize at all that until 1947, Indian economy
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had been, you know, under colonial sort of control.
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And most of the economic policy was driven by the Second World War's requirements.
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The Indian economy had been geared, you know, the resources were being taken away to provide
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for the Second World War.
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And you know, be it in terms of foreign exchange, be it in terms of exports, you could not import
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things, even if you could afford them, they were regulations, they were import controls.
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And all of these rules and regulations were written into Indian law, economic policy,
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which a lot of it has not been shared even today.
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You know, those were the sort of the founding principles of a lot of economic policy.
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And much of it was shared in 1991, but a lot of it survives.
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We still need to, you know, get rid of those that control mentality.
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And what that control mentality is that before 1947, which carried on for some time after
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that, that everything would be determined by the needs of the war.
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So you have to, you cannot import, you know, things like steel or if you're producing things
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like steel, it has to be used for a certain purpose, which is determined by not what is
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good for the rest of the economy or people like you and me, but you know, what is good
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for the Second World War, Great Britain.
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Now once that was done, when we got freedom, I think the immediate response of the government
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at that point with the heavy influence of Pandit Nehru was that we need to reconstruct
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the economy, which had been under the colonial rule and which had taken this huge hit because
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of the Second World War.
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From what we understand, the private sector was small and not in a shape to take up the
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huge challenge and therefore the public sector had to be relied on and it had to be strengthened.
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Now we all know how that philosophy and of course there was also the fear of economic
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We had just gained political freedom and I think the country at that point in time did
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not want to surrender economic freedom and therefore the fear of foreign capital and
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And I think those are the two sort of guiding principles at that point in time, which led
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to what is called Nehruvian socialism.
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When we criticize Nehruvian socialism, and I definitely am not a fan of it, but when
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we criticize it, we must remember the context in which that came as a policy response.
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Very soon the limitations of that kind of thinking became apparent, but it was a little
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too late to do anything about it.
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I think the government's attention was drawn to other things, political things, etc.
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And this sort of carried on and I think as Sunil Kilnani talks about in his book, Idea
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of India, what this did deliver was that the economy was stable.
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It did not grow very fast, but it was quite stable.
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Then came the Indira Gandhi variety of socialism, which had a lot to do with government spending
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led economic policies and also later on nationalization and the charter that was, I think the seven
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points that were announced.
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That was quite damaging.
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That was very, very damaging for the economy and of course there was not much growth, but
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there was also a worsening of the fiscal parameters and macroeconomic stability.
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And because these parameters were weakening, by the 80s there was a realization amongst
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Indian experts and Mrs. Gandhi here and there does show some openness to listening to these
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things, including a couple of times when Dr. Manmohan Singh sort of in various capacities
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tried to explain how Indian economic policy was completely off course.
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And some little bit corrections do begin to take place in the 80s.
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Bank nationalization has sort of indirect good influence on India's saving rate and
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therefore investment rate.
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And those little sort of low hanging reforms that were undertaken, that were taken up in
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the 80s begin to show a little few results, which carries on when Rajiv Gandhi becomes
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But after that, political instability and incompleteness of the reforms, inability to
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think through a lot of things meant that the economy was not doing well.
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And the fiscal parameters started weakening more and more.
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And after that, so there was this one external shock of the Gulf War, which really weakened
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India's external position a lot because we had been borrowing so much.
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And those were the days when the government could just print more money and pay for anything
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that was not covered by its own revenue.
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So the difference between its expenditure and its revenue was simply covered by printing
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And that meant a lot of short-term borrowings that they kept rolling over.
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And therefore, the shock of the Gulf War sort of tipped the balance of payments into a dangerous
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zone and the famous 1991 crisis happened.
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So that's what was the story before 1991, that a lot of bad decisions, some of them
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under the influence of the context of that era, but some of them because of complete
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disregard for what is good for the economy.
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I think it's also kind of pertinent to point out that more than as much as policies that
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sort of were in place, it's also pertinent to point out the mindset behind them.
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Now, Nehru, who is again a great statesman, I admire him, I think India was lucky to have
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him as its first prime minister.
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And in terms of economic policies, like you rightly said, sort of soft socialism he followed
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was a flavor of the times and he wouldn't have known better at the time and he died
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before he could correct if he would have been open to it.
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But essentially, two of the fundamental problems was one was a distrust of private enterprise
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and a distrust indeed of the profit motive, like Nehru once famously said to JRD Tata,
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do not talk to me of profit, it is a dirty word.
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And that distrust meant that he looked at private enterprise as necessarily something
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that is exploitative of the people, which also brought back those memories of colonialism
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He didn't see it as a positive some game it is by which everyone benefits and economies
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And therefore, the second part of his mindset, which was so fatally flawed as it were, was
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the whole command and control mindset that the government will do everything, it will
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plan every aspect of the economy.
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And I think by the time we sort of knew it wasn't working and Indira came to power, Indira
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moved leftward for political compulsions as much as any conviction in her economic policies
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because she had to distinguish herself from the syndicate in the Congress which she was
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fighting against and the leftward tilt was a sort of rebranding.
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And then she went into populism of Garibi Hatao and following these so-called pro-poor
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policies or they actually hurt the poor more than they help them.
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And this is a theme again that you touch on in your book a lot and I'm going to come back
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to you later and ask about that later in this episode about the interplay between politics
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And basically as you've summed up, we were sort of limping our way through making small
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corrections here and there, but the fundamental mindsets weren't changed.
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And would you say that the changes that happened in 1991 came not so much from conviction as
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circumstances because we had that balance of payments crisis, we were in a fix, we had
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no option but to ask the IMF for help and these were sort of their conditionalities.
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So Abhit, I agree with what you say on both Mrs. Gandhi and Pandit Nehru, except that
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my small point here would be that I'm not so sure the Indian private sector barring
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one or two examples such as JRD Tata and it is absolutely wrong to I think nationalize
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Air India, but barring those two examples was really our private sector willing to enter
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into these highly competitive and long gestation, high risk areas where the public sector was
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pushed into by Pandit Nehru.
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I don't think that, you know, the Indian private sector was roaring to go into these areas
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and they were denied a chance.
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Private sector was not banned.
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No, I'd argue that they weren't given the opportunity in the first place.
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Like the example that I often like to give, you know, to contrast the late eighties and
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just maybe for seven or eight years later is that, is you look at something like say
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telephones and airlines, you just, you know, in 87, 88 or so on, you had five year waiting
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list, 10 year waiting lists for telephones.
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Airlines were outside the bounds of most Indians and the moment those sectors got opened up
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in the private sector actually got the opportunity, you were flooded with both variety and value
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when you saw the result of competition.
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So today it's hard to imagine that you had to wait five years to get a telephone and
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that too only the extremely privileged could afford it.
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So, you know, in that sense and you know, I wish things like agriculture and education
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had also been opened up in the same way.
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Yes, but I just, you know, nuanced that a little bit by saying that, you know, if you
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were giving these permits, you know, for a limited production, you can produce this,
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but you can only produce this much.
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You can't sort of, that was the control, right, the mitraj.
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Now what that did was that was not so much anti-private sector.
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If you wanted only a few companies to be in that sector and do well, I mean, I'm not saying
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you wanted to, but that's what it ended up doing.
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You know, that only two car manufacturers can make cars and therefore they do well,
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but you know, but the rest who are willing to make cars, there's an entry barrier.
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So it's not exactly anti-private sector, but the problem is that, you know, you're selecting
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You know, it's not capitalism.
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You're choosing a few capitalists who can, you know, make super normal profits, but by
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preventing the rest of the private sector to enter that area.
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So that is the model they were operating.
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So in fact, I'll ask you a question here, which I was actually saving for later, but
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it makes sense now, like, you know, even in your book, you've used the two phrases pro-business
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versus pro-markets and this is something I think a lot of people don't get that, you
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know, and a lot of market supporters often, you know, they have the crony capitalism thrown
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in their faces and you know, what about this?
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And actually what is good for markets and what is a good for a few select businesses
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are very, very different things.
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Can you elaborate on the distinction between, you know, being pro-business and being pro-markets?
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So, you know, you're pro-business when you create a policy for a sector specifying norms
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where only few people can enter and qualify and you leave out the rest, then you're not
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So, supposedly, you know, you're not saying, so let's take the example of education today.
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You're not saying that education, only ABC business houses can enter education.
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That's not what your policy says, but your policy says that if you want to set up an
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engineering college, you must be able to put so much money into the laboratory.
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You must be able to put so much money into the, you know, initial permit that we give
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You must be able to put everything is defined in terms of you must be able to do this much,
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And when you look at that criteria, that becomes exclusionary.
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I may not, I may be running, you know, let's not say higher education institutes, but let's
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talk about, for instance, you know, schools, I may be running something under a flyover
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Every student I'm teaching is coming out with flying colors and passing examinations, but
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I can't qualify to get that licensed campus because your rules are excluding me.
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So in this case, you're not pro markets, you're pro business.
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Even though you're not saying, you know, private sector is not allowed, you know, so this is
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a very crude example I have given, but we see a lot of this even today in many sectors
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where do you think you and I can just decide to go and set up, you know, a cell phone company
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or an airline, you know, we can't, we can't, even if we had all that money, all that expertise
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that those who are in that sector today have the entry barriers into that sector are high
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and therefore there is no competition and therefore it is not pro markets policy.
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It is still in many ways pro business policy.
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And a lot of people don't get the distinction of what is, you know, good for markets and
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capitalism may not be what capitalists actually want.
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So you know, this distinction is sort of important to make.
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Coming back quickly to 91 sort of, one, were the reforms driven by conviction or were they
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forced by circumstance or a combination of the two?
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And two, how far do you think, you know, what difference did the reforms make and do you
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think they went far enough?
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Like where did we fall short?
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So it depends on whose conviction you're talking about.
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You know, the economists and some select bureaucrats, they were convinced about what had to be done.
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They knew exactly what had to be done even back in the 1970s.
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You know, there is a paper that Dr. Manmohan Singh, for instance, had written, and I think
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if I'm not wrong, 1971, where he had said that, you know, how, in fact, even his PhD
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thesis, he has written about how Indian policies are all wrong and, you know, they will land
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So Indian economists and Indian, many of the technocrats were fully aware of what was
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going wrong and what needed to be done.
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But there was no buy-in from the politicians and there was no political conviction.
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By 1991, I think politicians were left with no choice.
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And we see that the IMF lays down its conditions and Mr. Yashwant Sinha, I think, was the finance
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minister and he's sort of not able to go through with that.
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The government changes.
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PV Narasimha Rao comes and he begins to look for a finance minister and he's forced to
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look for finance ministers that the IMF will trust.
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His first choice is IG Patel.
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IG Patel declines and therefore, and I think IG Patel suggests that Manmohan Singh would
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be a good option and therefore he goes to Manmohan Singh.
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And Manmohan Singh comes up, I mean, he comes up with his list, but already when he comes
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into office on his table, there is a list of things that have to be done, which have
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But that doesn't mean that if Manmohan Singh and his team of, you know, I call them the
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rescuers, you know, if they had no list arriving from the IMF on what all needs to be done
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for that bailout package to be approved, he had not done the same thing.
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I think he would have also probably come up with a pretty similar list and done the same
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And so definitely what was done was because the politician could no longer postpone these
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decisions and could no longer tell the economists and the technocrats that I'm not going to
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And in that sense, it was driven by the crisis.
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But I don't give much credit to the IMF for the way the reforms were designed, because
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there's enough evidence, you know, that these things were being talked about in the Indian
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policy circles much before that, including in the official papers.
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I think Rakesh Mohan has sort of documented a lot of this, especially about the industrial
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policy and the de-licensing, et cetera.
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So that's to talk about the conviction.
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What the reforms did was that wherever the economy was sort of like we discussed, putting
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these conditions and restrictions and asking for, I mean, wherever it was operating under
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license, those things were removed, foreign capital was less restrictive.
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I mean, they had to open up to foreign capital, many areas that had been reserved for exclusively
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for public sector that had to be opened, trade barriers had to be reduced.
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And I think later on, I don't know if this was prescribed by the IMF or not, I need to
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But later on, I think one of the biggest reforms that does not get talked about in layman's
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circles is, you know, the understanding between the Reserve Bank of India, the governor at
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that point was Sri Rangarajan, and finance ministry headed by Manmohan Singh, that, you
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know, printing of money to provide for the fiscal deficit, that will just not go on.
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That was a very big reform.
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I forgot to mention that the rupee was at that point in time not floating like it is
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It was a controlled, it was a fixed currency.
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And because of which, you know, it was an artificially strong currency.
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So there were two rounds of devalued, of devaluation, because of which the, so what happens when
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your currency is artificially, you know, kept at a level.
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In the international world, it costs X to buy something, for instance, petrol, you know,
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the price of petrol is X, but your currency is artificially up there.
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So your economy is not responding appropriately to the price movement internationally of a
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product, because your currency is fixed.
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So your demand internally was not adjusting properly.
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And by those two rounds of devaluation that was gradually corrected, and eventually, of
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course, you know, the rupee became floating.
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So those were the kind of, you know, corrections in policy that took place.
#
Now, those were all good and needed to be done, but that was the very basics.
#
The really difficult thing to do was, you know, agriculture reforms, labor reforms.
#
Those have still not happened.
#
And I don't see anybody even saying that those need to be done.
#
That was my biggest worry that, you know, the political consensus, somehow, this thing
#
doesn't even get mentioned.
#
And in that sense, you know, reforms have not graduated to the second generation and
#
third generation level.
#
25, 26 years later, we still talk about change of FDI caps or liberalization of FDI caps
#
I don't think that should even be called a reform now.
#
That should just be an everyday policy decision that somebody junior sitting in some ministry
#
should be able to just sign off, you know, the word reforms itself has become so cheapened
#
because the big reforms are not, you know, taking place.
#
And would it be the case, I mean, the reforms momentum slowed in the mid 90s and then seemed
#
to almost disappear at some points.
#
And part of the reason for that, if I may speculate, is that, you know, the urgency
#
of those reforms was no longer felt and the old political imperatives came back in play.
#
So even if for some of these period, you had, you know, people in the finance ministry and
#
the finance minister himself who were reform minded, it just became much harder to push
#
In some cases, the political impact would be negative and in some cases, the political
#
impact would be so long term and the process so arduous that it didn't make sense at all.
#
So you're right that, you know, politicians first love is not reforms, so they have to
#
Now, when you're making a case for reforms vis-a-vis other things they can do, you know,
#
what they look at is the, I mean, you know, I think the experience of the Vajpayee government
#
has sort of given a scare to our politicians and they think that reforms don't get you
#
reelected and reforms sort of turn masses of voters against you.
#
And to overcome that for a sitting government, I think to overcome that thought process,
#
it becomes difficult also because, you know, to understand what a reform is, what it will
#
do, how it will play out in the economy is slightly difficult and wonkish and often it's
#
And I think the second thing that happens is that paradoxically, you know, political
#
parties want to make their opponents seem like they are not good at their economic performance
#
and therefore they oppose reforms when they are in the opposition.
#
So as it is to begin with, you know, for the sitting government, there is very little incentive
#
and they, you know, the decision makers politically have to be really explained what needs to
#
And whatever little they might be willing to do, the opposition is so noisy and so obstructive,
#
you know, that decisions become even more difficult to take.
#
So for example, let's take the example of GST.
#
GST could have happened in the tenure of the UPA.
#
It did not happen because the BJP ruled states did not support them.
#
This is quite discussed in the book at length in the second chapter.
#
Or you take the example of, you know, land reforms and labor reforms, which the Modi
#
government attempted, but trade unions affiliated to their own political set up opposed the
#
And, you know, Mr. Modi met with them, but after he heard them out, he just vanishes
#
And the Congress party's opposition to land reforms in parliament in 2015 again push land
#
reforms off the agenda.
#
So it is one that, you know, politicians, when they are in office, economic reforms
#
is not their agenda, is not high on their agenda.
#
But whenever it comes up, you know, when, when the reformers in our government try to
#
push it, there is so much opposition from within the political parties and from the
#
opposition that the reformers voices are getting drowned out.
#
And we see this happening in governments ruled by all shapes of the political color.
#
So, you know, let's kind of get to the book now.
#
Your book, of course, starts off in 2008.
#
Get me up to speed with sort of where India is at that point economically.
#
What is our trajectory?
#
How are we sort of growing?
#
And then the implications of the 2008 financial crisis.
#
This is the other thing, you know, which first time voters either not aware or they've completely
#
forgotten, which is that the India and the Indian economy, you know, in the in the before
#
2008 was so different from what it is today.
#
You know, the Tatas are buying, you know, Corus and JLR, Jaguar, Land Rover and even
#
small, I mean, they are big companies, but even small Indian companies, mid-sized Indian
#
companies were going and acquiring companies overseas, businesses overseas.
#
There was so much exuberance.
#
You'd recall if you were in a job at that point, the kind of increments we were getting,
#
the kind of, you know, job opportunities that are coming up.
#
India was growing at eight point eight percent three years consecutively before 2008.
#
India grew at eight point eight percent, which is unprecedented in the history of independent
#
A lot of this was because the world economy was booming.
#
The cost of money was very low.
#
International interest rates were very low.
#
And when you have very low interest rates, if you can borrow money at a very low price,
#
you know, interest rates of like one percent or nearly zero percent, what are you going
#
You're going to bet with that money, you know, because your cost of money is so low,
#
your risk taking ability goes up.
#
And internationally, investors were looking for where to put their money so that they
#
could get high returns.
#
And they discovered emerging markets.
#
And among emerging markets, this economy called India that had started with economic reforms
#
and there was a lot of promise that, you know, those economic reforms will be carried further.
#
And India was going to have this huge demographic dividend because a large proportion of the
#
population was going to be young and therefore, you know, in jobs, earning incomes and therefore
#
So India was a very attractive market at that point in time.
#
That's how the potential was.
#
And everything seemed right.
#
The government was headed by an economist, you know, Dr. Manohan, saying it was a very
#
celebrated political leader.
#
The finance minister was Peter Dambram.
#
Again, he's, you know, he has this reputation internationally of being a darling of investors.
#
He had in the reforms era in the 1990s presented what is called a dream budget where he reduced
#
income taxes so drastically that the, you know, the collection of income taxes increased.
#
It was a stark contrast to the marginal rate of 90% during Mrs. Indira Gandhi's time.
#
And that was a very big reform, in fact, the rationalization of income taxes.
#
He had in the 1990s, you know, taken off a whole lot of, he had liberalized trade a lot.
#
So he came with excellent credentials and between 2005 and 2007, people have forgotten
#
this, but he had reduced the fiscal deficit so drastically, not by cutting expenditure
#
so much, more by raising more money through taxes, you know, because the economy was growing
#
so well that people were paying more taxes.
#
And you know, the tax system at that time was not as coercive as it started becoming
#
from the era of Pranam Mukherjee when this whole tax terrorism thing came up.
#
And the income tax to GDP ratio that was achieved in 2007 has not been achieved even till today,
#
And so, you know, fiscally, the macroeconomic parameters looked very good.
#
The economy looked very attractive and therefore a lot of foreign investment began to come
#
When the foreigners discovered India and started investing here, the local, you know, companies
#
also figured that this was the time to, you know, take risk.
#
This was the time to expand because India has so much problems.
#
If the foreigners think we are a great economy, then we really, really must be a great economy.
#
And you know, a whole lot of investments started taking place.
#
So yeah, the economy was booming for exports were doing very well because world demand
#
for exports was quite robust.
#
Investments were doing very well and manufacturing was doing much better than it is, you know,
#
Now, this was the state of the economy, you know, a global boom and within that an Indian
#
boom when the global financial crisis happened.
#
The global financial crisis sort of disrupted this whole exuberance that India was seeing.
#
Sorry, I forgot to mention, which I explained in the book, which is that, you know, when
#
the cities were experiencing this boom because of all these investments, foreigners coming
#
in, a lot of hiring taking place, companies expanding, getting into new businesses.
#
What that did was that, you know, the cities need for a support staff, you know, sort of
#
They needed new malls, they needed a lot more drivers, they needed a lot more assistance
#
and these requirements were supplied by the rural area.
#
So a lot of people began to come from rural India to the cities, you know, for these jobs.
#
And that's how the gains of this boom were sort of shared with the rural areas as well.
#
And once when the global financial crisis disrupts this, then it was quite serious and
#
all kinds of changes happen, you know, that's how the book begins.
#
All kinds of changes happen in the economy, directly because of the crisis, but also indirectly
#
because of the way Indian policy responds to that crisis.
#
And initially, those are positive dynamics and, you know, eventually because of policy
#
errors, things begin to go haywire and the Indian economy actually suffers more than
#
it would have if policy decisions were better.
#
So yeah, so that's how the book begins.
#
And you talk about sort of the first period after 2008 where the Indian policy makers
#
led by Chidambaram and Montek Singh Alwale are very precise about what they need to do.
#
To quote from your book, quote, Chidambaram's instructions to the crisis managers at the
#
RBI and the government were precise.
#
He wanted measures that could ensure three objectives, enough liquidity in the market,
#
no run on banks and no bank collapses resulting from asset liability mismatch, stop quote.
#
And the response of all the policy makers is again very considered, very precise, not
#
looking at political considerations, just trying to handle the crisis and get India
#
out of there and, and they kind of succeed in doing that.
#
And is this sort of, you know, in all the years that as an economic journalist, you've
#
been covering government, is this an aberration or is this something that can sort of happen
#
that, you know, outside of politics, economic decision makers continuously keep making the
#
No, it's, it's an aberration and it happens only when there's a crisis.
#
What happens is that, you know, in 2008, nobody wanted a repeat of 1991.
#
And therefore, you know, just like in 1991, they had given a free hand, finally, you know,
#
after things go horribly wrong and the IMF lays down conditions, finally in 1991, they
#
gave a free hand to the economists.
#
Same thing happens in 2008 that, you know, because there's a crisis and you're seeing
#
globally how severe the crisis is, you don't know how exposed you are to that and you don't
#
know how much you're going to suffer because of that.
#
At that point in time, you're so scared that you let the economists take the right decisions
#
because you don't want a repeat of 1991.
#
And I think that's what happened in 2008, that the economists actually got a free hand
#
and politicians let them do what was needed to be done because nobody wanted to repeat.
#
Also, I think it helped at that point in time that the key people involved, you know, like
#
if you're going to have Manmohan Singh as your prime minister, he understands these
#
things a lot more than a political prime minister would have.
#
And therefore, he, you know, gave the economists a free hand.
#
Same with Chidambaram, Chidambaram had seen, you know, the aftermath of the 1991.
#
Also, we must not forget, this is not there in my book, but it can be seen in the book
#
of written by Dr. Reddy, his memoirs that, you know, Dr. Reddy tries to caution P. Chidambaram
#
in the run up to 2008, many times of, you know, how the economy is overheating and there's
#
this international imbalances are growing and Chidambaram is not so receptive to it.
#
I think that may have also been a thing that, you know, it may have weighed on him that
#
he had not listened to Reddy until 2008 and Reddy was right, there is this crisis that
#
breaks and therefore he is now a little more careful and willing to listen to economists.
#
I'm speculating over here, this might be also, you know, one factor.
#
No, and in a sense, your book and what I like about your book is that it's not just a book
#
It's also a lot of human drama in there.
#
I mean, at the surface level, of course, it's about how politics impacts economics, but
#
there's also a lot of human drama between all these different characters and, you know,
#
the internal dynamics that's going on, which was like very fascinating to me.
#
I thought, you know, Shakespeare could pick up the book and find things in this, which
#
would, you know, remind him of King Lear, for example.
#
Yeah, because, you know, as a journalist, you're kind of an insider kind of, you know,
#
you're often watching a whole lot of things and you're seeing things that, you know, people
#
are doing and you're seeing that they're driven by things other than, you know, policy.
#
Somebody's pushing for something only because he's looking at a career, you know, sine qua
#
So as a journalist, you're always watching these things and sometimes they become more
#
important than other considerations when policy decisions have to be taken.
#
I mean, the drama is pretty Shakespearean.
#
I mean, you've got King Lear, Macbeth, Comedy Affairs, all of that.
#
You know, you've given an excellent account in your first chapter, the shock of how our
#
policymakers responded to that.
#
But for me, where the book really gets fascinating is from the combination of the two seminal
#
events which change everything and which are not events you would expect to disrupt an
#
economy to the scale that it did.
#
And the first of those, interestingly, is the 2008 terrorist attacks.
#
So, so I think that sort of determined the course of the decade a lot more than anything
#
else to do with politics or economics or, you know, conscious decision making.
#
When the terror attack happened, the Home Minister in charge had to resign.
#
So there was a whole controversy, if you recall, about how many times he was changing his outfit
#
And there was a lot of noise by the opposition and he resigned.
#
Now when he resigned, Peter Damrum is brought in as the Home Minister.
#
And this is barely, I think, a month and a half after the global financial crisis breaks.
#
And so Peter Damrum gives up on finance ministry.
#
So there's a vacancy in the finance ministry.
#
Now so what Manmohan Singh decides is that he's going to, you know, take the additional
#
charge for the finance ministry and everybody in the finance ministry and everybody in the
#
economy as a whole, you know, industrialists and all, they're all very excited because
#
here's the person, you know, who was the most important character in the 1991 reforms and
#
he's now the finance minister apart from being the prime minister.
#
And you know, so we are going to resume the 1991 reforms kind of thing.
#
But that turns out to be a very temporary thing because in January, unexpectedly, he
#
has to go in for a coronary bypass.
#
And Chidambaram tells me, as I write in the book, that nobody knew about this.
#
Chidambaram heard of this, you know, when Dr Singh was being, you know, taken to Ames
#
That's when the Home Minister finds out about it.
#
So it's something very unexpected.
#
Now, when the prime minister becomes in this post for something like this, there is a lot
#
of, you know, standard procedures that sort of have to be followed.
#
And part of that is that you need a new finance minister.
#
Now in Lutyens, Delhi, the feeling amongst everybody is that, you know, the additional
#
charge will pass on from Manmohan Singh to Pichadambaram because even as Home Minister,
#
he was assisting a little bit.
#
He was assisting Manmohan Singh, you know, in his finance ministry duties, mainly, you
#
know, every minister has to respond to questions in parliament and ministers, we don't, you
#
know, average people don't take that seriously, but for the minister, that's very important.
#
Every minister takes his parliamentary questions very, very seriously.
#
It's the most important thing, according to them, that they do.
#
And for that, Pichadambaram was assisting the prime minister and officials used to go
#
to him in his home ministry office for briefing, etc.
#
And the other thing was that election was coming and was approaching and therefore an
#
interim budget had to be placed in parliament and there were preparations on for the interim
#
And under instructions from Manmohan Singh, the interim budget meetings of finance ministry
#
officials were being taken by Pichadambaram in his home ministry office.
#
And therefore, you know, when secretaries to Government of India are going to him and
#
discussing with him what needs to be done in the interim budget, the impression in Lutyens,
#
Delhi is that, you know, now that the prime minister can no longer hold charge and he's
#
going to be hospitalized, etc. in this post, and therefore, you know, the charge will pass
#
And so, you know, there's this meeting that I describe in the book, you know, where they've
#
all had this meeting with Pichadambaram in his home ministry office and, you know, they're
#
all discussing on the way walking that, you know, how he's going to now be the only person
#
in history of India to hold home ministry and finance ministry charge to two portfolios
#
that give you disproportionate control in Government of India.
#
And by the time they, you know, return to their chamber and, you know, this particular
#
official, the television is switched on and, you know, he started to find that the press
#
communique from the President House says that additional charge for finance ministry has
#
been given to Pranam Mukherjee.
#
And nobody could have guessed that.
#
And you know, Pranam Mukherjee is given additional charge, but the press communique quite clearly
#
says it is only for as long as Manmohan Singh is indisposed.
#
But once Manmohan Singh returns to office in March, which is just a little short of
#
when elections are announced, Pranam Mukherjee does not give up on the additional charge.
#
He holds on to that charge.
#
Now, what is the politics behind it?
#
I only speculate in my book.
#
But nobody expects at that moment in time for this government to get voted back to power.
#
And once the elections happen, this government is voted back to power.
#
And interestingly, you know, they retain Pranam Mukherjee as the finance minister.
#
And Peter Damrum tells me, you know, and I put that in the book that Manmohan Singh was
#
very clear and he very clearly had told Peter Damrum that he intended to hold the finance
#
He had plans for the economy and for economic policy, and he intended to hold that portfolio.
#
That portfolio passes on to Pranam Mukherjee.
#
And until 2012, you know, Pranam Mukherjee is the finance minister.
#
Now, this is an outcome of first, the Mumbai terror attacks, secondly, the bypass surgery
#
that Manmohan Singh goes into and, you know, some politics that goes on where this portfolio
#
goes to Pranam Mukherjee.
#
But, you know, when we look at between the time, the three and a half years, Pranam Mukherjee
#
has been the finance minister.
#
He takes so many decisions that have such an overbearing, disproportionate impact on the
#
economic policy and therefore the economy in this decade.
#
And he's in that position to make that influence despite not the prime minister's first choice.
#
So, you know, that's what I mean when I say that things, you know, don't always go like,
#
you know, how we plan and the role of chance, et cetera.
#
And the interesting thing about Mukherjee is that even though he's completely on top
#
of politics, you know, he's known as Amur and Shekhar and someone who can negotiate with
#
all the parties and get things done.
#
When it comes to economics, it's completely the other way around.
#
As you point out, he'd held the finance portfolio 24 years earlier.
#
If I remember correctly, when Indira Gandhi was assassinated, he was finance minister.
#
And you quote a secretary in his department saying, quote, he was in the first few months
#
And I'll elaborate on this when you say, and now I'll quote you, finance and economics
#
had changed since then.
#
The economy had been liberalized.
#
It had changed structurally and fundamentally.
#
The work culture and mindsets in the ministry had changed too.
#
Mukherjee, though, still seemed to swear by the socialist era ideology that had long been
#
His approach and instinct was still defined by an abiding faith in the jaded religious
#
The new finance minister was not as conversant with the new economic order as his post-liberalization
#
Mukherjee soon earned a reputation for being old school and being out of tune with global
#
And what kind of adds to this, which is very intriguing because this is, again, a dynamic
#
that has obviously come about because of politics, is that he is disinclined to listen to anything
#
his prime minister, Manmohan, says, and part of this might well be because when he was
#
finance minister under Indira Gandhi, he had appointed Manmohan as a governor of the RBI.
#
So now the tables are almost kind of reversed.
#
But part of it is surely because of this increasing sort of ambiguity about who is really in charge
#
Is it Manmohan Singh or is it Sonia Gandhi?
#
So yeah, the second chapter is actually about all of this.
#
And I do say in this chapter that Pranam Mukherjee represents everything ideologically and otherwise
#
that Manmohan Singh had taken a part in 1991 through his reforms.
#
Manmohan Singh represents what happened in 1991, but Pranam Mukherjee represents what
#
it was that Manmohan Singh had taken a part.
#
And Pranam Mukherjee is not able to update his ways to post 1991.
#
And therefore, once he's back in the finance ministry, what he does, he tries to recreate
#
a pre-1991 economic policy regime.
#
And this is not just me saying this, Pranam Mukherjee in his memoirs a couple of times
#
says that his and Manmohan Singh's ideologies were poles apart.
#
They could never agree on their economic ideology.
#
And Peter Dambram also tells me the same thing, except that they are both very graceful in
#
the way they negotiate their differences, Manmohan Singh and Pranam Mukherjee.
#
And I hear from everybody in the bureaucracy and cabinet colleagues of the two of them,
#
where they say that, yes, they both ideologically disagree completely, but they don't disrespect
#
There is a point by when their differences are so deep and so non-negotiable.
#
And I think I wouldn't say this is because of Sonia Gandhi, but I bring out in the book,
#
I think it is because of Manmohan Singh's personality.
#
It never comes to a point where Manmohan Singh tells Pranam Mukherjee, listen, you disagree
#
with what I think should be done, but I still want you to do this.
#
I'm your prime minister.
#
And I really wish he could have done something like that, because after all, he's a prime
#
I think it is his personality where he sort of doesn't do that, such as one of the examples
#
I give is infamous Vodafone retrospective taxation provision where the government of
#
India loses the case in the Supreme Court and yet Pranam Mukherjee brings in a legal
#
provision overturning that and slaps this tax bill onto Vodafone capital gains.
#
And before he took that decision, he discusses this in the core committee of the Congress
#
where there's the prime minister and a whole lot of other ministers, each one of them.
#
And he himself writes this in his book, in his memoir, that even Sonia Gandhi told him
#
not to do it, Manmohan Singh explained to him why it was not the right thing to do,
#
but he still went ahead, not listening to them.
#
He still went ahead and he did it.
#
And I think that's the thing, Pranam Mukherjee was just this personality in the UPA2 government
#
who would just do what he wanted to do.
#
Most of what he wanted to do was, you know, how decisions were taken in pre-liberalization
#
India because that's, you know, those were his formative years.
#
He was refusing to tune himself to the post 1991 economy.
#
And at no point does the prime minister tell him that, you know, I'm advising you to do
#
So he kind of, you know, has this free hand.
#
And I describe in the book that it does reach a point where there's no communication between
#
And finance minister's office and the prime minister's office communicate with each other
#
only through messengers.
#
And there's an example also I give there of a particular decision that has to be taken
#
and how, you know, they go about, the prime minister goes about, you know, getting Pranam
#
Mukherjee to finally, you know, sign on the file.
#
But so, you know, your prime minister and your finance minister is not even talking
#
to each other at a time when the economy sort of recovering from a very severe shock.
#
The finance minister's ideologically driven to do everything that he should not be doing,
#
you know, he's doing everything opposite to what is required in the economy.
#
Can you imagine, you know, the kind of policy chaos that goes on in such a government and
#
the price we are paying of it even today?
#
So I'll quote from your book again about the impact of his years.
#
At one point you write, within 24 months of Mukherjee's entry into the finance ministry,
#
the GDP growth rate crashed from 8.9% in 2010-11 to 5.5% in 2012-13.
#
And elsewhere you write, before Mukherjee's appointment as finance minister, India was
#
on the verge of being christened a miracle economy.
#
By the time Mukherjee exited large fiscal deficits and a high net international debt
#
position had made the country vulnerable to global financial shocks and terms of trade
#
You know, sum up for me, what are the different things he did, which obviously Manmohan and
#
Chidambaram would have done differently.
#
What are the kind of policy decisions which went into play which made all of this happen?
#
So broadly along two lines, one was his whole approach to tax policy and, you know, sectoral
#
policy that dampened the investors' mood.
#
If you recall, the whole Vodafone thing was a huge embarrassment for India as an economy
#
in the global investor community.
#
India was not seen as a good investment destination after that.
#
Secondly, you know, there were a lot of reforms that as finance minister he was in charge
#
of, that he just did not push through, most important of which is the GST.
#
Here is a politician known to create consensus and build bridges with the opposition and
#
push legislation through.
#
If you recall, you know, he was a troubleshooter so-called of the government and for one legislation,
#
you know, the constitution amendment to introduce the GST that falls in the purview of his own
#
ministry for nearly three years, the Standing Committee on Finance headed by Yashwant Sinha
#
did not even prepare its report.
#
So you know, that's a procedural step unless the Standing Committee gives its report.
#
You cannot proceed with what you need to do to, you know, move the constitution amendment
#
How did he not, you know, persuade Yashwant Sinha to speed up the process of giving his
#
So, you know, those are the steps in terms of the reform steps that needed to be taken.
#
There are many other such examples that I give in the book.
#
To point out how Dr. Arvind Virmani had actually given a whole list of reforms which needed
#
to be carried out, which Manmohan and Chidambaram were on board with, but Mukherjee just completely
#
ghosted him as, you know, millennials would say.
#
And you know, Dr. Virmani was telling me, which I, you know, I quote him in the book
#
is that, you know, he was earlier the chief economic advisor and then he's appointed
#
as India's, you know, representative at the IMF in Washington.
#
And so once a year, every year he used to come down to India and, you know, as part
#
of protocol, he used to meet the finance minister and, you know, the chief economic advisor
#
And in his meetings with the finance minister Pranam Mukherjee, he tries to tell the finance
#
minister that these are reforms that you need to do and, you know, this is what you need
#
to do with your fiscal policy and because you're not doing your fiscal policy the way
#
it needs to be, it is impacting the monetary policy and, you know, the fiscal policy, monetary
#
policy combination is just going haywire.
#
So Pranam Mukherjee tells him that, listen, you know, right now, let this be, but when
#
you come, you know, just before the next budget, you come back and you tell me and in the coming
#
budget I, you know, we will do this, we will do what you're saying.
#
So Arvind Virmani plans a special trip to India from Washington to come and meet Pranam
#
Mukherjee in Delhi before budget preparations start and not block to brief him on what needs
#
And when he comes back in this particular trip to explain to him and, you know, to brief
#
him on what needs to be done on economic policy and the fiscal policy, etc. reforms, but he
#
failed to get an appointment, you know, from the finance minister's office and he is forced
#
to return to Washington, you know, the trip is wasted because the finance minister's office
#
does not give him an appointment to meet Pranam Mukherjee and all these reforms that he has
#
recommended don't take place or GST does not make much progress because the standing committee
#
is sitting on its report.
#
It's headed by Ashwant Sinha.
#
And on top of that, all these decisions are getting taken, you know, where you're after
#
a private sector company, a voter form, you know, wins a case against you in the Supreme
#
Court and you bring, you know, legislative changes to, you know, sort of force them to
#
do what you want to do.
#
And that's completely destroying India's, you know, reputation internationally as an
#
investment destination.
#
And you're also following this policy of, you know, just sort of injecting so much money
#
into the economy, again, going completely against the advice you have received from
#
the economists in the government.
#
You're not rolling the part of the response measures that were designed by the economists,
#
you know, because of which Indian economy did not completely collapse after the global
#
Part of that was this whole fiscal stimulus spending that needed to be done.
#
Now it was very clear in their heads and in their proposals that this was all very temporary
#
You cannot give this stimulus year after year, you know, unendingly.
#
But Pranam Mukherjee refuses to, you know, roll back that stimulus.
#
It just goes on and on and on and the fiscal deficit keeps climbing.
#
It reaches a point where, you know, the fiscal deficit is 6% for the central government and,
#
you know, that has implications in the real economy, that has implications for monetary
#
And I also described how the RBI governor comes to Delhi for meetings before his monetary
#
policy announcements to meet the finance minister.
#
And in these meetings, the finance minister never says anything, but his whole team of
#
officials, you know, keep forcing the RBI governor to, you know, make changes in the
#
monetary policy, saying that there's nothing we can do from here, you know, in our block
#
about fiscal policy and whatever that needs to be done to help the economy has to be done
#
And the entire burden of controlling inflation, which is, you know, by that time, when Pranam
#
Mukherjee was in office at one point, you know, inflation reaches 20%.
#
And Pranam Mukherjee and his team of officials in his block are not willing to do anything
#
And they just keep telling the RBI governor that, you know, whatever has to be done has
#
It has to be done by the RBI.
#
So economic policy making, coordination with RBI is not in a very good shape, you know,
#
during Pranam Mukherjee's tenure.
#
It's really, I mean, as finance minister, it's really difficult to look for what it
#
is, you know, that goes right in the finance ministry in this period.
#
In fact, speaking of his clashes with the RBI, there's a great quote by him, you know,
#
an official who knew Mukherjee has quoted him as saying, which you've reproduced in
#
your book, where Mukherjee says, quote, I can't do anything on the fiscal side because
#
of political compulsions.
#
The RBI must therefore take full responsibility for reviving growth.
#
Stop quote, and for a moment, you know, let's take a sidetrack here.
#
And one of the sort of themes that runs through your book and the policy making is firstly
#
the role of the RBI, its tenuous relationship with different governments, and also the fundamental
#
issue of inflation, where Mukherjee, of course, assumed that, you know, inflation could simply
#
be managed by the RBI with monetary policy, which of course is not the case.
#
And you know, there were constant tensions that often comes up is with lowering interest
#
rates, whereas you point out politicians will always want the RBI to lower interest rates
#
because their interest groups are happy.
#
You have more money going into the economy and all the big corporate houses that funds
#
them are getting cheaper money and that's what they want.
#
So their imperatives are in that direction.
#
But the more you lower interest rates, the more you raise the chance of inflation because
#
you have more money chasing fewer goods.
#
And therefore the RBI is always sort of pushing back against them and this is a constant tussle
#
So you know, through this period, in fact, the entire 10 years for that matter, can you
#
just kind of sum up what were the sort of stresses between the RBI and the governments
#
So the stress between the RBI and the government can be seen throughout this 10 year period.
#
It is of one nature in the time of the UPA because there the main fight for the RBI is
#
against inflation and it becomes a little different in the post 2014 period where the
#
governments change because there the nature of the problem that the RBI is attacking changes.
#
Inflation comes under control and you will see that it comes under control because Urjit
#
Patel and Raghuram Rajan starting 2013 take a very strict stance against inflation and
#
they get for a small window of 18 months when Pichu Dampram comes back as the finance minister,
#
they get support from him because I guess Pichu Dampram and Manmohan Singh are in tune
#
with the RBI a little more than the other political leaders who become finance ministers
#
and they start to take steps and of course Narendra Modi government's record on inflation
#
is a lot better and it has helped a great deal by international oil prices.
#
So RBI is no longer fighting inflation post 2014, they need to support growth.
#
Either way the tussle between the RBI and the government comes because for some reason
#
finance ministers and politicians in India have just assumed that the only way to reduce
#
inflation is interest rate policy, the only way to support growth is interest rate policy
#
and fiscal policy can be whatever their political compulsions dictate it to be.
#
Either they have assumed this or they pretend this is what they know but in India the interest
#
rate policy cannot only be determined by the needs of the industrialists for capital because
#
Indians are savers, we have a huge section of our society that depends on its savings
#
for retirement growth and they are a dispersed group, they are not as vocal as corporate
#
lobbies and industrial lobbies are.
#
They would like interest rates to be high, corporate lobbies would like interest rates
#
to be low, corporate lobbies are very organized in getting themselves heard by finance ministers
#
and the RBI in the end becomes the only institution that is sensitive to the needs of the savers
#
in the economy and also inflation which is a tax on poor people.
#
I quote from his book where he says that the political consensus in India until about 2005
#
seemed to be that the level of inflation after which politicians begin to get sensitive until
#
that was as high as 10% and he also explains that when inflation is high what we don't
#
realize is that the shock of that on poor people can set them back in ways where slowly
#
even if you bring inflation under control they may not return back to that normal position
#
from where they had started losing because the poor have very low ability to absorb shocks
#
to their incomes which is not the case for people who are not poor and therefore the
#
RBI must always be more sensitive to inflation concerns and it's very strange that politicians
#
according to him do not display this sensitivity of the poor and their incomes to inflation
#
Of course in the UPA2 tenure there are some factors of inflation that are beyond their
#
control which is oil prices but during the tenure of Pranam Mukherjee a lot of that inflation
#
is because of his fiscal policies and he just refuses to listen to the RBI governor on that
#
and in fact the RBI governor I quote from his book and I also quote him in his conversation
#
with me for this book where he says that he goes and meets routinely he meets the prime
#
minister and the prime minister keeps bringing up this point and he explains to the prime
#
minister why inflation is high, why what needs to be done, fiscal deficit needs to be reduced
#
and the prime minister is always in agreement with him but he doesn't say anything to the
#
finance minister and he makes it known that this is between the governor and the finance
#
minister and he's kind of not going to throw his weight one way or the other and again
#
this is I think I would call it a leadership failure of Manmohan Singh where this is not
#
a thing of turf if inflation is biting the people the prime minister should tell the
#
finance minister that the RBI is saying this and I'm an economist I understand this that
#
a lot of it is because of your fiscal policy you need to tighten your purse strings that
#
doesn't seem to happen or if it happens so far we don't have evidence of it let's not
#
say it doesn't happen there is no evidence is yet available that Manmohan Singh had these
#
conversations with Pranam Mukherjee.
#
Hello hello hello everybody welcome to another awesome week on the IVM podcast network if
#
you are not following us on social media please make sure you do we're IVM podcasts on Twitter
#
Facebook and Instagram you know the IPL has been going full board this week or for the
#
last couple of weeks if you podcast around that we got a couple of suggestions for you
#
there is a new show that we've launched called what a player it's being hosted by Akash Mehta
#
the host of Artha lab and Siddharth Dudeja who is a really funny stand-up comic also
#
on Cyrus says we've been doing this Wednesday episode called Lanzo left arm not so orthodox
#
on that Cyrus is talking to a variety of different people about what happened the previous week
#
in cricket and if you want to get a historical perspective on what T20 cricket is and how
#
it's come about you might want to check out the show we did a couple of years ago called
#
the Cricket Walla Chronicles is hosted by Ayaz Mehmet and the first season Ayaz examines
#
how T20 cricket started and speaking of the action this week it's an abundance of Cyrus's
#
this week on Cyrus says a Cyrus Brocha is joined by Cyrus Hoshi that ad man and former creative
#
director of MTV India both of them talk about the heyday of Indian music television and
#
why it was a success on advertising is dead Varun is joined by his ex-boss Saurabh Kanwar
#
co-founder of ATKT they talk about what ATKT does and how it's helping the community of
#
college students why the current generation is more equipped than the last and more on
#
the sponge podcast Amby Panmeshwaran talks about why it is crucial to say no to incompatible
#
clients on this week's episode of the Vishal Gondal show Vishal is in a conversation with
#
Niyati Shah who talks about the importance of sexual health parenting and spreading awareness
#
about the subject on our Kannada podcast Thalle Harate Pawan Srinath and Ganesh Chakravorty
#
talk about voting and predict election results with Karthik Shashidar on dating is garbage
#
the co-founder of books on toast Anuja Jakaddar talks about how the patriarchal system surrounds
#
the institution of marriage and with that let's get you on with your show.
#
So to go back to the political morality played as unfolding during Pranam Mukherjee's tenure
#
I mean you point out how number one he's not carrying out any of the reforms that are desperately
#
required especially the structural reforms that'll you know boost manufacturing and all
#
of that secondly you point out about his you know how fiscally he's gone haywire there's
#
a lot more money being pumped into the economy and social sector spending goes up enormously
#
because of political imperatives the third thing which I'd like you to quickly sort of
#
mention that you talk about at length in your book is the policy paralysis that comes about
#
because of the 2G scam.
#
Yes so there I think it's got a lot more to do with the role of the CAG the role of the
#
opposition and the role of the media also you know how things played out in courts where
#
this scam scares decision makers and government so much that they stop approving files and
#
files stop moving now remember this comes at a point when because there was a boom in
#
the economy and Indian corporate sector and industrialists were hopeful that you know
#
that trajectory will continue it is because of betting on that trajectory they have taken
#
a lot of loans and started a lot of projects and they may have gone overboard as Raghuram
#
Rajan says there was an over exuberance they've taken more loans than they ideally should
#
have and but the global financial crisis an unexpected event takes place and those you
#
know investment decisions need to be reassessed in light of you know the changed economic
#
scenario but because the economies handled well you know the growth does not collapse
#
instead of recalibrating their investment decisions and exuberance what the corporate
#
sector does is it extends itself even further and then when because of Rana Mukherjee's
#
policies and other economic shocks such as inflation you know the economy doesn't do
#
as well and this 2G scam happens the projects get delayed or stuck the investment calculations
#
of companies go haywire instead of you know saying that I'm not going to do as much as
#
I thought I'll recalibrate what they do is they ask for more loans you know they further
#
extend themselves and banks very willingly extend even more roles and there again I describe
#
how the seeds of this NPA crisis is actually sown at the time when Rana Mukherjee is in
#
the finance ministry and there's a complete failure of oversight you know and so companies
#
take further loans and no policies are being taken because of which the economy just doesn't
#
recover and projects keep getting stuck bureaucrats don't take decisions and there is a complete
#
paralysis in the economy where approvals are not taking place more and more loans are being
#
taken so that projects don't die and there's an incentive I describe how you know the banks
#
are also they think it is in their interest to evergreen these loans instead of cut their
#
losses and you know write off and say that you know this project is not viable anymore
#
let me you know just sort of put that in my books they also don't do that so that's how
#
there's a policy paralysis that gets converted into a big NPA crisis and eventually that
#
NPA crisis comes back in the tenure of Narendra Modi government becomes a complete banking
#
paralysis where then there is you know credit flow in the economy completely gets choked
#
and there's no money banks have no money you know to extend credit because in between you
#
know comes this new RBI governor who forces everybody to become you know more honest about
#
what is the kind of NPA sitting on their bank books they can't hide it anymore and you know
#
that's a huge part of the economy where things are not going right in this decade.
#
And I have a sort of a broader philosophical question here which is that you know the policy
#
paralysis as you've as you've laid out got exacerbated and you know led to NPAs becoming
#
worse because people were scared to take action and even outside of that domain bureaucrats
#
were afraid to do anything that could lead them later to be accused of corruption so
#
my broad question here is that there is you know everyone would agree that government
#
needs to be transparent and they need to be there needs to be scrutiny of all decisions
#
that are made so there seems here to be some kind of trade-off between scrutiny and paralysis
#
that on the other hand you need a certain amount of scrutiny to keep government honest
#
but on the flip side of that as we saw in this case is that if officials become terrified
#
of doing anything at all you know like in the 2G case for example like you've eloquently
#
described in your book and I'll ask my listeners to check that out is that what the government
#
claimed was that they were you know looking at a trade-off between revenue optimization
#
and welfare optimization and they went on the side of welfare and therefore but then
#
later that was thrown back in their face as if the revenue foregone was a was an example
#
of corruption and leaving aside the merits of that particular case how does one resolve
#
this trade-off in this conflict between scrutiny and paralysis?
#
I think this is a leadership failure political leaders I discussed this point with the P.
#
Chidambaram in the book and he agrees and I mean you know so what I'm trying to say
#
is that there is probably this is how even the government of the day felt that this is
#
completely political leadership you see why did the 2G scam become such a thing of scare
#
the the overzealous investigative agencies why did they become such a scare for all bureaucrats
#
across the board because let's not forget the first instinct of a bureaucrat is self-preservation
#
what they were seeing is that what should have been a policy decision had been presented
#
as a scam and cam theory had got so much purchase in the media and in the political setup that
#
you know the courts found it difficult to not not take it up and the whole thing became
#
such a huge controversy I don't think you know any bureaucrat would have reacted in
#
any different way I mean why should I take a decision and tomorrow be questioned about
#
it rather than not take a decision and you know retire safely so I think bureaucrats
#
were acting very very rationally and what was happening is that the whole thing really
#
got very politicized very controversial and this trade-off how to prevent this I think
#
you know there has to be a balance of information why did this happen there was asymmetry of
#
information the media was playing it up the you know opposition in parliament was playing
#
it up the government was keeping quiet and there's a long description from an interview
#
that Salman Khushid has given you know to the Hindu newspaper where he describes how
#
there was absolute lack of clarity within the government on how to handle this political
#
this was a political crisis this was not an administration crisis it was not an economic
#
crisis this particular case it was a completely political crisis and because of the duality
#
of authority in the UPA between Sonia Gandhi and Manmohan Singh the cabinet just didn't
#
know how to handle this and Salman Khushid says this is the first time you know in the
#
congress that where this has happened always their political party leadership and prime
#
minister were always one individual so they didn't know how to go about this they were
#
not able to counter you know things that were being said and it just got out of hand and
#
you know as always happens when I am three-quarters of the way through an episode as often happens
#
is that I realized that a book is so good that I can't possibly do justice to all of
#
it during the episode so out of your four chapters I'm going to quickly summarize what
#
your third chapter is about and encourage listeners to read that for themselves because
#
I'd rather go to the fourth very fascinating chapter of the Modi years but the third chapter
#
basically is about how just as serendipity took us backwards by giving us Pranab Mukherjee
#
as a finance minister it also then helped us out where you know one of his possible
#
lifelong ambitions of becoming president since a prime ministership seemed out of reach was
#
finally fulfilled and because he could become president Chidambaram could you know with
#
18 months left to go for the elections become finance minister again and start taking some
#
really hard decisions for the economy and I'll just quote his own words from it as you've
#
quoted in your book about what happened quote fiscal deficit was sharply reduced the current
#
account deficit in fact had been contained substantially by squeezing some very harsh
#
decisions were taken which of course affected growth and it did not give us a kind of advantage
#
that we should have got if inflation had been lower ultimately we lost the 2014 Lok Sabha
#
elections partly on apart from the corruption charges we lost our inflation stop quote and
#
this is again very interesting where you have an economist who really gets it and he gets
#
that this is almost like a crisis brewing and something needs to be done and he takes
#
decisions which essentially harms him and his party politically yes I do see that you
#
know in what he says that you know there are these are these trade-offs that have to be
#
made and you know he makes those trade-offs as the person in charge I do argue in this
#
third chapter that you know the sort of political landscape was made fertile because of this
#
high inflation and you know really mismanagement of the economy by the UPA government and there
#
are various other things discussed like you know why the food inflation was so high and
#
Sharad Pawar's role comes in there and because of the corruption charges it is because of
#
this economic discontent this is my theory and it is for political analysts and exports
#
to examine if I maybe right or wrong this is what I sort of speculate you know whether
#
because the economic discontent made the political landscape fertile there are a lot of promises
#
that were made by Narendra Modi in his campaign starting September 2013 that sort of got the
#
kind of purchase from voters that it did so the land for that was made political landscape
#
for that was made fertile by the economic mismanagement by the UPA too ironically headed
#
by a distinguished economist and the start of the Modi wave is actually because of the
#
complete economic mismanagement by the UPA too right so you know so Modi comes to power
#
in 2014 tell me a little bit about what is Modi's approach to governance and economics
#
because it seems to start off well where he makes as he did during campaigning he makes
#
all the right noises he has no shortage of good advisors you know Ela Patnaik is part
#
of the setup and you know the Neeti Aayog is set up with Panagariya and so on but what
#
is Modi's own approach to economics and the problems that India faces then?
#
Actually good question in the last chapter you know I asked this exact same question
#
of Mr. Arun Jaitley and I quote his answers to me you know on Mr. Modi's whole approach
#
to economic policy and what those answers tell me is that Mr. Modi is more politically
#
inclined and you know whatever he does whatever decisions he takes it is on basis of the political
#
gains that can be expected from those and I think a lot of it depends on who it is who
#
is briefing him about what needs to be done and what the problem is so when he starts
#
in 2014 I described this whole you know meeting that he does with all the secretaries to government
#
and how he makes all the right noises all the bureaucrats in Lutyens Delhi you know
#
80 secretaries to government of India how excited and thrilled they are that the phase
#
of policy paralysis is ended and finally they're going to be you know headed by a decisive
#
prime minister and they're going to be taking decisions but as the months progress it becomes
#
clear that you know not only is Mr. Modi complete polar opposite of Dr. Manmohan Singh he's
#
also he's very close to the ground and what appeals to him is you know programs and schemes
#
Swachh Bharat you know there's a whole long list of programs that bureaucrats design and
#
he loves to go and inaugurate them and he has these solutions for things that he has
#
seen as a chief minister go wrong but you know I quote bureaucrats there where they
#
begin to wonder very soon is that really the job at the center of a prime minister we have
#
some reason to believe that Mr. Modi has a more chief minister like approach to his prime
#
ministership which has its plus points and its negative points plus points because he's
#
less ivory tar type you know than prime ministers can be but negative points because really
#
the job of the center's policy making you know correcting for policy errors and programs
#
and schemes cannot substitute for policy making and so Mr. Modi's heard that economic reforms
#
need to be done he's built a campaign on the jobs crisis in 2014 he promises jobs and he's
#
obviously been briefed by his economic advisors that land reforms labor reforms GST making
#
India the way to go forward and fix all the problems of the economy and you know he's
#
doing that he does that in 2014 and 15 but the minute he faces his first political crisis
#
he loses faith in all of that in 2014 not only did he win the 2014 Lok Sabha election
#
there are a whole lot of state elections assembly elections that BJP wins quite handsomely but
#
starting 2015 in February they get a root shock in Delhi and through 2015 that's really
#
a turning point for the Modi government the year 2015 through 2015 they face a lot of
#
political crisis in parliament when the congress raises the slogan of suit boot ki sarkar and
#
they oppose the land reforms and you know the land amendment legislation that the Modi
#
government has brought in parliament and they have promulgated an ordinance and it has been
#
re-promulgated multiple times they finally are forced to allow it to lapse because by
#
November there are no other state assembly elections through 2015 but in November there
#
is the Bihar election where again they get a root shock and I think in 2015 internally
#
they really begin to ask themselves has the Modi wave ended you know has it ended and
#
like I've said that you know it happened at the time of the Vajpayee government losing
#
election that whole you know the way the politician thinks that reforms do not get me elected
#
and therefore let me now do something that will get me elected and therefore you know
#
what the BJP decides to do is they need to reinvent Mr Modi's image as somebody who's
#
pro-poor they need a scheme which they think will match up to what the NREGA was for which
#
they believe that you know UPA 2 was voted back to power because of NREGA and they have
#
to the other thing is that you know big part of their campaign was the black money issue
#
the corruption issue where Arvind Kejriwal's win in Delhi shows them that you know he may
#
now just walk away with the mantle of you know corruption and black money and they need
#
to do something they've taken many steps there have been lots of things that they have done
#
for black money but nothing is you know everything is produced very moderate results there's
#
nothing they can go to the voters with and say see this is what we've done against corruption
#
and black money and therefore you know there is a kind of a rethinking that takes place
#
in 2015 in the BJP and it takes them back to the drawing board and they come up with
#
demonetization as the solution and not only do they come up with demonetization they bury
#
all plans for land reforms for labor reforms, Make in India takes a side seat, the prime
#
minister stops talking about Make in India at his public events he talks now all the
#
time about farmers doubling farmer incomes and things like that so he kind of reorients
#
he reinvents his image but he also and very successfully and he you know reorients his
#
government policy away from reforms and towards you know what he thinks will have purchase
#
with voters and yeah so that's the story really of how you know Mr. Modi sort of responds
#
You know I've had a number of episodes on demonetization I'll link them from the episode
#
page which cover all the economic aspects of it but what I particularly found fascinating
#
in your book was the political narrative behind it which again underscores how to Modi governance
#
doesn't matter at all only optics does so it's not that he wants to solve the problem
#
of black money or even understand why that problem exists he just wants to be seen to
#
be solving it it's not that he actually wants to be pro-poor in fact he just wants to be
#
seen as pro-poor and you know at the root of all of this is can I get a rhetorical advantage
#
from these things and not a concern of whether those policies will do harm or do good and
#
demon of course which you know I call the largest assault on property rights in human
#
history was incredibly harmful for our economy and we hardly need to elaborate on that but
#
even sort of apart from that the very next year they do JST which is a great idea but
#
which again they manage to botch up in the way they they do it tell me a little bit about
#
Yes so as you're saying I don't put it so starkly but you know Mr. Modi does not display
#
an ability to go to the roots of a problem he does not seem to ask the questions why
#
something is happening why is there black money in the economy he's very happy to you
#
know come up with a scheme which seems very grand and it's the same approach you know
#
various economic policy decisions but especially also for JST where the very fact that his
#
government has come up with a JST and you know he wants to launch it in the midnight
#
session of parliament joint session of parliament his whole focus is on that and his because
#
of political complications the JST council has come up with you know a multiple rate
#
JST which is very difficult to collect and you know it is highly complicated the collection
#
of the JST is highly more than the rate structure I described in the book how it is the compliances
#
and the you know the collection mechanism which is really complicated he has not concerned
#
himself as much with those aspects of JST further you know JST becomes you know a tool
#
for political messaging before Gujarat elections there are certain items you know which are
#
closer to the hearts of Gujaratis the JST rate on that is reduced now a tax system which
#
is sold as a reform to become a means of political messaging tells you a lot you know about the
#
whole approach of the Modi government to reforms in JST I mean I can't say why you know Mr.
#
Modi did not approach the whole JST designing issue more in a more fundamental way how is
#
it that JST became what it has today I cannot imagine it is because the pressure was from
#
the state governments in the JST council for the JST to be like this because the example
#
of the Gujarati savories the rates on it that has come from the BJP-ruled state you know
#
it is obviously influenced by the BJP's politics and not by the other state governments so
#
clearly you know a tax reform becomes a tool for political messaging and gets watched up
#
in the process and there's no thought given to what it will do in the economy what it
#
will do for taxpayers and how it will make life very difficult for those you know people
#
who now suddenly overnight become exposed to the tax jurisdictions if you're doing
#
business and you know all the 20 plus states you're going to now have to be exposed to
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the tax jurisdictions of tax authorities of 28 states not just the center and that one
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state where you operate you know so that obviously has not been thought through yeah I've had
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a few episodes on GST as well which again I'll link these are like pet subjects demon
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in GST you know one of the sort of things that struck me about the book is that the
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two men who were prime minister through this period are both extremes in a bad way for
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example I couldn't help but contrast the fact that Manmohan simply did not assert himself
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enough the PMO was very weak during his time and he allowed Pranab to do all these things
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even when he knew that you know they would harm the nation and on the opposite side you
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see Modi who goes to the other extreme and he doesn't consult any experts or you know
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even though they are available to him he doesn't take considered decisions he is just too decisive
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he just goes ahead and does whatever the hell he wants and some of it is absolutely disastrous
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for us so it's a contrast between a PM who is perhaps too weak and a PM against who is
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perhaps asserting himself too much and equally it's a contrast between what seems to be a
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policy paralysis not just of you know in the in the sense is typically used of officials
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and so on during UPA too but also in terms of the indecisiveness of Manmohan himself
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versus the speedy and bad decision making of Modi and it's an interesting contrast
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in just thinking aloud as I ask this question it strikes me that isn't politics more likely
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to come up with the second kind of leader like Modi because he has more of these qualities
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which make for a good politician leave governance aside and Manmohan after all was sort of an
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accidental politician in a sense and therefore we are more likely to get Modi's than Manmohan's.
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I absolutely agree that you know speedy decisions supporters of Mr. Modi you know one of the
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things that they say is that he's very decisive and he takes quick decisions and supposedly
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a great thing about the current government the Modi government is that you know they
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take decisions I mean with a surprise there's an element of surprise we find out about it
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when they announce it I'm not sure those are good qualities and I don't know why they're
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celebrated you know all this discourse that happens on whether something is a policy is
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good or bad ideally should be preceded you know by the announcement I mean it should
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happen before the government makes up its mind the government does not take on board
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all these analysis for the simple reason that it does not share its decision making you
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know well in advance it only announces decisions and I mean speedy decisions are not necessarily
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good quality decisions you know so that certainly is a thing and I also agree that Mr. Modi
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and Dr. Manmohan Singh are a study in contrasts and you know a political system is more likely
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to come up with leaders who are perceived as strong rather than wise and sensitive and
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but in the current case Amit I would say that it is also likely that you know if you notice
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at least I feel so that Mr. Modi has at all points pitched himself as absolute opposite
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to Dr. Manmohan Singh it is because Mr. Manmohan Singh was called the weakest Prime Minister
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ever by Ms. Sushma Swarajan Mr. Arun Jaitley in Parliament which I also quote in the book
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because he was the weakest therefore Mr. Modi is presented as the strongest you know so
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the plan or the you know the way they have strategized perhaps I don't know I'm not you
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know I don't know what goes on in the BJP I'm not a political reporter but looking at
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it from the outside it is one you know it is possible that the strategy is that you
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know Dr. Manmohan Singh is the weakest so we have the solution to that we have the strongest
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you know that could also be a possibility.
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Yeah I think you sell yourself short by saying you're not a political reporter I think your
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book is packed with political insight and you know I'm going to have to end with one
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last question but before I ask that question I feel like I haven't done justice to this
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book at all so the next time you write a book kindly give me six hours of your time and
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come to the studio and yeah so here's a last sort of question coming up for you which is
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that if you look forward to just the next five years of India's economy you know leave
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aside of who wins the selections and so on just if you look forward to the next five
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years of India's economy what's the best case scenario and what's the worst case scenario?
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So looking at the next five years if I look at it as a continuation of the last 10 years
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you know unlike a lot of people I do not see the last 10 years as Mr. Modi versus Dr. Singh
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and I don't see too many differences between the UPA2 and the Modi government what I see
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is that there is a certain slide and a certain failures and weakening of institutions that
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starts in UPA2 perhaps even before that but I begin to document it in UPA2 and that slide
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deepens you know and takes proportions that in recent you know memory we have not seen
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that happens in Mr. Modi's time.
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Now if this slide continues if it is not addressed the worst case scenario is that we are already
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seeing the economy is slowing down once again.
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This time round in the earlier phases you know whenever the economy was slowing down
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in the last 10 years a fiscal stimulus or a correction in global oil prices or some
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little bit economic policy decisions generating positivity succeeded in you know a small pickup
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in the economic growth rate that may not have that kind of impact now.
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So what I'm trying to say is that stopping this slowdown and reversing it will not be
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as easy as it has been in the last 10 years.
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You cannot just do a fiscal stimulus or a monetary stimulus and genuinely you know turn
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the trajectory you're going to have to take some very tough decisions because we have
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wasted 10 years you know the need to take those difficult decisions has increased even
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more and I've got in the book the IMF article for both at the time of just before the 2014
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elections and after that where it clearly says that India's well past the stage where
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simple monetary and fiscal policy stimulus is going to you know be able to sustain growth
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momentum it needs to do the hard reforms and the main hard reform that they say is building
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human capital which is the most difficult thing to do you have to fix your education
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policy you have to do something about public health and it's only then you know that the
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true entrepreneurial capacity of Indians and potential of Indians will be unleashed and
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that will translate into a collective economic growth.
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The demographic dividend that was being celebrated before the global financial crisis on the
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basis of which you know all the investments had been made in India that demographic dividend
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could turn into a nightmare you know if the difficult decisions on reforms are not taken
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and these youngsters cannot be you know gainfully employed in economic activity.
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The other thing is that you know the last 10 years most of what has gone wrong is policy
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induced and mainly self-inflicted wounds there is very little you know which is because of
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external shocks the taper tantrum there's a small episode which is a macroeconomic shock
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the oil prices a small episode that's an external shock but other than that everything that's
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going wrong is because of wrong policies that are being taken decisions that are being taken
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and I see no signs of realization of how these decisions are poor quality decisions and you
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look at if you look at you know the farm prices there's a long subsection of the farm prices
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You know first the Modi government experiments with MSP plus you know what they've promised
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then they come up with the six thousand rupees of you know PM Kisan scheme in response to
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that the congresses come up with their Nyaya scheme and I call this the rise of populism
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and in fact the triumph of populism but none of this is the real solution that the agriculture
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sector needs and there is obviously no realization of that there is no realization of why there
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is a job crisis make in India has taken a you know has slipped off the priority list
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so if we continue on this trajectory the five things that I see is that almost immediately
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you know your growth momentum will slow down we're already seeing signs of that when we
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see production cuts announced by Maruti etc two wheelers and all demand is those are early
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indicators and so you know a growth momentum slow down which means that your job crisis
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is not get taken care of which means you're going to have this huge army of youngsters
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who are not being fully employed in the economy full of energy and perhaps soon frustration
#
and huge unmet expectations if you have a farm prices you know I don't know what how
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that will have implications for food security and inflation yeah so I said it's farm prices
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and I said is it the growth momentum and therefore the job prices you know without growth all
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the youngsters who we've been talking about is the demographic dividend and who you know
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we're going to get these jobs and earn make these incomes and therefore be that big market
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you know the whole promise of why there should be investments in India that cycle gets broken
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and that's the economic point side of it but you know all these youngsters with incomes
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not commensurate with their aspirations and lifestyles not commensurate with what they
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were promised and that demographic dividend will turn into a demographic nightmare and
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it will lead to all kinds of other social and maybe political problems so that and so
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I mean everything that policy determines you we are already in on the exports front we
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are already losing our comparative advantage to other economies that are you know sort
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of working very hard and therefore you know gaining and because we are not even you know
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working hard to stay where we are we are losing global position you know in textiles etc we
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were second only to China we you know other countries are now ahead of us we are no longer
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the second largest exporters you know we've slipped on the pecking order and you know
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these are all cycles once you begin to lose your advantage then it just multiplies because
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these are very highly competitive industries where you know small margins lead to huge
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it's the volumes game so so you know you lose an order you lose big volumes you suddenly
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slip down the position you lose further orders to the export side especially where there
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are labor intensive industries that should begin to hurt and finally that brings me to
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the point that you know if you're economically not secure and doing well and your economic
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momentum does not have strength this whole argument that people keep making about national
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security it has ramifications for national security if you are an economy doing very
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well your growth momentum you know is promising and the world is looking to trade with you
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and do business with you and then come and invest in you and you know your young demographic
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dividend is just going to pay off you're this huge market your difficult neighbors will
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take you their approach to you is going to be very different than your difficult neighbors
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approach to you when your economy dealing with an investment crisis a farmer crisis
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and you know the youth out on the roads because their jobs are not as good as they'd wanted
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can you see the difference in approach of your difficult neighbors to hold your you
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know issues that are of national security concern which you right now think you know
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you're doing very well on national security that whole thing that comes into question
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in the whole approach of your neighbors can not be taken for granted if internally you
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are economically not that strong and secure these are all very enlightening points and
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in fact i have episodes on jobs and agriculture as well which will link from the episode page
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you know on the one hand i despair that there is no political will to do anything about
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any of the problems that we face but on the other hand i have hope because people like
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you are writing the kind of book that you just wrote and which i learnt a lot from thank
#
you so much for coming on the scene in the unseen pooja thanks amput it's been great
#
to talk to you and be on your show if you enjoyed listening to this episode do hop
#
over to your nearest bookstore and pick up the lost decade by pooja Mehra you can follow
#
pooja on twitter at pooja Mehra p u j a m e h r a that's p u j a m e h r a at twitter
#
you can follow me at amitwarma a m i t v a r m a the scene and the unseen is supported
#
by the takshashila institution an independent center for research and education and public
#
policy you can browse all our past episodes at sceneunseen.in and thinkpragati.com thank
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you for listening hi my name is anupam gupta i'm b 50 on twitter i am the host of paisa
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paisa the show that talks money on my show i speak to experts from every field of money
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