#
Here's a fundamental value of mine that shapes the way I look at the world.
#
I believe that two consenting adults should be able to interact with each other in any
#
way they want as long as they're not infringing on the rights of anyone else.
#
As long as there is consent and it's not harming anyone, it's morally wrong to get in their
#
Now this holds true in any context.
#
This interaction could be in the bedroom or in the marketplace.
#
And yet you will find people of different ideologies that will oppose such freedom in
#
one domain or the other.
#
Some want to clamp down on personal freedoms, invoking shady notions of collective morality.
#
Some want to clamp down on economic freedoms.
#
All of these restrictions are morally wrong.
#
And not only are they morally wrong, they lead to terrible consequences.
#
Societies grow and prosper through the free exchange of ideas.
#
Equally, societies grow and prosper through the free exchange of goods and services.
#
That is why voluntary interaction is so amazing.
#
It leaves both people better off.
#
I like to invoke a phrase coined by the writer John Stossel for this, the double thank you
#
Let's say you go to a cafe to buy a cup of coffee.
#
When you hand over the money, the cashier says thank you.
#
When you receive your coffee, you say thank you.
#
You value the coffee more than the money.
#
It's the other way around for the cafe.
#
Both of you are better off.
#
This is the secret of economic growth.
#
Most of the world's societies became prosperous when people started interacting in such positive
#
There's a direct correlation between the degree of economic freedom and the rate of
#
This is why, after millennia of not much happening, millennia of pretty much everybody being poor,
#
the last two centuries have lifted our standards of living so much, globalization, trade, consenting
#
Despite this, markets often get a bad rap.
#
Here are a few reasons for this.
#
One, it is intuitive for us to think of the world in zero-sum ways.
#
If someone is getting richer, we assume it has to be at the expense of someone else.
#
All voluntary interaction is a win-win game.
#
Two, we confuse cronyism for free markets, while they are opposite things.
#
In a free market, the state looks after the rule of law and there are no barriers to entry.
#
Competition benefits everyone.
#
But big companies often lobby the state, even purchase the state, to get coercive laws made
#
that restrict competition, protect their own incompetence, and harm consumers and citizens.
#
This creates the opposite of a free market, but people often mistake this for markets
#
Three, through history, including our own history in India, we have seen rapacious companies
#
get together with a coercive state that has a monopoly on violence to exploit the people.
#
This is exactly what the East India Company did, and it causes an irrational distrust
#
of markets, while it should really cause a rational scepticism of state power.
#
Four, some of us are entranced by an engineering mindset, the notion that we are smart enough
#
to design the world from the top down.
#
This is what Frederick Hayek called the fatal conceit, and it is, of course, a fallacy.
#
Five, there are ideologies that build a narrative of compassion around themselves and rely on
#
using state power to suppress individual rights, whether in the bedroom or the marketplace.
#
And these are often couched in good intentions.
#
These good intentions are seen.
#
The terrible consequences of the coercion they involve are unseen.
#
So we need to be clear-eyed about this.
#
At both a moral and consequential level, freedom is good in every domain.
#
And that is why India's liberalisation of 1991 was such a big deal.
#
It increased our economic freedom, empowered individuals, and lifted millions of people
#
It was a humanitarian miracle.
#
Welcome to The Scene and the Unseen, our weekly podcast on economics, politics, and behavioural
#
Please welcome your host, Amit Verma.
#
Welcome to The Scene and the Unseen.
#
30 years ago, India lifted many restrictions on private enterprise, which brought over
#
a quarter of a billion people out of poverty.
#
But the reforms could have gone further, and the momentum eventually ended.
#
Between 1991 and 2011, we had a golden period.
#
Since then, we are on a downward trajectory.
#
What makes it worse is that over 60% of India is born after that liberalisation.
#
So though they reap the benefits of those reforms, they don't realise what a big deal
#
They don't have a memory of the times before those reforms.
#
In some cases, they even idealise the ideologies that kept us poor for decades and caused so
#
They look only at the intentions and not the outcomes.
#
In an attempt to correct that, the Mercator Centre at George Mason University, led by
#
my friend and frequent guest Shruti Rajgopalan, have started something called the 1991 Project
#
I encourage you to head on over and check that out.
#
I invited Shruti to speak about those reforms, as well as another of my favourite economists
#
and frequent guests, Ajay Shah.
#
Ajay has done brilliant, lucid episodes with me this year on the farm laws as well as the
#
economics of vaccination.
#
And I'll link both of those from the show notes.
#
He's also been an inside player within government for many of these years, and knows all the
#
When I invited them here, my intention was not just to talk about the 1991 reforms per
#
se, but also the India of the four decades before that.
#
Why did we go in the direction we went in?
#
What were the consequences?
#
What was life like before 1991?
#
And all three of us are old and have to remember some of that.
#
We got historical, we also got meta, and we had a digressive conversation which was so
#
Before we get there though, let's take a quick commercial break.
#
Do you want to read more?
#
I've put in a lot of work in recent years in building a reading habit.
#
This means that I read more books, but I also read more long-form articles and essays.
#
There's a world of knowledge available through the internet.
#
But the problem we all face is, how do we navigate this knowledge?
#
How do we know what to read?
#
How do we put the right incentives in place?
#
Well, I discovered one way.
#
A couple of friends of mine run this awesome company called CTQ Compounds at CTQCompounds.com,
#
which aims to help people up-level themselves by reading more.
#
A few months ago, I signed up for one of their programs called The Daily Reader.
#
Every day for six months, they sent me a long-form article to read.
#
The subjects covered went from machine learning to mythology to mental models and marmalade.
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This helped me build a habit of reading.
#
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New batches start every month.
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What's more, you get a discount of a whopping Rs. 2500, 2500 if you use the discount code
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So head on over to CTQCompounds at CTQCompounds.com and use the code Unseen.
#
Shruti and Ajay, welcome to The Scene and The Unseen.
#
We're very happy to be here.
#
We are very happy to be here.
#
Maybe we should have rehearsed this before, so we could have figured out which one of
#
you gets to react first.
#
But you're both happy to be here now that we've kind of established that what I'm not
#
going to do during this episode is the usual drill I do with new guests about what has
#
What are your intellectual influences?
#
Where did you go to school?
#
What did you eat for dinner when you were eight years old?
#
Because both of you are familiar to my listeners by now being such frequent guests.
#
So instead, why don't we start by talking about, say, your life in the 80s or your life
#
By 80s, I'm just thinking of my own childhood.
#
But your life kind of growing up because the fulcrum of this episode in a sense is the
#
So obviously it's not as if everything happened at that fixed point in time.
#
Something's happened before, something's happened later.
#
I find that today, given that more than 60% of India is born after 91, doesn't really
#
have a sense of what life was like before that and often have this really idealized
#
view of what India was like before that.
#
So I'll chip in as well with what little memories I have, though I was relatively incredibly
#
privileged in those times.
#
But Shruti, why don't we start with you?
#
Because in your wonderful essay on the part of the 91 project, one of the things I liked
#
about that essay was that you brought the personal in also, where you speak about what
#
life was like in the 70s and 80s and what your grandmother would do differently and
#
what your mother would do differently today and all of that.
#
So give me a sense of what life was like back then.
#
So you know, I was incredibly young when the reform moment happened, but for most of us,
#
like anyone's childhood memories, you only know what you see around you.
#
So it's not like when I was a kid and I was growing up in mostly socialism, very few goods
#
and variety in goods in terms of consumer goods.
#
So you know, very much grew up in the two brands of chocolate, two kinds of cola drinks
#
And it wasn't unusual simply because we didn't know better.
#
It wasn't like we were privy to this whole other world out there where there were these
#
amazing things that were available.
#
So for me, two things happened simultaneously somewhere around 1991, 92, my parents had
#
to go abroad for a stint and they were real troopers.
#
They took me and my sister, they kind of like more than troopers, I think they were a little
#
They just yanked me and my sister out of school and they said that you learn more traveling
#
So, you know, just come along with us.
#
So we basically didn't go to school for more than half a year and my mother's a musician.
#
So we sort of traveled with her and it was really the first brush with markets, right?
#
And the idea was all the myths that we read in our textbook was India is poor, India is
#
There are too many people trying to go for too few goods and things like that.
#
But one of the stark things you realize when you're in Europe is that the places you enjoy
#
the most are the places that are crowded, right?
#
And the places that are not crowded that have too few people, they are rich.
#
They have things, but the stores close at four in the evening, right?
#
Nothing is that easily available.
#
Even the streets are sometimes not lit in some of these, you know, Dutch villages and
#
It kind of feels pretty off and the really big cities which are noisy and polluted and,
#
you know, when you go to London or you go to Vienna, those are the incredible places.
#
So, you know, one thing became very clear that there's something about this overpopulation
#
thing which is very off that I, you know, kind of viscerally figured out that I seem
#
The other was just that there are possibilities of things that are available when you go to
#
You just go to the supermarket and it's no longer two types of things.
#
My mother spent our entire childhood, my sister and I have identical clothes, because my mother
#
bought cloth, took it to the tailor and got it stitched.
#
And when you're very young, there's too much leftover cloths, you're basically making,
#
you know, both kids wear identical clothes.
#
Our childhood pictures are ridiculous and will never be revealed.
#
So those are sort of the biggest memories.
#
Now I have a very different point of view when I look back at my childhood, because
#
now I'm a professional economist, right?
#
So now when I look back at my childhood, I'm not just looking at it from the point of view
#
of what my mom did or my grandmother did.
#
I have an analytical framework I can impose and now understand why this was happening.
#
So for instance, my grandmother used to spend pretty much every day in the afternoon, like
#
post-lunch and before dinner, she would go through all the rice, dal, wheat, and you
#
know, kind of separate the kankar, you know, there's a kankar and pathar, that's how many
#
Another instance is we would not buy atta in a packet, okay?
#
We would actually get the wheat.
#
My grandmother would do the separation thing and we would take it to the chakki, okay?
#
And we would be allowed inside the chakki where they would watch and make sure that
#
nothing is adulterated, right?
#
Everything is mixed into the atta and it's really pure.
#
These are very strange things to do, okay?
#
If you think about it, it means you basically don't trust branding, right?
#
You don't trust the reputation of any good.
#
There is too much adulteration in the market, right?
#
And now when I look back, I'm like, oh, I understand why there was so much rampant adulteration
#
It's because prices are controlled because of the essential commodities act and you know,
#
everything that follows and now you get everything at a very specific control price at the ration
#
So there are two ways of doing this, either the ration shop people just, you know, kind
#
of escape and they just siphon off all the wheat to the black market and they try to
#
make a killing, but still there are going to be people standing outside the ration shop
#
So you've got to give them something.
#
So what is a way to both siphon off some of the wheat and rice and dal while also serving
#
It's just you mix it with, you know, all this other pathar and kankar until it reaches a
#
weight where the market price will compensate whatever the control prices, right?
#
Because now you've mixed it in and the weight has increased.
#
So these were the sorts of things that were going on.
#
Of course, as a seven, eight year old, I have no idea that, you know, there's this entire
#
socialist political economy at play.
#
It was more that this is just how life is.
#
The sort of like aha moment really came, I think maybe starting 1992, 93, you get this
#
big shift in consumer goods, you know, and some of it is pre 1991, like, you know, Pepsi,
#
drinking Pepsi was like a major thing in our life.
#
My sister loved Michael Jackson, Michael Jackson drinks Pepsi, Pepsi must be amazing because
#
Michael Jackson is amazing and all the other things that follow, but Pepsi actually came
#
to India a few years before because of various, you know, deals that the government was literally
#
trying to woo the company to come back and set up plant and things like that.
#
So some of this was already in motion, but by 92, 93, you suddenly started seeing a lot
#
The second was you could finally import stuff, right?
#
So you could get like a, like a VHS recorder fairly easily or a CD player fairly easily,
#
even if you couldn't get like CDs easily from a library.
#
Those sorts of things started becoming very common quickly in my childhood.
#
And I remember that, you know, that moment being quite stark because we had just seen
#
all these amazing, you know, variety of goods when we went abroad, we came back to India
#
and within a matter of three, four years, you started, you know, getting the same things.
#
And of course, you know, all the usual stuff, I think we already managed to get a gas connection
#
and a phone connection pre-liberalization, but I remember it taking a long time, right?
#
So when the cell phone revolution happened much later, when I was in college, that was
#
sort of like a, like an incredible thing.
#
So some of this is like lived experience.
#
Some of it is just when I look at childhood pictures and I try and understand what the
#
hell is going on in my household, I look at it as a grown economist and that's the way
#
I make sense of my, my childhood.
#
So my memory can be a little bit faulty on this.
#
I can, I can imagine you asking your mother that, Hey, why did me and my sister always
#
And she's like, you are an economist, you figure it out.
#
And I'm really glad you brought up that overpopulation point because that's still a bogey that is
#
being banded around, you know, we were taught in our textbooks that India's problem is
#
I mean, India's problem is really bad governance, not too many people, you know, too many people
#
People are brains, not stomachs, their resources, and that's why in all of human history, what
#
you see is a migration from places with less population density to places with more population
#
That is why we go to cities.
#
However much we may idealize a village life, I don't think most of the listeners of this
#
episode for that matter are, you know, living in say villages or whatever.
#
And every time a politician tells you population is a problem, the politician is telling you,
#
That's again kind of resonant because with me in the 80s, because I was of course a son
#
So things like, you know, I didn't have a scarcity of a telephone at home.
#
But you know, as you were speaking, I just remembered an interesting incident when I
#
was in the 11th standard, which would be in the late 1980s, a girl who was my classmate
#
in college just rang the bell outside and I opened the door and she said, hi, I was
#
just passing by and I need to make an urgent phone call.
#
I know you have a phone.
#
So she came in, she made a phone call and then she went off.
#
And of course it, I was pretty clueless and perhaps relamped.
#
So it took me many years to figure out that the purpose of her visit wasn't necessarily
#
the phone call, but that's how scarcities were.
#
It would take you five years, 10 years on a waiting list to get a phone.
#
You know, I had an episode with Raghu Sanjilal Jaitley, who writes that fantastic newsletter
#
with Pranay Kutasane and the episode was titled Raghu Sanjilal Jaitley's father's scooter.
#
And you mentioned scooters in your essay where you point out that a secondhand scooter
#
actually cost more than a new scooter because a new scooter would take 10 years to come.
#
And I want to read out this lovely para from your piece where you write quote, is this
#
the first time I'm quoting you at yourself in the show?
#
It's very freaky probably.
#
So you write quote, it got so bad that when a girl child was born, well-wishers would
#
only half in jest suggest to the parents that they should immediately book a scooter.
#
So it would arrive in time for the wedding.
#
This was reminiscent of the old Soviet Union joke about a man paying for an automobile.
#
The clerk tells him it will be delivered in 10 years.
#
The man asks, morning or afternoon, what difference does it make, responds the clerk.
#
Well, the plumber is coming in the morning.
#
And it was kind of the same with everything, not just phones, like, you know, another thing
#
I remember was that back in those days, it was a very, very big deal if someone went
#
abroad to study, right?
#
You know, you had to be the elite among the elite for that to happen.
#
Well, today that is so commonplace.
#
The opportunities are just insane.
#
You know, an airline flight, even for a privileged kid like me, was such a big deal.
#
Flights were so expensive and like, I remember looking at the prices 15 years later and realizing
#
that they are the same, you know, and obviously inflation had happened and in real terms,
#
they were way, way cheaper.
#
And when that opened up like today, you know, smartphones even are so affordable.
#
So many more people can fly.
#
And again, I remember what a struggle it was to get the books you wanted, the movies you
#
I remember, in fact, when satellite television came, something that you mentioned, just watching
#
star movies or whatever the equivalent was in freaking bewilderment that they are showing
#
I don't have to wait for that once a week when Doordarshan will show something all day.
#
I can watch seven movies a day.
#
But before I kind of forget, yeah, go ahead.
#
I want to add something to the to the Bajaj thing.
#
You know, the actually the Soviet Union joke, Alex told me, Alex Davrock told me that joke
#
and I have appropriated it.
#
So you know, the Bajaj thing, there are like, I just want to unpeel that because it's a
#
good example of what was going on and why it was happening, right?
#
So on the one hand, you're like, oh, you had to wait a long time to get a Bajaj scooter,
#
Now that seems a little bit like what's happening right now during the pandemic.
#
I ordered some furniture and because of all the supply chain, you know, complications,
#
it's going to take like six weeks for some very basic furniture to show up.
#
But that's not the reason that it was delayed.
#
It wasn't like a pandemic or something like that.
#
It was more endemic than that.
#
And the reason is that the original command and control system, they thought that all
#
the means of production, right, all your typical iron, steel, these sorts of things, they're
#
We need to make sure that these things are used well and not wasted.
#
And the way we ensure that it's used well in a closed economy where people can't just
#
go to global markets to just buy as much steel as they want is to ensure that the government
#
allows people based on priority on what they can and cannot produce, right?
#
So there's an order of priority list on who can, you know, use what kind of steel.
#
Now once you make this kind of five-year plan document, which we can talk about in detail
#
and it's fairly complicated to make this and you still get it terribly, terribly wrong.
#
But let's say that you attempt this kind of five-year plan document, you still need to
#
figure out that, hey, I have X tons of steel that we're producing in the country.
#
And now what are the priority sectors?
#
So they'll have an order of priority.
#
You know, some of it has to go to heavy machinery, blah, blah, blah.
#
Now scooters and Vespas are somewhere in the list of priority, right?
#
Godrej Almira is somewhere in that list of priorities.
#
So you keep going down bicycles, spectacles, whatever.
#
The thing is they realize somewhere down the line that people actually want more scooters
#
than you think they should want, right?
#
That's what's really going on, right?
#
So all these young men who are now, you know, in the seventies with like an explosion in
#
population growth, these young men, why do they want these scooters?
#
So now Bajaj says, but they want them.
#
And, you know, Rahul Bajaj has talked about this.
#
He keeps going back to the ministry of commerce and industry and saying, I want an expansion
#
permit because lots of people want scooters.
#
Now what normally happens when you limit the number of scooters that can be produced, but
#
more people want it, right?
#
The price of scooters will go up, but when you're in a socialist economy, you cannot
#
allow Rahul Bajaj to profit from the system you put in place in the first place, right?
#
To make sure that resources are used appropriately and they're not wasted and so on and so forth.
#
Which means now not only will Rahul Bajaj have a limit or a restriction on where he
#
can set up his firm, how much he can produce, how much steel input he can use, how many
#
workers he is allowed to have on the shop factory floor versus in the sales department.
#
These are times where if you had to shift someone from the sales office to the front
#
office or the factory floor, you needed to go back to the government, get permission
#
and come back and make the switch, right?
#
So not only do we have to do that, now we also have to control the consumer end, right?
#
People want this too much and they're going to drive the price up because they're stupid.
#
They want these Bajaj Vespas, they shouldn't want them.
#
So now how do we control the price?
#
We put in price controls.
#
So now an automatic consequence of price controls and not being allowed to expand supply because
#
you have these expansion permits which are required is you're going to have quantity
#
demanded far exceeds quantity supplied.
#
There's a very classic shortage.
#
You can have long lines, right?
#
Sometimes and in this instance, the long lines is replaced by other things.
#
So one of them is just time preference, right?
#
So the point that you were talking about, which is a second hand scooter today is more
#
valuable than a first hand scooter 10 years from today because now I can have it today.
#
But it also pops up in this marriage example, because if you talk, I'm too young for this.
#
So maybe I'm going to, anytime I want to make like old people jokes, I'm just going to dump
#
But Godrej Almeyra's, right, Bajaj scooters are all number one dowry demands, right?
#
Because that is a moment when you really know someone will go a very long way to skip the
#
So Bajaj scooters are not mostly being driven by men, not so many by women, but it's always
#
the bride's father who's like struggling to get these things.
#
So there are about six kinds of socialist command and control problems going on for
#
this joke to become so endemic to Indian life, right?
#
So it's not just any shortage because Indians also face all sorts of shortages.
#
Sometimes you have to wait in a long line to get an iPhone.
#
This is not that kind of shortage.
#
I just want to make that clear because I don't think this is a sort of shortage that most
#
Indians modern day in modern day life have experienced.
#
So Ajay, you've been silent all this while, though not silent all these years.
#
So tell me what was life like for you kind of growing up in India?
#
I'm guessing that there were a lot of things which were normalized, which felt normal.
#
And over a period of time, you actually start as you become an economist, you apply your
#
frame to it and you kind of figure out, you begin to break it down and understand exactly
#
But give me a glimpse of sort of what it was like for you in the seventies and eighties.
#
I grew up in the 70s and some of my more interesting memories from that period are my sisters
#
and I would venture out in the morning to stand in line for the rationed access to milk
#
and bread and butter and cheese.
#
There were long queues.
#
And so it was efficient for parents to have multiple children because you could parallel
#
process on those queues.
#
And it just seems unbelievable that there should be shortages of milk, of bread, of
#
But that's the way it was.
#
These things were just not available.
#
I remember pervasive lack of access to books and music and so on.
#
So getting books was a big deal.
#
I mean, I grew up in a house with six thousand books, but each of those books was a treasure
#
and there was like a sustained long range project that we're going to get this book.
#
And it would be like a big task before we would get this book.
#
I was at the Hostel 3 at IIT Bombay in 1983 and we had an LP of The Dark Side of the Moon
#
by Pink Floyd and nothing else.
#
Because that was the only LP that was released by HMV in India.
#
There was no other Pink Floyd content.
#
So Susan Thomas got Wish You Were Here from Kuwait and that was like our first precious
#
LP which could play Wish You Were Here.
#
So it was a strange world.
#
It was a funny experience growing up through all that.
#
My father was an economist.
#
And for example, we got to read Milton Friedman's Free to Choose in 1976.
#
So we were very much aware of that intellectual discussion around how this whole thing is
#
So we could rage against an incomprehensibly stupid system, but we also lived in it.
#
I also remember I first went abroad to do my PhD.
#
And I vividly remember that in Los Angeles in 1987, for the first time in my life, I
#
For the first time in my life, I saw a CD player.
#
For the first time in my life, I heard a CD.
#
These were things that didn't exist in India.
#
Before we talk about 91, I really do want to talk about 1947 as well.
#
It wasn't that you had a bunch of policies put in place by one person and it was an accident
#
and a historical accident and we suffered for that reason and then eventually we overturned
#
some of the policies and things get better.
#
It was much more than that.
#
There was a certain way of thinking that was pervasive in those times.
#
And before we actually get down to talking about the ways of thinking, especially of
#
Nehru and his influences and so on, sort of a counterfactual question because if you look
#
at the leaders of that time, you actually see different ideologies.
#
It is not necessarily the case that it is inevitable that India would have set upon
#
You had people like Raj Gopalachari and Patel who were of a more liberal bent as far as
#
markets were concerned.
#
And you also had people who were far more to the left than say Nehru himself was.
#
So on one hand, it is a popular and largely correct notion that Nehru was a creature of
#
This was a temper of the times.
#
Nobody at that time knew the reality of the Soviet Union.
#
It was natural to kind of admire them for what they did.
#
And Friedman hadn't written his books.
#
Hayek was an obscure economist somewhere.
#
But on the other hand, it's also kind of true that there were other directions we could
#
And this is not just in terms of economics.
#
It's also just in terms of so much else, the direction our politics took, the constitution
#
that we came up with, all of that.
#
So when you look back on that period in history, is there a sense of perhaps an opportunity
#
Is there a sense that hey, it could have been worse?
#
Like one point so many people make is that the fact that India stayed together, that
#
the centre held is itself a kind of a miracle because many such previous experiments just
#
fell apart after colonialism was defeated.
#
So what's kind of your sense of that, Ajay?
#
I'm closer to the position that if you and I had been co-pilots with Nehru standing in
#
the 20s and 30s and 40s, we would have been closer to those positions.
#
So let's look at that world.
#
At that time, the argument would be made that look, the Great Depression showed that the
#
simple application of free markets doesn't work so well.
#
Folks like John Maynard Keynes were very keen to protect some basic decency and liberal
#
democracy because as they saw it, the alternative was to collapse into national socialism in
#
Germany or communism in Russia.
#
So the idea was that the only way to stave off the barbarians was to give up some of
#
Then when you look from the viewpoint of people in India, of the dreamers for India, there
#
is no question that there was a remarkable economic development project which took place
#
in Japan after the Meiji Restoration and in Soviet Russia after the Russian Revolution.
#
So people like Nehru dreamed that we don't have to take 400 years to do this.
#
Can we do this in 40 years?
#
And Nehru often talked about this tension that you wanted the decency of British liberal
#
democracy, but at the same time, you want to match British quality prosperity within
#
40 years, within 50 years, within 60 years.
#
So they felt that state mobilization and the quaint term used by development economics,
#
which is a developmental state, was the way to do it.
#
One more piece I want to add to that is the Second World War.
#
During the Second World War, all over the world, governments commandeered the economy.
#
They normalized oppression because all parts of the economy were taken over by the government.
#
I want to say in passing, there is a bit of that going on with COVID-19.
#
War powers is a huge problem because it normalizes state control.
#
I have increasingly grown to think that by default, we tend to sink into oppression.
#
It takes a tremendous effort by a people, by an intelligentsia to claw back freedom,
#
that state oppression is the norm and freedom is the exception.
#
And around the time of the Second World War, all over the world, state domination was the
#
norm and not the exception.
#
Look at the UK, look at the US, they had price controls all the way till the 70s.
#
If you read about Australia all the way till the early 80s, it sounds like the stupidity
#
of Indian public policy.
#
So it took many years for the world to wake up and say, no, that's not the story that
#
So I'm reasonably sympathetic to the kind of arguments and the debates that took place
#
in that period that led to a certain outcome.
#
I envy a country like Taiwan, a country like South Korea that chose to walk a different
#
I admire the people who did that, who led that.
#
My reading of that period is that that was an exception and I fear that if the three
#
of us were put in that place, in that time, in that consciousness, with that sense of
#
the dream for India that we can do this rapidly, I'm much more of a conservative today in
#
the sense that you let the world evolve organically.
#
At that time, it was much more fashionable to think that a developmental state will take
#
a country by the scruff of the neck, will remake a country, will make a new man.
#
There was all this dreaming about the power of a state to reshape a society.
#
So I'm sympathetic to what those guys did while recognizing in hindsight that those
#
decisions were awful for the country.
#
I would add a couple of things to this and go even a little farther back in history than
#
When you started, Amit, you asked if this was like a foregone conclusion, if India was
#
just predestined to do this.
#
Some of it is, of course, there is an entire structure of war controls in place.
#
Nehru becomes the successor and he is very enamored by socialists and there's that going
#
But I think if you go back maybe 50 years, 60 years before Nehru, you start seeing the
#
So if you look at the Indian intellectuals of that time, you see the old guard, which
#
is Nauroji and you see Hume and you see Firoz Shah Mehta, Gokhale, all these people, they
#
are liberals somewhere between Scottish enlightenment and sort of Berkian conservatism.
#
That's kind of where they are.
#
But their experience, and this I have learned from studying, especially Nauroji, is number
#
one that the British government, while they might pretend to be laissez-faire, it's really
#
a mercantilist economy.
#
It's not really functioning like a laissez-faire economy.
#
And second, when it comes to India, it is acting as an extractive state, right?
#
It's a predatory state.
#
So they're literally just stealing resources from India, they are burdening, they are taxing.
#
It's not like India's, you know, glorious free trade internal network at that time.
#
When they start lecturing on these things, the only allies that Nauroji finds is the
#
So when he goes abroad, though he's standing for elections in the Liberal Party, and this
#
is William Gladstone's Liberal Party, it's not any willy-nilly, you know, Aaj Ka Liberal
#
But the people who support Nauroji to even win the seat is the Social Democratic Federation,
#
George Bernard Shaw says, I'm so glad the SDF went Fabian and supported the Fabian candidate
#
who, by the way, is Dadavaya Nauroji, right?
#
So the Fabian connection to Indian nationalist movement goes back about 50 years before Nehru.
#
Nehru is a consequence of that.
#
It's not that Lasky and George Bernard Shaw just whispered something in Nehru's ear and
#
wow, he became Fabian, right?
#
Some of this is, you know, by then, George Maynard Keynes has already written the obituary
#
of laissez-faire, it's called the end of laissez-faire, right, his essay.
#
And you can see there's the shift going on, right?
#
So there is progressivism in the US, there is fascism, Nazism in Europe, there is full
#
blown, you know, command and control, socialism happening in the Soviet.
#
So there, I mean, the whole world is going in a particular direction.
#
And there are very few naysayers, okay?
#
Hayek is not obscure at that time, just FII, okay?
#
He's already written his, done his work on capital theory, he's taken on John Maynard
#
Keynes, he's like the world's most famous economist.
#
I think, I think for non-economists, he's, he's kind of obscure, I mean.
#
Actually, for non-economists of that time, he's not, I'll tell you why, because when
#
he writes The Road to Serfdom.
#
That's 1945 or something, right?
#
Yeah, it's, but you know, I mean, the Reader's Digest does a miniature version of it, like
#
which, you know, major economist writing major books today is appearing the next day in Times
#
of India or Stardust or, you know what I mean?
#
So what I mean is that they had more connection to the intellectuals than, than we imagine
#
But leaving that aside, so, you know, BK Nehru says that all the people who were interested
#
in the Indian nationalist movement went to LSE because LSE supported, you know, Indian
#
Why did LSE support it?
#
Because the Fabians were so close to the British Labour Party, the Labour Party was more pro-Indian
#
independence versus the Tories.
#
So there is like a deep linkage here, which is at the time India got independence, given
#
that it was the Labour Party in power, right?
#
And given that there were war controls and it's actually Nehru who succeeded, you know,
#
it's almost predestined we're going to be Fabian.
#
But the second part is because this was going on, all the Indian intellectuals who actually
#
went abroad to originally appear for the civil services were also exposed to this, right?
#
So for me, it's not interesting that Nehru was influenced by Lasky.
#
For me, what is interesting is Trilok Singh and P N Huxer are Lasky students, right?
#
P N Huxer is the most important advisor to Indira Gandhi and Trilok Singh is like, you
#
know, sort of the first de facto writer of, you know, the first five-year plan and things
#
So I think that is the more interesting thing, you know, when Ajay said that if the three
#
of us were advising them, you know, maybe we would have gone with the vein of what things
#
were or we would have advised them differently.
#
But that's the point, the army of people advising Nehru, other than a very small minority, the
#
people in the civil services, the people who are actually executing these war controls,
#
they have largely wholesale bought into this idea that development can be led by the state.
#
They are very far from the Scottish Enlightenment view.
#
And second, even post-World War, when the world is now saying, hey, we need to once
#
again embrace liberalism and trade, the global consensus among elite economists is that's
#
the prescription for developed countries.
#
Developing countries still need industrial policy and import substitutions because they
#
And, you know, it takes the South Korean and Taiwanese miracle in some sense for that view
#
to change and like Anne Kruger and Bhagwati and all to come along and say, hang on a second,
#
I don't think this is a good prescription for developing countries.
#
Developing countries are doing great without, you know, industrial policy and import substitution.
#
In fact, they're getting impoverished because of this.
#
So there is a scaffolding of ideas which is being held up by people in positions of power
#
within the bureaucracy in politics, which we have now forgotten because we don't read
#
But I think that is the critical part as opposed to Nehru did this and, you know, Manmohan
#
Manmohan Singh happens to be an academic economist, so we put him in a different category.
#
But like Nehru did this or Vajpayee did that or, you know, Narsimha Rao did this.
#
I think that's a little bit reductive version, both in 91 and in 47.
#
And, you know, on the note of what you were saying about, you know, the economic temper
#
of the times and how the world was generally evolving, just a point and a recommendation.
#
And the point is that at one point, and this might confuse some listeners, that you said
#
that you spoke about the move away from Scottish Enlightenment ideals of individual freedom
#
and personal liberty and all of that happening with progressivism and Nazism and command
#
And the listener might wonder, but these are all different things.
#
But the ways in which they are moved away from Enlightenment ideals is that they all
#
focus on the collective over the individual, on group identities instead of individual
#
And they are all flawed in different ways and to different extents.
#
But in that sense, that's kind of what you meant.
#
And the recommendation I have is that a book I reread recently, The Clash of Economic
#
Ideas by our mutual friend, Lawrence H. White, where he kind of talks about this evolution
#
of economic thinking and ideology through those decades, including an excellent chapter
#
on India as well, which is a book I'd heartily recommend.
#
So I have a much broader question, which might seem like a bit of a ramble, so please indulge
#
me while I go on it, which actually goes back to one of my pet themes of how do we form
#
How do we form our view of the world?
#
For example, one way in which we do that is through personal experience.
#
Like there's an anecdote I wrote about in a column of mine and which I talk about sometimes
#
to talk about the importance of reading is something that a friend of Narendra Modi once
#
told me that, you know, she knew him a decade ago and when he was Gujarat CM, she was hanging
#
out at his place with a bunch of friends, there were six or seven of them.
#
And at one point, Mr. Modi started telling a story about how his mother was ill when
#
he was a kid and she was feeling very hot.
#
And he went to open the fan and he found there was no electricity.
#
And as Mr. Modi told the story, apparently he started crying.
#
And my friend's point in telling me this story was that his view of the world is very experiential,
#
that anything he can experience, he gets it, otherwise he doesn't.
#
So for example, when he becomes CM, he tries hard to electrify every village of Gujarat.
#
He cares about roads because he can see them, he can walk on them, he has experienced them.
#
But there are other things which you can't experience, things like how markets work,
#
how spontaneous order works, a positive someness of things.
#
And therefore, those are where he is deficient.
#
And you know, and my point in the column was that people should read a lot more.
#
So that's how we gather dots and, you know, paint more high definition pictures.
#
But in the case of someone who hasn't been lucky enough to read a lot, my suggestion
#
was that have a lot of humility, always talk to experts, which is something he didn't do.
#
And a lot of the massive blunders of, you know, his time as Prime Minister from, you
#
know, demonetisation and so on, are really, in a sense, due to his being this kind of
#
an aakho dekhi Prime Minister and not being humble enough to correct for that.
#
The other way that we arrive at views of the world is actually through the opposite of
#
Like in this case is perhaps a lack of education.
#
But we also arrive at wrong views of the world through education itself, you know, which
#
can depend on where you go to university, where you go to college and so on.
#
Now it seems to me that in Nehru's case, it's a bit of both.
#
For example, in his autobiography, he has this interesting line where he writes, I have
#
long been drawn to socialism and communism and Russia has appealed to me.
#
I realised more and more how the very basis and foundation of our acquisitive society
#
and property was violence.
#
So he's got a negative notion of private property because the aspect of which that he has seen
#
is the violent aspect of it.
#
Similarly, he would have a negative notion of markets because he would associate it with,
#
you know, his aakho dekhi experience of the British state, which of course came from the
#
East India Company, which was exploitative, which was, you know, all of those things that
#
people sometimes caricature markets as today.
#
And equally, when it comes to sort of getting his ideology, again, Time magazine once wrote
#
about him in a 1951 piece, quote Beatrice and Sidney Webb, the godparents of Fabian
#
socialism are in a truer sense, his creators and Vishnu and Shiva.
#
And at a later point in time, you know, John Kenneth Galbraith wrote, quote, the centre
#
of Nehru's sinking was Lasky.
#
And Ram Guha once quoted an unnamed person saying, quote, in every meeting of the Indian
#
cabinet, there is a chair reserved for the ghost of Professor Harold Lasky.
#
So my sort of larger kind of question, which I wonder about is that on the one hand, you
#
get your view of the world from the things that you see around you, and you perhaps make
#
simplistic causal inferences from there.
#
On the other hand, you can do it through education or just through exposure to different worldviews,
#
because when we are young, we are searching for ways to make sense of the world.
#
The first simplistic ideology that seems to explain everything that is coherent, it could
#
be untrue, but it could be coherent, just appeals to us.
#
And sometimes, sadly, we become wedded to that.
#
So that's one view of how, you know, a person's view of the world can be formed.
#
But the counterpoint to that is that there is something more happening here, that the
#
Aankho Dekhi element doesn't really matter so much, because what we see in today's times
#
in modern politics is that narratives are more important than reality, which is why
#
you have so many young people, you know, born after the fall of the Soviet Union and the
#
Berlin Wall and all of that, who haven't experienced any of the horrors of communism or socialism
#
gone wrong in the 20th century, suddenly drawn to those ideologies based on coercion, which
#
then kind of makes me wonder that are we all slaves to these ideologies?
#
And you know, a bit of a ramble, but so I'm not, you know, framing a question here.
#
But what are sort of your thoughts on this?
#
You're absolutely right in thinking and asking the question, how do we learn?
#
And how do many people develop their worldview?
#
And when you try to apply that to Nehru, you have to be in that special corner of the general
#
theory of how people learn, which is that he was one of the most powerful intellectuals
#
He was no ordinary person.
#
He was a deeply well-read person.
#
He got face time with the smartest people in the world.
#
There was no brilliant person of that age that Nehru did not get intensive weekend long
#
So there are no simple flaws in what he was thinking.
#
He's the author of The Discovery of India, one of the greatest books ever written.
#
And arguably, if you ever want to step away from Churchill's claim that India is just
#
a geographical expression, that idea was invented in The Discovery of India.
#
It's like the first coherent statement of what is India and what all of us one way or
#
the other define as our concept of India is really from The Discovery of India.
#
So I will again take you back to the formative years, the formative years of the INC and
#
of every dreamer for India.
#
Okay, there is racism in the world.
#
There is a very powerful preconception that white people are better.
#
It takes guts, it takes nerve to even rise to the point of saying, no, I'm every bit
#
It seems easy for us to say that today.
#
But think of how many people in India today will think an NRI is better than us.
#
So racism runs deep and the colonialism in our minds is not merely about evicting the
#
It's an enormous act of courage to step out of that and say, I dream that I will be as
#
good as you, if not better.
#
And then when you start looking around in world history, there's just no running away.
#
It's Japan, the major restoration from 1868 to 1905.
#
In 1905, for the first time in world history, an Asian country, Japan, won a war against
#
a half European country, Soviet Russia, sorry, Tsarist Russia.
#
And that was done in a short time with really a state-led model.
#
It was government leadership.
#
It was the government that planned, we're going to have a steel factory, we're going
#
to build warships, we're going to get kids to learn how radar works, and so on.
#
So it is really hard to play the game of rapid industrialization in India and a rapid catch-up
#
with the global frontier, which was the UK, without trying to think in ways that were
#
reminiscent of Japan and Soviet Russia.
#
We are different today, because we know that those rapid catch-ups really don't happen.
#
And it's a long, slow process.
#
And that's what buys space for a self-organizing system.
#
So things will evolve slowly.
#
We are not saying to ourselves that I want to do this on the time horizons like 1917
#
to 1942 or 1943, where you go from the Russian Revolution to winning the Battle of Stalingrad
#
and becoming the world's greatest land army, or on the time horizon from the Meiji Restoration
#
We don't worry about those things today, partly because we don't think that even a centrally
#
planned system can particularly do that.
#
Essential to the conception of a self-organizing system is to take a little more time, but
#
it will be done right, and it will be a decent, fair outcome.
#
You have to also notice how Nehru constantly says to himself and to everybody that we want
#
to do all the great things of Soviet Russia without the concentration camps and without
#
the purges and without the massacres.
#
So he was searching for that middle road that how do you achieve the decency of the UK?
#
How do you achieve civil liberties and constitutionalism and the lack of violence against your own
#
people while achieving a Soviet-style catch-up to the global frontier?
#
You know, having said that, you look at the Soviet Union and you say, OK, we want to do
#
A, B, C, but we don't want to do X, Y, Z, we'd rather be like Britain.
#
But at the same time, he's looking at a particular aspect of Britain.
#
You know, Britain was also in many ways much more laissez-faire, for example, than they
#
Like at one point, you know, there is this famous quote from this Time magazine, a 1951
#
piece on Nehru, where they wrote, quote, he shares all the socialist emotional tenets
#
about the capitalist order.
#
In consequence, he has a socialist undisguised contempt for capitalism reinforced by the
#
aristocratic Brahmin's contempt for the Baniya caste.
#
He speaks of the quote, Baniya civilization of the capitalist West, stop quote, of the
#
West cutthroat civilization.
#
Utterly unlike Gandhi, he admires modern production methods and wants to bring them to India.
#
But as a socialist, he believes that capitalism, after its prodigies of production, is bound
#
to make a bloody and cruel mess of distribution.
#
This view is based on the standard British socialist reading of 19th century economic
#
The understanding of 20th century American capitalism is negligible, stop quote.
#
And so it's a particular strand of thinking, you know, which was in England that he's really
#
He's not focusing on all the other things that are happening there.
#
If you want a simple model, he was trying to do, you know, X percent of the UK and one
#
minus X of the USSR, so it's going to be pretty bad.
#
And is there also then a certain intellectual arrogance and therefore simple-mindedness
#
in people who are drawn towards these kind of command and control models of thinking
#
Once again, in defense of those people, I just want to say that each of us struggled
#
And if you and I were in those times, we would think differently.
#
So my father started out as a card-carrying member of the Communist Party, okay.
#
He changed his mind completely over the years.
#
But the point is that in that age, when you looked at the world, it looked different.
#
No, I'm not talking about the specific people.
#
My question, I would say, even applies today, that are certain kinds of people applied?
#
And I'm thinking aloud here completely.
#
So I might find this a silly question when I listen back on it.
#
But are certain kinds of people drawn to certain kinds of ideology?
#
Well, I think there are two things going on.
#
One is the characteristic of the individual, which can change, whether it's Nehru or Indira
#
And the second is the ecosystem that they inhabit, right?
#
Now, I'm a product of a very particular ecosystem, right?
#
I mean, it's not like I sprung out of the soil as an economist or as a free market-leaning
#
economist or anything like that.
#
I was as socialist as anyone else reading about overpopulation, five-year plans, panchil
#
agreements in our civics textbooks, right?
#
Emergency and your trains ran on time.
#
But I was very fortunate and privileged.
#
I had an exceptional economics professor, principles of microeconomics, the basics of
#
You know, the basics I was telling you, the shortages and excess demand, excess supply,
#
Like the basic stuff, he just explained it so well to me, it was hard to unsee the world
#
Now, if I think about my own intellectual trajectory post-undergraduate economics, once
#
I understood that, I gravitated more towards books that would help explain that better.
#
I gravitated towards people who explained to me that, you know, why is everyone disagreeing
#
Why do I see markets as a good thing and everyone else seems to think I'm bananas, right?
#
So you start getting together with the Amit Vermas and the Ajay Shahs of the world, and
#
they are able to explain a little bit better to you that, hey, this is happening because
#
So this is the analytical framework you're using.
#
Other people are wrong, not because they're stupid or malicious or malevolent.
#
It is because there's a fundamental misunderstanding in their mind about how this particular thing
#
Or when they say socialism, they mean something else, or when they say markets, they mean
#
And then I've been incubated in that ecosystem for a really long time.
#
I eventually got a PhD.
#
I happened to get a PhD from George Mason, which, you know, is a leader in Austrian economics
#
and a lot of my own professors worked on the socialist calculation problems, all the things
#
we're talking about today.
#
You mentioned Larry White.
#
He was on my dissertation committee.
#
All this is not by accident, right?
#
That I have turned out the way that I have turned out.
#
So there is something about the ecosystem that is incubating you.
#
So even in that time, right, for every Nehru, you have a Shanoi, okay?
#
Shanoi happens to be one of the people who went to the, you know, went to the UK.
#
And incidentally, he's at the LSE at the same time as all these other guys, but he's more
#
attracted to Karl Popper and he's more attracted to Frederick Hayek and he's not so attracted
#
But if you talk to BK Nehru, if you talk to Minumasani, right, same people, similar generation,
#
they go the completely other way, then Minumasani was like card carrying socialist, went on
#
the 10th anniversary of the Bolshevik revolution and saw what was the celebrations in Moscow
#
firsthand and things like that.
#
And then changed much later because of a Gandhian view of why Stalinism was bad.
#
So there's an ecosystem that incubates these people.
#
So now Nehru is of course exceptional on multiple margins.
#
He's an exceptional mind.
#
He has access to an exceptional ecosystem.
#
Now did he meet every possible individual that he could have met and took in every possible
#
He took as many elite views into question of that time as he possibly could.
#
And you know, now talking about this Ankhon Dekhi business, he's also got results.
#
Like India was growing at maybe 1, 1.2% in colonial India, especially by the time the
#
By the time 15 years of Nehru is done, we're roughly growing at 3.5% to 4.5%.
#
That's a pretty big jump.
#
So not only is Nehru's model working, it's working far better than anything that he inherited
#
from the colonial masters.
#
Now everything goes to hell right after that.
#
But at the time, it's not just that he's not willing to look at the world or not willing
#
The evidence is in his corner.
#
The elites are kind of supporting what he's saying.
#
There are very few people who are disagreeing with him.
#
Most of the people he trusts who are trained by other people at top universities are going
#
along the same way as he is.
#
It would be very surprising if he went a different way, to be very honest.
#
Everyone else who went a different way did so for various other reasons in different
#
coalitions at a different point in time.
#
So a tantra party, which to me is probably politically most aligned to the way of thinking
#
for not just me, perhaps all three of us, they are conservative on many social issues.
#
They're very conservative on things like caste in a way that Nehru and Ambedkar are
#
They are explicitly allies with the aristocracy of India, which is all the Maharajas, who
#
in a sense are your Maharajas and Zamindars or the feudal lords.
#
Now I'm not saying anything about the character of these people like Gayathri Devi and all
#
the people they allied with, but it's a very odd group of people to make your allies in
#
post-colonial India when you have a different vision for India, which is India needs to
#
not just be economically prosperous, but also needs to be politically free and equal and
#
caste needs to go away and feudalism needs to go away.
#
So with every group of people, I'm sure if we had a deep enough discussion, we would
#
find something terribly, terribly wrong with the ecosystem that they inhabited and the
#
kinds of ideas that they borrowed.
#
Having said that, I think there is also a really big problem in any of us viewing that
#
we have the right idea or the right model of the world.
#
It is scientism at its worst, right?
#
So when people say, even when free market economists say, hey, we figured this out,
#
to me, that's the worst thing I can hear from anyone.
#
It immediately terrifies me.
#
Have we really figured it out?
#
Yes, we know certain things for sure.
#
We know that resources are scarce.
#
We know that there are unintended consequences when you try and command and control these
#
We know there are very early limits to human ability to process decentralized knowledge
#
and therefore control the economy.
#
But having said that, have markets just managed to solve everything?
#
Has decentralized and spontaneous order figured everything out?
#
There are a lot of decentralized, spontaneous, long-term orders, which are quite perverse.
#
And you can find examples of witchcraft abroad.
#
You can find examples of caste system, misogyny, patriarchy.
#
These are all, by the way, also spontaneous orders like markets and language.
#
So everything's going to have something.
#
So anyone who says that we figured this out is very problematic.
#
What we can do, the best we can do as experts is find a framework through which we can carefully
#
look through both theoretical frameworks and the empirical evidence and say, this is what
#
And given what we know, I think this is what we proceed.
#
And I think Nehru and company did that reasonably well.
#
Yeah, you know, I don't know why you went off in the Nehru tangent because I wasn't
#
even talking about Nehru.
#
Like my last few questions were just general broad questions and I'm not litigating Nehru.
#
I have great admiration for him, though it must be pointed out to listeners that he was
#
In fact, you know, these days people are talking about the sedition law and the thing is the
#
Supreme Court of India struck down the sedition law in 1950.
#
Nehru brought it back with the First Amendment, right?
#
So in many ways, he was an anti-liberal and definitely in a sinking of markets.
#
To overcome the Communist Party, there is that part of the story, right?
#
To overcome his political enemies.
#
You know, it doesn't matter who your political enemies are, you know, they are not anti-national
#
just because they're opposed to you and you're in power, a lesson we should remember from
#
today and something that, in fact, aligns him with Mr. Modi today.
#
The other thing I would say is that the right model of the world you use that phrase is
#
humility, you know, that is the only right model of the world.
#
And you know, which kind of just to elaborate, though I won't ask you to respond to it,
#
but just to elaborate on what I meant by does character determine the kind of choices that
#
you make, that I find that a lot of ideologies will draw intellectually lazy people because
#
it is far easier to say, for example, believe a particular narrative of victimhood, whether
#
it is coming from the right or the left and then think in terms of group identities, rather
#
than get down and messy and accept that everyone contains multitudes, the world is deeply complicated.
#
You can't just cast black and white judgments on different things.
#
And I think gaining that kind of humility to be able to have the rigor to constantly
#
keep questioning your assumptions is sort of an important quality to have.
#
You know, you mentioned B. R. Shanoi and the thing is when Nehru, I think, in the mid fifties
#
got those 21 economists together to give their perspectives on, you know, I think the second
#
planet was B. R. Shanoi was the only one who dissented and therefore he was completely
#
A bureaucrat, in fact, described him as quote unquote a madman and which is just crazy.
#
Similarly, you look at Massani, great admiration because he bucked the trend, you know, first
#
he followed the trend by, you know, becoming a communist like his peers following the whatever
#
the intellectual fashion around him must have been.
#
But then he had the humility to keep questioning his assumptions and to sort of look beyond
#
So that was a question unrelated to this episode or to Nehru or to anything.
#
It's just something that I generally sort of think about, which is why, you know, I
#
sort of deplore labels when they are used in modern times, even a label like Libertarian,
#
because it immediately seems to put you in a tribe, it seems to put you in a fixed place
#
that this is where you are and this is who you are and these are the people with whom
#
And I find that at some level that it's a problem.
#
Like my view of the world is that I am firm on values, which is individual rights and
#
freedom and whatever, but I am completely open on, you know, accepting new facts about
#
the world and changing the way I think with regard to those new facts.
#
But that's a digression.
#
Another quick general question before we come to the specifics of post-independence India,
#
which is that one criticism people can make is that we refer to everything before 1991
#
as socialism and people will point to the textbook definition of socialism and say that,
#
hey, that's, you know, socialism is good.
#
It means the state owns everything.
#
There's no private property.
#
What was there wasn't socialism.
#
And the way that I think about it and, you know, you can respond to that and say how
#
you think is that I think a more accurate way of describing India before 1991 was statist
#
and it is less statist, but still very statist.
#
And that's, that is actually inevitable if you go down the socialist road because power
#
So you will always under a socialist system or for that matter, a Nazi system or, you
#
know, various different systems which look different end up in the state having too much
#
So I don't really care so much about the terms.
#
The way that I kind of view them is how much power does the state have, how much stratism
#
And that's really the fault line along which I look at those things.
#
So how would you guys think about that?
#
I would disagree a little bit in the following sense.
#
I mean, I know this word socialism means like 40 different things to many people.
#
For some people, it just means good intentions.
#
For some people, it means removing inequality.
#
And for at least Ajay and I here are professional economists, right?
#
There is something very specific about socialism here where number one, you control the means
#
So that is a very classic socialist system thing, which is different from progressivism
#
or, you know, the kind of guild forms under fascism.
#
There is something very specific about socialism where your, the aim is to control the means
#
The second is the kind of price and quantity controls.
#
You can have a very statist economy.
#
You can have a huge welfare economy that doesn't actively distort prices, right, or quantities.
#
And one classic aspect of socialism is that it will actually impose price and quantity
#
I do agree with you that India has always been statist, okay?
#
And that some of it is worse and some of it is better.
#
In fact, on some margins, India is more status today than it was before.
#
And I will very explicitly say that India was socialist for a very large chunk of time
#
between, say, 1938-39 till 1988, you know, and some parts even maybe until 1993, depending
#
on when you are choosing the cutoff of which price controls come in and which ones go away.
#
But for a good part of those four or five decades, it's very clear that India is socialist.
#
The aim is to control means of production.
#
And the aim is whatever the market allocation is, we're not happy with it.
#
We're going to impose price and quantity controls.
#
The right way to think about it is that what is the role of markets in determining the
#
organization of economic activity?
#
It's about products, processes, industries, firms.
#
Okay, so do you want the government to decide, do you want the government to pick winners?
#
Do you want the government to choose what is appropriate technology?
#
Or do you want to let private people figure out what is right and let the price system
#
sort out what works and what doesn't work?
#
A big date in my mind is 1942 when there were large scale controls brought in by the British,
#
which were in the nature of trade controls, trade restrictions, and capital controls.
#
The first capital controls in India's history came in 1942.
#
So it seems like unbelievably free age that before 1942 in British India, people from
#
within India were able to travel all over the British Empire without a passport or a
#
visa and move assets in and out of India and build multinational empires.
#
So it's a level of freedom that is just incomprehensibly far away from where we are in India today.
#
So it's bracing to look back at how much freedom has been lost.
#
But you know, even on this traveling abroad thing, like Ajay talked about how he went
#
in 1987 to start his PhD.
#
He didn't tell you how hard it was to collect the foreign exchange through legal means to
#
be able, you know, like that those $200 or whatever it is you need to, I don't know what
#
the allotment was in 87, but to just collect that, I mean, it's like, it's not a family
#
It's like a quasi city effort, right?
#
Every single person you know, has been drafted into the effort of getting that very limited
#
And all this just so someone like Ajay can show up in LA and you know, the first couple
#
of weeks of meals and basics are sorted out and then he'll figure out his own foreign
#
exchange from that point on, right?
#
It's sort of incredible when we talk about these controls.
#
We talk about it in a mythical sense, right?
#
There's a control on foreign exchange as a foreign exchange as a person and a sentient
#
It's just the control is really on human beings, right?
#
Human beings ability to trade, human beings ability to spend, Narayan Murthy's ability
#
to get a mainframe computer.
#
So these foreign exchange controls, we just call them currency controls.
#
We should call them, I'm controlling your ability to do whatever it is you wish to do
#
Yeah, that's a good clarification and also a useful clarification about socialism and
#
I'll defer to your views.
#
It's kind of irritating.
#
You know, in popular parlance, people will often use socialism as a synonym for something
#
that is good for society.
#
And actually a lot of these terms are very loaded because they really mean the opposite.
#
Like socialism certainly is not good for society as we've seen all through the 20th century.
#
You know, progressives are often the least progressive people around.
#
In America especially liberals aren't really that liberal.
#
So these terms are kind of very loaded.
#
So if you're a lay person, just kind of listening in from the outside, you'll say, hi, I may
#
be progressive who socialism to achieve out there.
#
But then you talk to an economist and you are like, oh, these economists are such boring
#
Socialism will be be achieve out there.
#
But moving on from that, you know, I keep telling my writing students that avoid abstract
#
things, speak about the concrete.
#
So let's kind of get concrete that finally gain independence.
#
You already know his mindset, as he said to J.R.D. Tata once, quote, do not speak to me
#
Profit is a dirty word, stop quote.
#
So you know that this is not only someone who wants a state to play a big role in society,
#
he also distrusts private enterprise and is against individual liberty in that particular
#
Now, is economic policy really evolving during this time?
#
And why is it so bad for us?
#
And what about it works?
#
Like you pointed out, he did get the growth rate of from one percent to three and a half
#
percent, which was famously called the Hindu rate of growth.
#
But it was, you know, that was a pun on the secular rate of growth, which is a term economists
#
But so what worked about it and what didn't work about it?
#
As I see that period, there was a view, including amongst folks like the Bombay Plan.
#
There were things like steel mills and machine tools and electricity generation equipment
#
that were difficult to organize for private persons.
#
So I remember I had a conversation with Bimal Jalan once who said something remarkable to
#
He said in the 50s, when we in India, which is a mixture of private or public, when we
#
in India would desire to set up a factory, very often we would fail.
#
It seems inconceivable today.
#
Today, it seems that you just have to have the money.
#
You'll be able to get the right engineering consultants who will do the design of the
#
You'll buy all the right capital goods.
#
Today, all the world's good capital goods are available in India.
#
There is an ample supply of construction contractors who build the factory, switch on the factory,
#
But the level of capability in India at that time was unbelievably low.
#
There was also a lack of finance.
#
Now you and I, one of our first responses will be very well, if you can't make steel,
#
It's wrong with importing steel.
#
It's no sin to say that in my country, I'm unable to make steel and I'd rather import
#
For whatever reasons, these people were mistrustful of international trade and wanted to do it
#
They wanted to build steel themselves.
#
Then they were posed with a certain problem that there was an array of so-called heavy
#
industry, which were large complex capital intensive factories that were essential for
#
the rest of industrialization that led to Proposition 1 that the government's going
#
The government will build the public sector companies who will be that heavy industry.
#
It almost seems farcical today to think that this would be a bright idea.
#
But a lot of very smart people at that time thought this was the way to go.
#
And amusingly enough, if you read the Bombay Club, which is the business community of Bombay,
#
they are pretty much asking for the same.
#
They're saying that, look, I can make light machinery.
#
I can make consumer goods, but I can't do the heavy industry myself.
#
Side by side with this is a finance story, which is where is this money going to come
#
And at that time, the taxation capabilities of the government were quite limited.
#
The formalization of the economy was quite limited.
#
There were also a bunch of regulatory disasters on insurance companies and banks.
#
And again, with the benefit of hindsight, we would say what was needed was to build
#
state capacity in banking regulation or state capacity in insurance regulation.
#
But those are very modern ideas which are not present today.
#
So alongside the government-led and government-planned machinery in the real sector, there came a
#
government-led and government-planned machinery in the financial sector, where the government
#
built a whole financial system.
#
There were government banks, there were pretty much only government banks.
#
The government had a monopoly in life insurance, the government had a monopoly in general insurance,
#
the government had a monopoly in mutual funds, and so on.
#
So in one after another element of finance, the government directly controlled the financial
#
So the words used, again, I cringe at the words, but at the time, the words used were
#
that the state would mobilize savings and direct them into applications in investment.
#
So you really didn't have a modern concept of a market-based financial system where private
#
people and speculators and risk and return would generate the allocation of capital.
#
Those are very modern concepts in India today, if I may say only understood in a limited
#
way by most people in the Indian landscape.
#
So if I had to characterize that period, this was that story of government leadership in
#
the real sector based on the notion that if we don't do this, the private sector will
#
not do it, plus government control of the financial system undertaken in an autarkic
#
environment where you don't do international trade and you don't do international capital
#
So that's my rough description of what was done.
#
And exactly, Amit, as you said a moment ago, once you go down this route, it just goes
#
bad and it gets worse because we will experience one failure after another.
#
Today, we know that the only flexible, endlessly thinking, endlessly adapting system is a market
#
When they try to do these state-led projects, then every day the steam would come out of
#
some sprockets that doesn't work and there'd be a problem there.
#
So you would layer on one more rule and one more rule and one more rule.
#
And there's layers on complexity and it becomes an incomprehensibly rigid, inflexible system
#
that basically nobody's thinking.
#
So there's the silence of a graveyard that happens in a centrally planned system.
#
When the government is telling you about products and processes, the private sector switches
#
off their minds and they say, yeah, just tell me what to do.
#
And it becomes just one big bureaucracy, becomes a world of obedience.
#
There's a lack of creativity, there's a lack of innovation, there's a lack of hunger.
#
And there's more than an echo of all these maladies around us in India today.
#
In large parts of the Indian economy today, you've got the deadness of central planning
#
systems where a government chooses the technology, a government tells you which is the way to
#
And the employees of private firms basically become glorified bureaucrats.
#
They just say, look, you tell me the policy, I'll do it.
#
It's too risky for a private person to put capital on the line and take a risk of innovating
#
and building something.
#
I would add a couple of things to this.
#
One is the state capacity problem goes on for a very long time in India and it really
#
starts with the East India Company.
#
I don't want to blame everything wrong with India on East India Company and the colonial
#
But the fact of the matter is that investments in state capacity were very low.
#
So there are multiple reasons why they call India the extractive, the worst victim of
#
the British extractive economy, because all the taxation that was collected, all the resources
#
that were diverted, not much of it was invested in India.
#
And if we really think about Scottish enlightenment values and we bring them onto the modern world,
#
especially the financial sector, nobody is saying that there is no role for the state.
#
Most of us who are talking about a certain kind of decentralized emergent order, we think
#
of the role of the state in a very specific way, which is it needs to enforce contracts.
#
It needs to bring in some basic financial regulation.
#
It needs to have disclosure requirements so that people who are investing know what kind
#
of risks they are exposed to.
#
It needs to have some kind of financial regulatory infrastructure so that there aren't repeated
#
runs on banks and all the basic stuff.
#
Now the fact of the matter is this infrastructure was not present in India.
#
Capital was low on bureaucrats per capita.
#
It was low on judges per capita, on contract enforcement per capita.
#
Even in colonial times, this is not just a modern day problem.
#
So now if you don't have a sensible way of enforcing contracts, then obviously you're
#
going to worry a lot about fraud in the market, right?
#
Which means I live in the United States and I have very little fear of fraud, right?
#
Because there is so much, you know, both market competition and consumer protection and litigation
#
and tort law and, you know, like the regulatory, you know, sort of they will throw the book
#
at any firm that is, you know, negligent in the behavior and I drink something adulterated
#
and get sick or something like that.
#
I literally have zero fear, okay?
#
There is an enormous fear in India in the 1950s of failure that comes from the private
#
There are two kinds, two, three kinds of fear.
#
One is the basic fear, which is, you know, like what happens when your wheat gets adulterated
#
and people get poisoned, you know, that kind of basic level fear and fraud.
#
The second kind of fear is a misallocation.
#
Resources are so scarce that if they went in the hands of the wrong industrialist, then
#
we are wasting these resources, right?
#
They don't understand that when there's a bankruptcy, resources just need to switch
#
The resources themselves don't die, okay?
#
But there is this great fear.
#
And the third fear is in some sense, the collapse of the system or loss in the faith of the
#
Like this is your classic run on private banks kind of fear.
#
So if you don't have a sensible state led infrastructure to kind of provide this scaffolding
#
to prevent the worst things that come out of, you know, private or decentralized emergent
#
orders, then you're going to want to clamp down on everything.
#
And I think that is part of it, right?
#
You simply don't trust what is happening in the markets.
#
When markets do function now, a lot of the times what I was talking about this, you know,
#
I don't worry about adulteration and like, you know, eating unsafe foods and things like
#
Most of it is not state regulated, actually.
#
I'm never checking if there is a, you know, FDA stamp or an ISI stamp on whatever.
#
It's just, I live in a world where market competition is so strong and so robust and
#
reputation is so strong and litigation is so aggressive that I know that I can exist
#
in the shadow of that system and still be safe, right?
#
Now even that shadow of that system did not exist in 1950.
#
So I think we need to think about this.
#
It's not like there was this incredible market system which was thriving and amazing and
#
contracts were enforced and Nehru came out of the blue swooped in and said, no, we're
#
going to end that system and we're going to replace it with that.
#
That system simply didn't exist.
#
I would disagree slightly.
#
If you think of the capitalism that was present in Bombay pre-independence, if you went on
#
the fort, there was actually something remarkable there, which we sometimes don't give enough
#
As an example, the Metropolitan Magistrates Court in Bombay was adjudicating commercial
#
disputes based on the British Quality Contracts Act of 1870 and the British Evidence Act of
#
1870, they came side by side and was writing orders that were decent by early 20th century
#
It's absolutely mind blowing that in a developing country like India, there was a certain judicial
#
capability, the likes of which again, we have completely lost in India today.
#
We have declined very badly compared to that period.
#
Where I will fault the policy community of that period, the Nehru of that period, was
#
a failure to recognize the value and the importance of the infrastructure of civilization that
#
we got from the British.
#
We were so angry about the freedom movement.
#
We were so convinced that the British dealt us a bad hand of cards, that we did not sufficiently
#
treasure some of these things and nurture them and build them.
#
Over 20, 30 years, a lot of that collapsed.
#
One little thing about unintended consequences was that all the best lawyers and judges of
#
India at the time were trained in London because there were really no law schools and law universities
#
It's incredible how damaging it was when the currency controls prevented people from going
#
abroad to study because you couldn't get foreign exchange.
#
Even if you were rich enough to go abroad to study, you couldn't get the foreign exchange.
#
Sure enough, 25 years later, you got a precipitous collapse in the quality of judges and lawyers
#
all over the country because that pipeline had broken.
#
I think of some of the British infrastructure of civilization, of the common law, of the
#
courts, of the criminal enforcement as something that the INC did not treasure adequately.
#
We were the sorcerer's apprentice.
#
We got the reins of power, but we didn't understand the intricate checks and balances through
#
which civilization is upheld every day.
#
We went off with this grand idea of a developmental state and we didn't nurture the foundations
#
of civilization, which is the machinery like the criminal justice system and the courts,
#
the commercial disputes.
#
I think we disagree less than you imagine, Ajay.
#
I agree with you that we have excellent judges at the time.
#
The point is not that we don't have them.
#
The point is we don't have enough of them.
#
You have excellent courts in all the presidency towns.
#
You have them in Bombay, in Madras, in Calcutta.
#
You go to rural India, there is virtually no modern kind of dispute resolution penetration
#
because these Zameendars have simply not made the investments and the colonial powers have
#
just let them run amok with whatever the hell the Zameendars want to do.
#
On the other extreme, you have, say, the Maharaja of Mysore or the Maharaja of Travancore.
#
They have made enormous investments in education, health, basic public sanitation, court system.
#
You can see the benefits of that even today in modern day India coming from those states
#
because of investments that were made 100 years ago.
#
It's not that I think the British investments, the quality was bad.
#
It's just that I think that it wasn't enough and as widespread that India could overnight
#
switch to removing all market controls and switching.
#
If we think about banking, you spoke about Larry White and there is this whole thing.
#
His whole work is on free banking that emerged in Scotland.
#
You look at the Chettiar community in the southern part of India.
#
Just the entrepreneurship, they were basically the financiers of Singapore and Malaysia.
#
They would actually travel and they would finance huge projects.
#
You had this thing going on in India and then of course all the banking regulation came
#
in and none of their networks could function anymore and they couldn't quite convert it
#
into a formal bank as easily as they wanted.
#
All this human capability existed.
#
Some of it existed formally through the British conduits, through lawyers and bureaucrats
#
and civil servants and things.
#
Some of it existed through our caste networks.
#
There's the Chettiar community, there is a Marwadi community and things like that.
#
But these are still small pockets.
#
The great Scottish enlightenment idea that we can trade with strangers because the institution
#
allows us to trade with strangers and both sides can benefit, that was not the reality
#
in India as I understand India at that time.
#
I think Ajay and I disagree a lot less than we originally imagined.
#
If I may just try to restate just for both of you to take a stab at it.
#
The proposition I want to hold up for examination is it is remarkable that standing in 2021,
#
we feel that it is more likely for a criminal matter or a commercial dispute to generate
#
a bad outcome with the criminal justice system and the courts of India today as compared
#
to where we were say in 1943.
#
I find that a mind blowing proposition and I wonder why.
#
I blame Nehru and his community for being the sorcerer's apprentice.
#
They were so fascinated that we will go build steel mills.
#
They didn't understand that the real temple of democracy is the courts and the police
#
These are really wise words and I can see that you disagree a little bit about disagreeing.
#
So I don't know how we will unravel that, but obviously I'm not a student of history
#
and can't talk about the rule of law back then.
#
But just looking around me, every single businessman friend I have and I have people who run small
#
businesses and all that will tell you that the rule of law is absent.
#
That if there is a dispute, you know, there will be no dispute resolution.
#
It's just there on paper.
#
You can't actually get anything done.
#
You survive on different systems that are not encoded in the law, different systems
#
of trust within the community and so on and so forth.
#
You know, Ajay a little while back referred to the deadness of the system and that reminded
#
me of this great quote by Shashi Tharoor where he's talking about one of Nehru's big mistakes
#
and there Tharoor said, quote, Nehru felt it was necessary to have the state to be the
#
disinterested maibaap of the people who would act in the interests of the common person
#
because the state would not be motivated by profit.
#
Of course, what he failed to realize was that as a result, he'd put bureaucrats in charge
#
of the commanding heights of the economy rather than businessmen.
#
And these bureaucrats were better at regulating stagnation and distributing poverty than actually
#
generating wealth, stop quote.
#
And you know, Ajay also spoke about how difficult it was to do any kind of innovation or get
#
permissions to do anything.
#
And there's a great passage by Gurcharan Das, which I want to read out, which is from his
#
book India Unbound, which really illustrates this where he writes, quote, the way that
#
the bureaucracy went about administering the licensing system created a nightmare for the
#
An untrained army of underpaid third rate engineers with inadequate and ill organized
#
information and without clear cut criteria, wetted thousands of applications on an ad
#
The low level functionaries took months in the futile micro review of an application
#
and finally sent it for approval to the administrative ministry.
#
The ministry again lost months reviewing the same data before it sent the application to
#
an interministerial licensing committee of senior bureaucrats who were equally ignorant
#
of entrepreneurial realities and who also operated on ad hoc criteria in the absence
#
of well-ordered priorities.
#
After the minister's approval, the investor had to seek approval for the import of machinery
#
from the capital goods licensing committee.
#
If a foreign collaboration was involved, an interministerial foreign agreements committee
#
also had to give its consent.
#
The finance was needed from a state finance institution.
#
The same scrutiny had to be repeated afresh.
#
The result was enormous delays, sometimes lasting years with staggering opportunities
#
The large business houses set up parallel bureaucracies in Delhi to follow up on their
#
files, organize bribes and win licenses.
#
Tragically, the system ended in thwarting competition, entrepreneurship and growth without
#
achieving any of his social objectives.
#
There's a similar passage I marked out by Rakesh Mohan from his introduction to the
#
book, Transforming India, which I'll link from the show notes.
#
I'm not going to just keep reading out dystopian passages and Gurcharan Das's book India Unbound
#
is also an excellent sort of narrative of this entire period of history, which I think
#
disillusioned him so much that the moment that it seemed that there could be a turn
#
away from the dispensation that led India through all these decades of misery, he went
#
all in for Modi and then he didn't adjust when he saw the reality of what a Modi administration
#
actually was, which is kind of tragic when it happens to people, right?
#
That you have rational reasons to say support a person, but even when it all goes south,
#
you know, and you should rationally turn away, you just become sort of embedded in that position.
#
Sorry, that's an aside, but any thoughts on that?
#
No, but you know, there is something valuable, I mean, the passage that you're reading,
#
okay, now, you know, again, this is, I don't just want to keep separating Ajay and myself
#
from like the rest of the people as if we're like some special category of humans, but
#
Both of you are special to me, but economists do think a little bit differently about this
#
and especially people like Ajay and myself who are like particularly trained in public
#
choice economics, right?
#
The way, one way to interpret the passage that you read from Gurcharan is that this
#
is about bureaucrats versus entrepreneurs, right?
#
It's almost like one type of person versus another type.
#
It's very like it's about incentives, but it is the first thing I know from public choice
#
theory is behavioral symmetry, right?
#
That every individual is fundamentally the same.
#
There is nothing special about an entrepreneur that is different from a bureaucrat, except
#
that the entrepreneur is the residual claimant in a firm and a bureaucrat is not, right?
#
So if I put the exact same people and I did some kind of, you know, crazy Chris Nolan
#
type like switch them from one to another in some crazy science fiction movie, they
#
would act the way there's a movie plot that we should have two twins were separated at
#
birth and one of them becomes the bureaucrat and one of them becomes the entrepreneur.
#
And then you flip them and now they act completely differently than what they are supposed to
#
Well, you could argue Shashi Kapoor and Amitabh Bachchan did all those films where they are
#
brothers and one is a police officer and the other is a criminal is exactly that.
#
I want to pick up on that criminal thing later for a minute, okay, but here, so it almost
#
seems like, oh, there is this Brahmin-Baniya conflict or this, you know, entrepreneur civil
#
servant conflict or, you know, the person who's the low level engineer.
#
I mean, they are low level engineers, not because there's something wrong with them,
#
but because that's the incentive they're in.
#
Their engineers being made to push files are supposed to solve engineering problems, right?
#
That's why they're low.
#
So there is something problematic, I think, about putting this as a group, this group
#
versus that group or this category of persons versus that category of persons.
#
I don't know if that's what Gurcharan intended to do, but that's the way it seemed to me
#
just taking one quote out of context and I think that is where the economists would disagree
#
that the problem lies with it doesn't matter who ran the system.
#
They could not make it work, right?
#
You could get, you know, God himself to show up and they couldn't possibly do a better
#
job of the permits than the low class or low quality engineers that, you know, Gurcharan
#
is so mad about, right?
#
Clearly, there is no entrepreneur who can easily overcome the system and still manage
#
to make a profit and still remain honest.
#
To me, that is the big takeaway.
#
And it also connects to the thing that you said about there's a whole category of people
#
in India who are so exhausted by socialism, they just latched on to Modi when he came
#
That again tells you that there is a fundamental misunderstanding.
#
This is not about groups.
#
This is not about people.
#
This is not about Brahmins and Baniyas and Nehru Gandhi versus someone else.
#
It's just a misunderstanding that Modi continued a system without changing it very much, continued
#
a commitment to a status system.
#
In fact, in some margins, like increased the centralized control, did not really trust
#
markets and decentralized actions to do their job.
#
So he's making the same mistake as Nehru did.
#
Nehru's original sin is not investing in education, in primary education, right?
#
He only invested in like higher level education, in health and in local government.
#
I think the lack of local government, which is a byproduct of high degree of centralized
#
planning in India, I mean, no thought of, yeah, we need steel mills, but who's going
#
to pick up the garbage, right?
#
This is something that was never planned for or thought through.
#
And I think it's the same thing with Modi and his followers, which is because there
#
is a fundamental misunderstanding of what the system is and why it works.
#
There's a lot of blaming of this group versus that group.
#
And there is no real understanding of what is the scaffolding I need to provide?
#
What are the investments I need to make so that a decentralized system can actually do
#
the magic that it's supposed to do the way Adam Smith talked about it.
#
So I think that quote that you read is very valuable, but for a different reason than
#
I mean, first of all, I'll come out and say that I don't think that Mr. Dasward necessarily
#
I think he'd also be aware of the power of incentives.
#
And that's a point worth underscoring that whenever people talk about a particular system,
#
the bottom line is we will all respond to incentives, which is why whenever I talk about
#
a system of governance, I point out that the system of governance you want is a system
#
in which you should assume the worst person you can think of, the biggest sociopath as
#
And then if you're okay with it, it's a good system of government because there are enough
#
There are mechanisms within that which increase accountability.
#
The incentives are going in the right direction.
#
The other thing I would say, and I don't want to defend Gurcharan unnecessarily.
#
And in this case, I'm not because he didn't change his mind after Modi did all the things
#
But the point is, you know, the Congress politician Salman Sohz was on my show a year and a half
#
ago or so, and he made the point that a lot of Modi's rhetoric in 2014 was great.
#
You know, minimum government, maximum governance, and obviously he's gone in the opposite direction
#
that the business of government is not to be in business or something to that effect.
#
Obviously he's gone in the opposite direction.
#
A lot of the rhetoric could have fooled people who were open to being fooled or who were
#
just simply tired of the existing system as it were.
#
So I don't judge people who supported, say, Modi in 2014 too harshly.
#
But at the same time, if you hadn't realized what was going on by 2017, then shame on you.
#
Then you had anchored yourself to the person and the party instead of to the principles
#
that you claim to espouse.
#
So yeah, I haven't spoken to Gurcharan about this personally, so I really can't comment
#
I don't know what his views were then and I don't know what they are now.
#
I meant more generally about how we think of different groups of people, even the entrepreneurs
#
Frankly, I'm not very impressed by them.
#
I mean, we talk about the Bombay plan and things like that.
#
But to me, there are aspects of the Bombay plan which just stink of this bootleggers and
#
Baptists kind of story, right?
#
It's a point I made to Ram Guha also, he didn't respond in the particular conversation we
#
were having, but I guess I didn't push him.
#
But you know, in his history of post independent India, he had written about the Bombay plan
#
and he said, you see, even the capitalists were aware that too much capitalism is a bad
#
Of course they were, because it's barriers to entry.
#
So my point there was that, you know, what is good for markets is not necessarily what
#
is good for particular big businesses.
#
It's always the opposite, that what ideally a free market should be is that you have no
#
Anybody can come and compete, competition is the best regulation.
#
But what businessmen will always want, hey, that protect my turf.
#
So obviously a big businessman will want something which is very protectionist, where newcomers
#
can't come up and compete against them, where the state is protecting them, and so on and
#
You can't expect a capitalist necessarily to be in favor of free markets, that you know,
#
what is pro business and pro markets can often be exactly the opposite, which is a point
#
a lot of people don't understand.
#
No, and also just the arrogance of it, right?
#
I mean, everyone talks about the Tatas and they're a great company and I have nothing
#
But there's this idea of exceptionalism, right?
#
Indian entrepreneurs can't really make steel, except us, we are amazing.
#
We can do, we can execute a big power plant really well, but it's, but the government
#
They don't trust anyone willy nilly, right?
#
I mean, today, globally, the largest steel company in the world is Arcelor Mittal, okay?
#
So this is, and if you talk to Mittal about it, he's like, Oh, I couldn't run a small
#
So I went to Indonesia and I decided that's how I'm going to build my steel empire.
#
So it's a little bit interesting how, how everyone, whether it is with good intentions,
#
whether it is because of hubris or whether it is very explicit bootlegger and Baptist
#
story that they just want to do this.
#
I don't know these people in question personally, because I wasn't around in those times, nor
#
have I studied them that keenly.
#
So I don't know what was exactly going on in their mind, but I am always very wary of
#
businessmen when they try to dictate economic policy in the specifics and not in the general.
#
And even now, the greatest calls for protectionism in India and increase in tariffs and all this
#
make in India nonsense, a lot of it is coming from industry, right?
#
For FICCI and CII, these guys are constantly.
#
So the call is always more protectionism for my industry, right?
#
Overall, we think free markets are a great idea, but in my case, I think you should increase
#
the import tariffs so that, you know, my, my particular firm or industry is protected.
#
So I am overall not, you know, thrilled about any group of people, you know, neither the
#
lowly engineers nor the almighty entrepreneurs.
#
I'm not, I'm not thrilled with any of them, nor am I impressed.
#
I want to go off on a slight tangent, but linking up to where Amit was a short while
#
ago on how do people learn?
#
How do people form views of the world?
#
So if you are a practitioner, okay, either an employee in a government organization or
#
an employee in a private organization, you're running a business, then it tends to be very
#
difficult to envision a world, five years out, 10 years out, 20 years out, that could
#
be significantly different from where we are today.
#
And at every point in India's journey, what I have experienced is that practitioners
#
wear blinkers and consider X, Y, Z to be impossible.
#
We in India will never be able to do it.
#
There are many examples of it I want to single out too.
#
The first of them was that when I landed up in India in 1993, at that time, it so happened
#
that an aspirational value for exports, for merchandise exports from India was about a
#
billion dollars a month.
#
So month after month, people would watch that number and it used to be the case that maybe
#
two, three months a year, you'll be more than a billion dollars and the rest of the year
#
we would be less than a billion dollars.
#
And people were just incomprehensibly challenged at understanding the dollar values of exports
#
that were being seen elsewhere in the world.
#
And here we are today, not so many years after that, where we get numbers in excess of $30
#
billion a month of merchandise exports.
#
But the practitioner of that age could never have dreamed this.
#
If you were in the world of business in 1993, you could never imagine an India where we
#
would be doing $30, $35 billion a month of merchandise exports.
#
Because practitioners tend to be extremely detailed and thorough in their understanding
#
of the practical reality in front of them.
#
And that comes with a lack of imagination and an ability to envision different worlds.
#
I want to tell you another story.
#
Some of my good friends were building the taxi company Meru, it was the first radio
#
And I remember them saying to me that, you know, really there's one particular Toyota
#
car, which is the perfect car to be a taxi.
#
It can take the beating, it can take the 100,000 kilometers a year that are required in the
#
But if you take the capital cost of that car into your spreadsheet, you end up with a price
#
per kilometer that just doesn't work in India.
#
And discount rates are bad, interest rates are very high.
#
So we end up having to buy crappy cars.
#
And every few years we destroy, we throw away the cars and we start over.
#
Elsewhere in the world, we buy these, any taxi company would buy these nice Toyota cars.
#
Well, it took all of 10 years.
#
In 10 years, the price points in India had shifted, the interest rates in India had shifted.
#
And there were entire taxi fleets coming about, which were those nice Toyota cars.
#
So I think that it's difficult for people to dream deeper into the future.
#
So if you talk to the folks in the Bombay club and you say to them that I will need,
#
you know, a billion dollars to build a steel factory, a billion dollars to build an electricity
#
generation plant, they would find it difficult to reconcile that with the kind of balance
#
sheets and financial access that they were seeing in that age.
#
And I think that's a reminder for all of us that we need to not worry about the practical
#
constraints of the world around us.
#
I think Bill Gates has a great line.
#
The world changes less than you think in one year and more than you think in 10 years.
#
So I think thinking for 10 years, thinking for 10, 20 years is a very different project
#
compared to small incremental improvements of one business or one government department.
#
And so practitioners find it very difficult to intellectualize.
#
Just to add to what Ajay is saying, they also don't think about in a very dynamic way and
#
accounting for innovation in particular, right?
#
For them, every technology is improving 5% in productivity in each successive plan, right?
#
That's a really important part.
#
The reason why they don't imagine that the world is going to change that drastically
#
10 years from now is every year you're only going to make marginal improvements in productivity.
#
So you're never going to get like a great phone or you're never going to get a breakthrough
#
like an mRNA vaccine, right?
#
Which is genuinely a game changer in how we do anything after that in terms of how little
#
So they don't think in terms of Zoom or technology like that where they're recording right now
#
as a genuine substitute for airline tickets for us to meet and do this in person, right?
#
Those are just things that don't occur to the bureaucratic mind, which do occur to the
#
ordinary mind and the entrepreneurial mind.
#
So the problem is even worse in one sense than what Ajay is saying.
#
It's that not only do they not do it, I don't think they can do it because their spreadsheets
#
can't account for anything more than a marginal change in technology.
#
They can't say, oh, I imagine like Martin Luther King, I have a dream that we're going
#
to have this productivity breakthrough in 10 years.
#
I think I think what Ajay said reminded me of, you know, that thing they say about futurists
#
and I say about creators in the modern creator economy that, you know, we tend to overestimate
#
the short term and underestimate the long term.
#
And I think that's something to watch out for.
#
And I'll talk about a framework that I find really fits this very well.
#
But before we do that, for my listeners, you mentioned bootleggers and Baptists, so I should
#
clarify for my listeners what exactly that is.
#
Bootleggers and Baptists is a phrase coined by Bruce Yandel, the regulatory economist.
#
And the whole idea is, you know, if you take the example of prohibition, Baptists will
#
preach that, you know, alcohol is a bad thing, it should be banned.
#
And the moment a ban is in place, a bootlegger will make lots of money.
#
So typically, Baptists and bootleggers go hand in hand and this is just something that
#
I had once written a film review of the Shah Rukh Khan film, Raees, where one of my main
#
There's a problem with that movie because they don't get together.
#
So that was my criticism.
#
Now, here's a framework that I quickly want to talk about, which I think is moves on from
#
what Ajay was talking about and is also valid to how we think of the economy in general.
#
And this is something I got from William Easterly, who's written a bunch of great books such
#
as The White Man's Burden and The Tyranny of Experts.
#
And his framework is where he talks about searchers and planners.
#
And he writes in a 2006 paper, which I'll link from the show notes, he wrote, quote,
#
historically, poverty has never been ended by central planners.
#
It is only ended by searchers, both economic and political, who explore solutions by trial
#
and error, have a way to get feedback on the ones that work and then expand the ones that
#
All of this in an unplanned, spontaneous way.
#
Examples of searchers are firms in private markets and democratically accountable politicians.
#
A planner thinks he already knows the answers.
#
He thinks of poverty as a technical engineering problem that his answers will solve.
#
A searcher admits he doesn't know the answers in advance.
#
He believes that poverty is a complicated tangle of political, social, historical, institutional
#
and technological factors.
#
A searcher only hopes to find answers to individual problems by trial and error experimentation.
#
A planner believes outsiders know enough to impose solutions.
#
A searcher believes only insiders have enough knowledge to find solutions and that most
#
solutions must be homegrown.
#
And which brings you to the power of local knowledge in markets and local government
#
But at one point, and this is where I want to sort of come at my next question for you
#
At one point, Easterly says, quote, the planners have the rhetorical advantage of promising
#
great things, the end of poverty.
#
The only thing the planners have against them is that plans don't work to help the world's
#
Not only because of the world's indifference to their poverty, but also because of ineffective
#
efforts on behalf of those who do care.
#
To escape the cycle of tragedy, we have to be tough on the ideas of the planners, even
#
while we salute their goodwill.
#
And it seems to me that here is sort of a key narrative problem.
#
Like earlier, Ajay, you spoke about how we should think of oppression as a default, of
#
people accumulating more and more power as a default and freedom as something we have
#
to fight for, something that requires eternal vigilance, as Jefferson put it.
#
That's the nature of institutions, that the moment you give power, power corrupts, and
#
then it tends to expand.
#
But the other reason that freedom has always got to fight is that all of these narratives
#
You know, when Indira Gandhi wins an election on the basis of Garibi Hatao, even though
#
all of our policies are actually hurting the poor, perpetuating poverty, that also kind
#
of becomes a difficult fight to tackle.
#
So sort of dual questions, I guess, that what do you think of this framework?
#
And is there something to that, that that narrative battle is a real one to fight otherwise
#
It is a huge issue in human affairs.
#
It's not efficient for most people to think for more than 10 minutes before voting.
#
So there will always be an information problem.
#
As Kelkar and I say in the book, most people know more about a motorcycle that they will
#
buy as compared to knowing about the GST, because they couldn't care less about what
#
happens or what goes wrong with the GST.
#
So I think of human societies as going through long, slow processes of waking up to figure
#
out that something doesn't work, you know, that the worst thing that you can do for a
#
The worst thing you can do for a society is socialism, even though these things sound
#
So unfortunately, you know, men and nations will do the right thing after trying every
#
reasonable alternative.
#
And it really takes a certain kind of shock therapy to wake up and realize that, oh, my
#
God, this didn't really didn't work.
#
If you look back, you needed the Second World War to get a lot of sensible people away from
#
the ideology of control, the ideology of state domination.
#
Not that Germany and Japan would not be as perfect and as amazing as they are today.
#
In similar fashion, you know, you needed the murder of Gandhiji to wake up the people of
#
India and, you know, get India going for 50 years in a certain direction and so on.
#
So it is these things that make us learn.
#
Unfortunately, most of us don't learn readily, and it's a very slow process and deductive
#
catchy phrases go a long way.
#
Yeah, and in fact, public choice theorists have a phrase for that rational ignorance
#
that for any one voter, it is simply not rational to spend too much time figuring out who to
#
vote for, because the chance of your one vote making a difference is very minuscule.
#
There was apparently a local election, I think somewhere in the North UP or Rajasthan, which
#
was lost by a guy with exactly one vote whose family didn't vote, you know, wouldn't have
#
made for the best dinner table conversation.
#
I was cooking food for you at home, no, why didn't you go to the booth?
#
And Naroji won his MP seat by five votes.
#
Yeah, back in the day where the world population was 40 people, yeah, so different.
#
No, and I'd say to add to rational ignorance, you know, I think the term rational apathy
#
also works, because, you know, we speak about how voters are so apathetic all the time,
#
but I'd say that that apathy is also rational, that man, I got to get on with my life.
#
It is safe for me to assume that nothing I do or say in the public domain will make a
#
difference to the world or will make a difference to governance or to society.
#
I'll just get on with my life.
#
So can I take this as a prop to ponder some of the developments that gave us 1991?
#
So we as a country were sinking into bad rates of growth, and there was just one long period
#
of absolutely horrible things that were happening.
#
Okay, so let's just go back.
#
In 1962, Nehru died, sorry, in 1962, we had the China war.
#
In 1965, we had another war and Shastri died.
#
In 1969, Indira Gandhi nationalized banks.
#
In early 1971, she won elections on the platform of Garibi Hatao.
#
In late 1971, we had a winning war, but one that involved tremendous demands upon resources.
#
And then by 74, 75, the economy was down in the dumps and the country was burning with
#
the various agitations all over the place.
#
And then we got to 1976, that was the emergency.
#
It was just one terrible long period.
#
I wish to say to everybody who's gloomy in India today, that this gloomy period ran from
#
Okay, so 15 years of bad times happens.
#
Okay, so you've got to rescale your fortitude and be willing to live through bad times and
#
bad times don't have to be short, they can be pretty long and they can be pretty disastrous.
#
What was going on in the minds of the elite and how did the elite consensus shift?
#
It's not voters really who woke up and started saying that Indian socialism is not working.
#
It was an elite led project where more and more thinking people started waking up and
#
saying, you know, this ain't working.
#
So I consider one of the most important pioneers in this field to be Arun Suri, who was writing
#
fundamental homegrown wisdom in the EPW about how the license permit Raj is generating terrible
#
It's just an observation of my own backyard, you know, all science at its best.
#
I turn around in my backyard and I describe the phenomena that I see.
#
And that was Arun Suri by the mid 60s.
#
There were people waking up and saying that, look at East Asia, they are getting their
#
They're learning to export.
#
They're getting a kind of prosperity that we have not got in India.
#
You don't need to be so pessimistic about exports.
#
That was Manmohan Singh's PhD thesis and so on.
#
So the challenge to the status quo came from people looking back at these 15 years and
#
saying, you know, it's broken and clearly we could do better than this, both based on
#
observation of what went wrong in India and on the observation of other countries who
#
are faring better than India.
#
There was an 81 IMF program and there was a 91 IMF program.
#
And that was very humiliating for all the senior policymakers who took it personally
#
that this is my failure, that we failed.
#
And so we had to go to the IMF and the World Bank with a begging bowl and take loans and
#
aid in order to tide over these situations.
#
And one last element I would add to that was the fall of the USSR.
#
It also changed the geopolitical configuration of the world.
#
So in 1971, when Indira Gandhi went to war in Bangladesh, she made India more cozy with
#
the USSR than ever before with the Friendship Treaty.
#
And when there was a fall of the USSR in 1989, folks like Narsimha Rao clearly understood
#
that the world had changed and we needed to find a new place in this world.
#
And this was one more element of the understanding, not just an economic understanding.
#
Of course, there was an economic understanding that the great proponent of socialism had
#
collapsed, but also that we in India now needed to find our way in a difficult world where
#
we did not have friends in the form of the USSR.
#
And so now what were we going to do?
#
And it reiterated the importance that we had to become strong economically, otherwise there
#
were going to be dreadful consequences.
#
So I think of this as the theory of change that brought us through the market orientation
#
from 1977 to 1991, as opposed to the stagnation and the mistakes of 1962 to 1977.
#
I would add a few more things to this, if I may.
#
I very much agree with Ajay.
#
I would say that I think some of the unsung heroes of this time are some very senior bureaucrats
#
And these people are not necessarily free market people.
#
A lot of the reforms for socialism came from people who were fundamentally socialist and
#
who said, hey, the system's not working very well.
#
Industrial licensing, we set it up with a particular goal in mind and it's not working
#
the way we think it should be working.
#
So something needs to change for us to meet our goal.
#
So they saw this huge...
#
It was very incongruent, the means they were using and the ends that they intended.
#
I think that's a really important part.
#
So one tradition we have lost in India is very good expert committee reports and very
#
high quality parliamentary bipartisan or multi-partisan standing committee reports and things like
#
There was a tradition which was... when you called a parliamentary committee, it was always
#
given to the best people.
#
It was typically not a cronyist event.
#
Now they always had the option of ignoring the committee report.
#
So they never tried to rig it or...
#
The tendencies were not what they are today, which is either you don't call the committee
#
or you just kind of undermine it before it begins.
#
So I think some of those committee reports from that time are still relevant.
#
So that's one thing I want to highlight, that there are some of these unsung heroes, we
#
don't know their names.
#
So we know the names of, for instance, like Abid Hussain committee on trade reforms in
#
the early 80s or something like that.
#
So we know the person who led the committee, but there were a lot of people doing good
#
The second is there is also a lot of historical accidents here.
#
It's not clear to me that Indira Gandhi, she's very socialist, so don't get me wrong.
#
I'm not saying that she's not socialist, but I don't think she came in with the same commitment
#
to socialism like say Nehru did.
#
Her commitment to socialism is a little bit more accidental and it's also the consequence
#
of a power struggle that happens within India.
#
So if you look at what happened in 1966, India had to undergo a devaluation.
#
It had a very similar foreign exchange currency crisis at the time.
#
IMF and World Bank, basically the Washington Consensus before it was even called the Washington
#
Consensus, came up with the prescription.
#
They said, we'll give you the loan.
#
You need to do this laundry list of things, but a few things happened simultaneously.
#
One is there were two moments of a break within the Congress party, right?
#
And the people who were against Indira Gandhi were the more liberal minded, reform minded
#
And she wanted to split from them because she was the one who wanted to be in power.
#
So this is the split with the syndicate in Congress, right?
#
And it just so happens that she was against the liberal side, so she became more socialist.
#
The second part of it is interpersonal relationships, right?
#
Like the way the Lyndon Johnson administration behaves by making India beg for PL480, you
#
know, each wheat shipment when India is going through a terrific shortage is going to come
#
one at a time and it needs like you need to beg and then it will be approved as opposed
#
to just opening arms and giving aid to a country which is clearly struggling in a moment of
#
Now these things make them very suspicious of America once again.
#
Now in 66, Ann Kruger has a great quote, it's a long one, so I'm not going to read it out,
#
but she kind of, you know, tries to think of a counterfactual that in 66 if India had
#
done what IMF had suggested and Indira Gandhi had gone the South Korea way, like where would
#
Look at South Korea's economy today.
#
It's a developed country.
#
And when South Korea started in the 1950s, it was like equivalent to what Syria or Yemen
#
It was torn by civil war.
#
It's the third poorest economy in the world and in a matter of 15, 20 years, they kind
#
of just, you know, escaped out of that poverty trap.
#
So Ann Kruger talks about how 1966 may or could have been a moment and what if it had
#
So there is a bunch of historical accidents and there is some internal churn going on
#
by well-meaning economists and technocrats.
#
Many of whom are actually dealing with the IMF at this time and they recognize the kind
#
of failures of their policy.
#
And when you come to the 1980s, about 10 to 12 years before the reform period that, you
#
know, that as Ajay mentioned, there is a series of really good reports, okay?
#
And the reports matter for two reasons.
#
One, they are coming from an elite perspective and we know the collective action problems
#
of voters getting together to defeat one ideology versus another ideology.
#
I don't think the voters have still managed to do that.
#
You know, even 30 years after liberalization.
#
But the second part is these elites have buy-in within the government.
#
They are part of the state machinery.
#
It's very different than Shruti Rajgopalan, Ajay Shah and Amit Verma talking over a podcast
#
about MRTP being bad, right?
#
There is a difference when there is actually a Satchar Committee report on MRTP, right?
#
And that report from the inside examines it.
#
They understand what is going on.
#
They understand how to write the recommendations in a way that they have buy-in within the
#
community that they are involved in and how to make these things go through.
#
Now, of course, this happens in 1979, early 80s, MRTP doesn't get reformed until the early
#
So there's a long time period.
#
But as Ajay said, 15 years, 20 years for these kinds of elite-led reforms is not that long
#
It takes that long for ideas to come in and for them to take root and things like that.
#
And the third is here I have a bit of an issue with my own community, which is that of professional
#
If you think about the 70s, once the Korean miracle has happened, by the 70s, I mean early
#
70s, you have Bhagwati and Padma Desai have written their book on how industrial licensing
#
and the entire industrial planning system is simply not working.
#
By the mid to late 70s, you have T N Srinivasan, you have Jagdish Bhagwati.
#
I mean, Jagdish Bhagwati is at MIT, T N Srinivasan is at Yale.
#
These are elite economists at top institutions and when they have a position on economic
#
development in Asia, it matters, okay?
#
Look at what today's development economists are doing, right?
#
I mean, they're very credible, they're excellent people, but today's development economists
#
are not talking about trade as the route to prosperity, right?
#
Today's development economists are tinkering.
#
Industrial protection programs, if we tinker a little bit and pull this lever and give
#
a sari instead of 200 rupees or have a timestamp instead of this other mechanism, what are
#
we going to get, right?
#
So there has also been a really big problem within the elite economics community.
#
There is a crisis where development economics has become a field in its own.
#
I don't even know sometimes what it means, but the engines of growth, which is, you know,
#
long macro monetary policy or trade policy, these things are now just taken for granted.
#
It's not fashionable to work on these things anymore.
#
I can't remember the last time I read something new, which was not like a journal of economics
#
perspectives piece that was really good on free trade as the engine of growth or like
#
endogenous growth theory or innovation specifically applied to developing economies or sub-Saharan
#
Africa or something like that.
#
That work is not existing, right?
#
Which means the next generation of economists who are trained are going to be doing something
#
a little bit different and it does matter.
#
And it matters not because of what Modi is going to do tomorrow, but it matters 15 years
#
from now, who is going to dig us out of this grave when the opportune moment comes, right?
#
Who is that such a committee report going to be written by in 2034?
#
Those people need to exist and they need to be trained and they need to be influenced
#
That actually depresses me more than virtually anything else that we're seeing right now.
#
If I may just continue on the sociology of the economics profession.
#
Shruti, as you know, well, Jagdish Bhagwati and T. N. Srinivasan started out at the Delhi
#
And so I actually trained them as Indian economists and not as MIT or Yale economists.
#
So they're Indian economists, but they get the world stage and they're talking about
#
India at a global platform with a certain amount of credibility, which really makes
#
a difference even for the Indians listening to them.
#
The Indians are more likely to listen to T. N. Srinivasan and Bhagwati when they come from
#
I just like to emphasize they pick their knowledge here out of observation of their backyard.
#
So it was in the great traditions, as I said earlier, that, you know, George Akerlof went
#
out walking from ISI Delhi and saw people selling vegetables and invented the lemons
#
So observation is the key being immersed authentically in that reality is what gave Jagdish Bhagwati
#
and T. N. Srinivasan the novel insights that they had.
#
Turning to the Indian landscape of that period, I felt there is an interesting distinction
#
between a Delhi community and a Bombay community of that period.
#
The Delhi community was very much part of Nehru's central planning of the idea that
#
the economists had access to some unique knowledge and the ability to plan.
#
So the economists cast themselves as social engineers, what might today be fashionable
#
for the computer technologists to call platform designers, that they will design society.
#
So those kinds of things were the flavor, the nature of the Delhi community, whereas
#
in Bombay, it seems to me that there was a greater nurturing of an economics that A,
#
did not involve the key protagonists possessing any power.
#
So they were more academic economists rather than going and running some central planning
#
or operation or the other and B, being closer to the private sector and seeing private sector
#
dynamism and capabilities and internationalization and so on.
#
And it seems to me that there is a very interesting moment in 1977, where Morarji Desai became
#
prime minister and H. M. Patel became the finance minister and D. T. Lakdawala became
#
the deputy chairman of the planning commission.
#
And these three people brought in a different ideology, a different framework.
#
There was a lot of gnashing of teeth and biting of nails on the part of some of the Delhi
#
establishment because these were not the cool kids who were spinning planning models.
#
But then that was the point.
#
That was how we started bringing new ideas to bear as compared to the old establishment,
#
which was this mixture of poverty and redistribution and mistrust of markets and central planning.
#
And one last addition to this Delhi-Bombay thing, there is also a majority of the pushback
#
is coming from the Forum for Free Enterprise.
#
I mean, Ajay mentioned Arun Shourie, Rajaji fortnightly writes about the stupidity of
#
price controls and the Essential Commodities Act and like the license.
#
He coined the term license permit Raj and so on.
#
You have people like Masani and Ady Trof giving lectures.
#
So there is a whole Bombay intellectual community, which is far less, you know, mistrustful of
#
private enterprise and far more in line with, hey, what are the engines of growth and what
#
are the unintended consequences?
#
One person I want to mention here who's like never thought of as an economist, but I think
#
had great writings of that time is Nani Palkiwala.
#
Nani Palkiwala is like the first public finance, like sensible public finance thinker we have
#
in India because he started out as a tax lawyer and about talking about, look at what the
#
And he came at it from two points of view, right, which are very valuable to the conversation
#
One is, hey, this simply doesn't work, right?
#
It has all these unintended consequences.
#
And the second is the constitutional rule of law perspective, which is what kind of society
#
can you have if your highest tax rates are 97% and you're going to end up making a criminal
#
out of everybody because no reasonable person is going to be willing to part with 97% of
#
the income that they've earned, you know, so on and so forth.
#
And so he comes at it from a very interesting perspective.
#
And Ajay is absolutely right that there is something very interesting going on in Bombay
#
at that time, culturally, that there is this group of people who are not just writing about
#
it, but they actively engage with the public, which is also something missing in Delhi,
#
Delhi people are not doing these huge public lectures and they're not really trying to
#
It's a very insider game.
#
We know how the game is played.
#
We are technical economists.
#
We know how the system works and we are going to make these clever plans and talk to each
#
other about it at the IIC.
#
And I think Bombay is just a fundamentally different culture, intellectually, not just
#
in terms of ideas, but also the dissemination.
#
So you know, you said there's something interesting going on in Bombay.
#
These days, the only interesting thing going on in Bombay is the seen and the unseen.
#
We'll take a quick commercial break now, but after which we'll talk directly about the
#
I did want to spend some time doing the segue from the Nehru years to the Indira years because
#
things became much worse.
#
But you've put a very interesting kind of nuance there, like one view of Indira, which
#
is essentially correct, is that economically she was a complete disaster.
#
People speak of the emergency, but I think a lot of what she did in terms of her economics,
#
they were crimes on humanity, they perpetuated poverty and suffering throughout the country.
#
But the interesting nuance that you pointed out is that she wasn't a committed socialist
#
She went in that direction because of political imperative.
#
She had to combat the syndicate within the Congress party, as it were.
#
And this was just a positioning game that she could, you know, position herself as apart
#
And it also sold well, you know, gari bhi hatao, good intentions sell well.
#
But at the same time, you know, it could have been reason for hope for some had she lived
#
because maybe she had no convictions, maybe she was just a sociopath will do whatever.
#
Certainly her young son Sanjay was and of course, a lot of the way she behaved came
#
from those incentives ki bete ko khush karna hai.
#
But you know, so we'll go directly to 91 after the break.
#
But before that, I leave my listeners with a thought that Ajay when he was speaking,
#
he mentioned he spoke about the elites of that period who were on these committees and
#
who had access to, you know, to bureaucrats and to politicians and not just people sitting
#
around doing a podcast.
#
And the thought struck me that imagine if I was to try and do a podcast in that period,
#
I would never get a license, right?
#
Because first of all, the conception of my podcast originally was very different 20 minute
#
episodes, a lot of experimentation brought me here, I would have had to apply for a license
#
for the original conception, which would have taken five years to come.
#
And the experimentation would never have happened.
#
And there would have been monthly bribes I would have had to pay.
#
The other thought I'll leave people with, which I've, you know, mentioned sometimes
#
in the context of agriculture, which was a one part of our economy, which wasn't sort
#
of reformed in 91 is that imagine that if writers had to go through an APMC.
#
So you're a writer, but you can't sell to any publication, you know, according to sort
#
of mutual concentration that you know, this is you pay me this much, I'll give it to you
#
for this much, blah, blah, you can't, you have to sell it to an APMC for writers, right?
#
Maybe a WPMC as it were, and they'll give you a fixed price.
#
And then they have all the writing in front of them and they sell that on to publications
#
So it would really be the equivalent of you getting say 200 rupees for a piece, which
#
they then sell all to the publication for 10,000 rupees.
#
And that's exactly what's been happening in agriculture for decades.
#
Ajay and I have a great episode on these recent farm laws.
#
In fact, which is, I think one of my top 10 episodes, so much lucidity and insight there
#
as there will be in this episode also after we come back from the break.
#
Long before I was a podcaster, I was a writer.
#
In fact, chances are that many of you first heard of me because of my blog India Uncut,
#
which was active between 2003 and 2009 and became somewhat popular at the time.
#
I love the freedom the form gave me and I feel I was shaped by it in many ways.
#
I exercise my writing muscle every day and was forced to think about many different things
#
because I wrote about many different things.
#
Well, that phase in my life ended for various reasons and now it is time to revive it.
#
Only now I'm doing it through a newsletter.
#
I have started the India Uncut newsletter at indiancut.substack.com where I will write
#
regularly about whatever catches my fancy.
#
I'll write about some of the themes I cover in this podcast and about much else.
#
So please do head on over to indiancut.substack.com and subscribe.
#
Once you sign up, each new installment that I write will land up in your email inbox.
#
You don't need to go anywhere.
#
So subscribe now for free.
#
The India Uncut newsletter at indiancut.substack.com.
#
Welcome back to the scene in the unseen.
#
I'm chatting with Ajay Shah and Shruti Rajgopalan on the importance of the 1991 reforms.
#
And finally, after two hours of conversation and hopefully delightful digressions, which
#
you would have found as interesting as I did, we have reached 1991 or not yet, because people
#
I think often speak of 1991 as if it is this fixed moment in time where there was a quantum
#
leap in events and everything just changed.
#
But actually there was a gradual process as both of you pointed out before the break,
#
which was underway, you know, what some economists have termed as liberalization by stealth happening
#
So tell me a little bit about that.
#
I mean, especially it's always fascinating to me to speak to you, Ajay, on all of this,
#
because it almost seems like you're discussing the French Revolution with someone who was
#
actually there when people were getting beheaded and who knew Robespierre personally and all
#
He just called you old.
#
Because I didn't call him old.
#
His co-author, Vijay Kelkar, was part of some of these committees.
#
I was just reading Rakesh Mohan's essays on what went on behind the scenes at that time
#
and Mr. Kelkar was a part of that to some extent.
#
Ajay, so take me through a bit of that process in the decade past, like when we look back,
#
it's easy to think of Indira as a socialist sociopathic monster, which of course she was
#
for a significant period of time.
#
But there is also this narrative that at a certain point in time in the late 70s and
#
early 80s, even she was beginning to give in to reason and sense which was coming from
#
others, you know, and so on with Rajiv Gandhi as well.
#
And had Rajiv actually lived, perhaps a liberalisation would have happened anyway, because he was
#
already turning towards the conclusion that we needed all of this, regardless of the crisis
#
that eventually happened.
#
So take me through the landscape.
#
There's a really important break in this history in 1977, where, as I mentioned, Morarji Desai,
#
Patel and D. T. Lakhtawala became the big three economic policy people of that period.
#
In those days, the deputy chairman planning commission really mattered much more than
#
And it was a cautious process of liberalisation.
#
So for example, instead of a tariff being 300%, it would be 200%.
#
In the early 80s, it was the concept of broadbanding of industrial licenses, where instead of having
#
a license to make a 20-minute podcast, they would say anybody who has a license to make
#
a 20-minute podcast is automatically deemed permitted to make a podcast of any length
#
between 10 minutes and 30 minutes.
#
And after liberalisation, because you suddenly got to move in an incremental way around your
#
ecosystem and find something that made a little more sense.
#
And these early steps in reform were actually successful rather quickly.
#
If you do the econometrics of structural breaks in GDP growth, right there in 1979-80, we
#
get a jump to 5.5% growth compared to the so-called Hindu rate of growth of 3.5%.
#
So fairly modest changes generated a decent impact on growth fairly early.
#
There are two big features of that early period, which we, in hindsight, would see as very
#
different compared to what happened after 1991.
#
The first was that it was very domestic-centric.
#
There was not a liberalisation opening up to the outside world.
#
So it was like a pre-globalisation phase of fixing up some of the domestic economy.
#
And the second big feature of that period is very little was done on finance.
#
It was all real-sector focused because can we get goods and services and raw materials
#
to move a little better?
#
My good friend Vivek Bhatia, who used to be in business today, tells me of the time when
#
he was a reporter, and in 1981, we got the big control of the price of steel and cement.
#
And there was like a funeral atmosphere in the Ministry of Steel and the Ministry of
#
OK, so did you know there was a Ministry of Cement or things like that?
#
I don't even remember what was the name of the department.
#
But this sounds trivial that there should be no government involvement in the price
#
There should be no government involvement in the price of cement.
#
But at the time, it was a big deal.
#
It was a very big deal.
#
It was as strange as the few market-oriented economists in India today who get the idea
#
that there is no role for a government in the currency market.
#
If you try to say in India today that the exchange rate should move based on market
#
forces, it would be a novel proposition for many people.
#
In similar fashion, it might sound obvious today, but at the time, it was a big deal.
#
And these were important liberalizations.
#
I can't help tell a funny story, my family story.
#
We moved into my present house in Bandra East in 1972.
#
And it was a cooperative housing society where in those days, the people who were members
#
of the cooperative society had to do a lot of the heavy lifting to make the thing happen.
#
And that was an age where there were shortages of cement.
#
So the thing got delayed for years and years in getting built until 1972 when we moved
#
in because individuals had to just figure out that, oh, there's a little bit of cement
#
Let's scramble over and get that cement.
#
And then the project would make some progress.
#
And then again, it would grind to a halt because there was not enough cement.
#
So these seem like small things, but they are a very big deal that a government involvement
#
in the price of cement or the price of steel is a huge distortion.
#
And many of these incremental things were getting done.
#
And as Shruti emphasized a moment ago with Nehru, there was a positive feedback process
#
that Nehru and Mahalanabes scored a significant acceleration of Indian growth compared with
#
In similar fashion, this community of the reformers gained confidence and earned respect
#
and gained credibility because right there after 1977, in 1979-80, there was a structural
#
break in GDP growth and growth accelerated to 5.5%.
#
And so this process was working its way through the 80s, and then we had a terrible mess in
#
the late 80s where many things came together.
#
There was domestic political difficulties that led to reckless fiscal policy, which
#
spilled over into a large current account deficit.
#
And then we had oil shocks after 1979, and those things came together and generated a
#
balance of payments crisis.
#
At a time when the political conditions in the union government were completely broken.
#
So that gave us the big messy BOP crisis.
#
Once again, to underline what Shruti was saying a moment ago about many people thinking about
#
these things and rebuilding the policy framework, it is not widely known that the Chandrashekhar
#
government with Yashwant Sinha as the finance minister had worked out a good chunk of a
#
complex policy package that would be done that looks a lot like what was finally unveiled
#
by Narasimha Rao and Manmohan Singh.
#
But it didn't happen because that government collapsed.
#
And then finally, we get to that epochal final moment where we had the absolute genius of
#
folks like Narasimha Rao as Prime Minister, A.N.
#
Sinha in the Prime Minister's office, Chidambaram as Commerce Minister, Manmohan Singh as Finance
#
Minister, Monte Kaluwalia as Finance Secretary.
#
Earlier, he was the Commerce Secretary with Chidambaram and Ashok Desai as the Chief Economic
#
Advisor to Manmohan Singh.
#
And all this came together and we just got a huge jump forward.
#
And my important characterization of this second phase is that it was opening up to
#
It was reducing trade barriers, it was reducing capital controls, and it was commencing on
#
domestic financial system.
#
So these are the two different phases of 77 to 91 as being more domestically oriented
#
and the 91 reforms as being more about the external sector and about finance.
#
I would add a few things to what Ajay said.
#
So first, I should plug the project, right?
#
So some of the things that Ajay spoke about are directly about the 1991 project.
#
So the website is then 1991project.com.
#
There were two crises that were happening simultaneously.
#
So Ajay is absolutely right, the structural break happens in the 80s.
#
But one is some of this, the benefits you're getting because of broad banding, right?
#
Like first you could make spoons, now you can also make forks.
#
So of course there's an expansion in what you can make and there is a reallocation of
#
goods going to slightly higher valued users.
#
So it's very, it's more productivity, but simultaneously the government had gotten into
#
all sorts of crazy welfare spending.
#
By the 80s, the croniest socialist state is kind of at its peak, right?
#
So everything you have from your loan waivers to a complete mess that is happening with
#
the banking system to increase in all your agricultural subsidies, post green revolution,
#
all this is like, you know, there's a huge fiscal burden.
#
So while there is growth in the 80s, I mean, we should also talk about how the deficit
#
started to become very large in the 80s and became a little bit unmanageable, right?
#
So both on the books deficit and off the books deficit.
#
The second is there's always all these global accidents that really matter, right?
#
So we knew that there is a balance of payments crisis brewing.
#
It's not like they woke up one day in 1991 and they realized that it's a problem.
#
They knew that this is going to come and go, but they thought at least the way the bureaucrats,
#
many of them tell the story is that Rajiv Gandhi was supposed to be the intended reformer
#
He had already brought in some technocrats.
#
He was being advised by Jairam Ramesh and Sam Petroda.
#
You know, they were like very, it was very unusual because they were very young people
#
who were liberal minded and studied in America as opposed to the old Nehruvian guard, which
#
had been advising members of his family before that.
#
And Montek Singh Aluvalia has talked about how he prepared a reform document, which later
#
became like a blueprint called the M document, but he started preparing it initially thinking
#
that Rajiv Gandhi is going to come to power.
#
And there were some murmurs that Rajiv Gandhi was a little bit more reform oriented than
#
his mother and the previous prime minister.
#
Simultaneously, globally, the Gulf War happens.
#
And this is where it's the balance, you know, you could have had a fiscal deficit crisis
#
that pushed India into reform, just happened to be a balance of payments crisis, right?
#
And what really ends up happening is we don't have enough foreign exchange to buy essentials.
#
And by the time you get to the mid nineties, right?
#
And the late nineties, you can't afford more than three, four weeks of oil imports because
#
the Gulf War has made oil suddenly very expensive, right?
#
And you're not exporting enough to earn enough foreign exchange to buy the imports.
#
That is, you know, in a nutshell, what the balance of payments crisis is.
#
But people know this is coming.
#
So there are a few things going on.
#
Verma, who is Narsimha Rao's, you know, sort of like the prime minister's office, the main
#
guy, but he was industry secretary before that.
#
So he had written with Rakesh Mohan a detailed note on the licensing while he was in the
#
industry secretary, right?
#
That work had been going on since 1988.
#
For instance, you had Montek, who immediately after Rajiv Gandhi died, it just so happened
#
that in those years, the world was a little bit less partisan, right?
#
So V.P Singh invited Montek Alawalia to be an advisor to his government when V.P Singh's
#
government suddenly lost confidence and he had to resign.
#
The Chandrasekhar government kept a lot of these old people on, right?
#
So they were, they continued to be advised by the A.N.
#
Verma's and, you know, the Rakesh Mohan.
#
So all these people, there was a lot of continuity.
#
So the idea that there were these three or four people who just suddenly showed up on
#
the scene and there was a balance of payments crisis and boy, last six weeks later, we had
#
That's a very reductive view.
#
These things were cooking for a long period because if they don't cook for a long period,
#
you get blunders like demonetization.
#
You know, I want to put this out there.
#
Demonetization is also an economic reform.
#
It is just a very, very bad idea and it had no consultative process and it didn't go through
#
the two things that Ajay has been flagging this whole time, which is I look in my backyard
#
and I talk about what's happening, right?
#
And second, a very clean analytical framework to say, why do we have these restrictions
#
Why do we have 75 industries on this list?
#
Why can't we just remove it, right?
#
Why do small scale industries deserve protection?
#
So that's one part of it.
#
And the second part of it that I want to flag, and I think we've done a good job of this
#
So right now, when we launched the project, we kind of gave the series of events that
#
I told you about, and it eventually precipitated in India can't afford imports, the world economy
#
has lost confidence in India, Moody's and S&P downgrades, the economy.
#
India is literally forced to sell its gold, which is a matter of great shame, because
#
this is something even the public understands, right?
#
You only pawn your family assets when, as they say, Diwala Nikal Gaya Hai, right?
#
Like you really, you're at the brink of bankruptcy.
#
So all this stuff is going on.
#
Two more things which are interesting here.
#
One is Narsimha Rao, when he was the external affairs minister with Rajiv Gandhi, has been
#
to China, he's been to Singapore, he's been to Korea, right?
#
These guys have seen the Asian miracle, and Narsimha Rao in particular is very inspired
#
by Deng Xiaoping, right?
#
And China matters a lot.
#
So Ajay mentioned that, you know, the Berlin Wall fell and, you know, the Soviet Union
#
is kind of collapsing and breaking down.
#
We already know about the South Korean miracle.
#
But at that point, when Anne Kruger and Bhagwati were talking about South Korea and Taiwan
#
being these amazing examples of growth, most of the development economists said, yeah,
#
but they are small countries.
#
You can't have this for India or China.
#
So when China sees a big difference in rates of growth when they start liberalizing in
#
the late 70s, now clearly there is a template for Indians to follow, right?
#
And it seems like Narsimha Rao, either because he was personally enamored or otherwise, is
#
a big fan of this template.
#
He wasn't able to meet Deng Xiaoping.
#
That's an interesting aside, but he's very inspired by it.
#
And Manmohan Singh is quite important in this story because he has at that point occupied
#
every important office within the bureaucracy that an economist could have occupied.
#
He's been at the Ministry of Finance.
#
He's been a chief economic advisor.
#
He's been a deputy governor at the RBI.
#
And these things matter because they foster trust, right?
#
When you want to push something through in the government and you want to do it quickly,
#
you have to be able to pick up the phone and call five people.
#
And they're more likely to listen to you if you worked with them before or you've established
#
a certain amount of credibility or people trust your economic judgment and your political
#
savvy and they know that you have the ear of the prime minister and so on and so forth.
#
So I would say in this instance, the technical skills of Manmohan Singh may have mattered
#
less than his actual experience within the Indian government.
#
So one of the things we came across was we wanted to put this story together.
#
We came up with a list of about 20 to 22 bureaucrats and many of them Ajay already mentioned.
#
So it's A. N. Varma, but it's also C. Rangarajan who is at the RBI at the time.
#
C. Rangarajan went on later to write the balance of payments committee report for the Reserve
#
Bank of India, which is still, it's like a textbook kind of thing that we all studied
#
in college, the Rangarajan committee report.
#
So these guys are very sound economists.
#
They are entrenched in a system in a good way in the sense that they all know each other.
#
They worked with each other.
#
They were together in a different capacity at a previous time.
#
They know what they are doing, which is a very large part of the reform story.
#
I don't think we've been able to recreate that in modern times because one, there is
#
a lot of partisan who belongs to which party kind of thing.
#
Now there is a whole, you know, the prime minister is a Gujarati.
#
So the Gujarat carder will be given precedence in all important positions in the bureaucracy.
#
So there's a lot of strange things going on.
#
I mean, there's an insider, outsider cut depending on caste and language and state and party
#
and economic background, but that seemed to have not been the case in that sort of like
#
a golden period of reform, as we call it.
#
And the last thing I'd say here is though we haven't gotten to that point in the project
#
yet, a lot of these people continue to consult for the government even well into the Vajpayee
#
You know, all this human capital and knowledge and expertise and connections that had been
#
built up, they didn't just disappear, right?
#
They were held on as people, you know, there was a lot of continuity, which is something
#
we don't see in government today for a long time, right?
#
And the people who do have continuity, we don't give them status.
#
So the reason, one of the reasons we put up the bios of all these people and we wanted
#
pictures and names and faces is people should know who Sri Rangarajan is.
#
You know, like, like they should recognize this face.
#
This should be a very high status individual, right?
#
These people should be celebrated because they come with the, like, you know, even scientists
#
the other day I saw in the Wimbledon, they stood up and gave a standing ovation to one
#
of the people who was involved in the AstraZeneca vaccine, right?
#
Like we've got to recognize who are the people outside the prime minister alone, like one
#
individual who work for 10, 15, 20 years for a very long and consistent period of time.
#
And they're able to nurture ideas, they're able to mentor the next generation of bureaucrats
#
and therefore there is a continuity in reforms.
#
So when I unpeel the 1991 story, the issue is not whether July 24, 1991 is a special
#
date and some, you know, there was a secret sauce and some magic happened and the astrological,
#
you know, universe aligned.
#
It is that when the moment could align and when the window opened, all this work had
#
already been done and all these people were already in position to make sure that sensible
#
ideas can actually be followed through in a sensible way.
#
So I think that to me is the most interesting part to add to what Ajay said.
#
I agree with everything Shruti has said, I have a few more aspects and illustrations
#
So I was just thinking about Vijay Kelkar's story.
#
He started out as economic advisor in the Ministry of Petroleum.
#
And so first, interestingly and surprisingly in the modern world, after some years in the
#
Ministry of Petroleum, starting out as an economic advisor, he became the secretary
#
So these days, career economists would not become the heads of department.
#
It just doesn't happen anymore.
#
But it was happening in those days.
#
Similarly, Monte Caluvalia was secretary commerce with Chidambaram as the minister in 1991, which
#
was very important to the trade liberalization, which happened in that period.
#
The second interesting thing is Vijay Kelkar got six full years as secretary, which is
#
something that I just unheard of these days.
#
And in those six years, he basically got that entire pipeline done of opening up to private
#
sector participation in oil exploration, in oil extraction, in refining, all the way to
#
retail, which I think got a bit messed up.
#
But six years is the kind of time horizon.
#
And note this is on top of many years spent in the ministry as the economic advisor.
#
So earlier, he was the advisor to people like Lavraj Kumar who were there when Lavraj Kumar
#
He blessed and anointed his successor.
#
So again, it was a different age that a person like that was given the continuity of going
#
on from being economic advisor to secretary and then got six years as secretary.
#
And it's a big important change that the petroleum industry is one of the most important industries
#
from the overall economy and piece by piece, that kind of detailed technical attention
#
was required in many, many parts of the ecosystem.
#
Second story I just want to tell at a more personal level.
#
I was hired by Yashwant Sinha and Rakesh Mohan at the Department of Economic Affairs.
#
And a short while later, Yashwant Singh became finance minister.
#
And with him, S. Narayan was the finance secretary and K. L. Kerr came in as advisor to the minister.
#
And after that, there were the elections and Chidambaram became the minister.
#
It never occurred to me that I was partisan because I truly wasn't, I was just a technician.
#
I was just used to solving technical puzzles and intellectual problems.
#
It never occurred to me that I had one side of the ideological spectrum or the other.
#
There was a whole world, there was a culture of experts and expertise and people worked
#
with government period.
#
It didn't matter who you were.
#
So as an example, when Monte Carlo Valia finished up as finance secretary, he went to the planning
#
commission, Vijay K. L. Kerr replaced him.
#
He came from being minister of petroleum, he became finance secretary at the Department
#
There was no fuss about these things.
#
It didn't matter that are you with this government or that government.
#
And then K. L. Kerr went to the IMF as the director.
#
And when Vajpayee was prime minister and Jashwant Singh was finance minister, K. L. Kerr came
#
back as advisor to the minister at the North block.
#
There was no fuss about all these things.
#
And has it changed today?
#
Yeah, that today all the features I described, you won't find career experts becoming secretaries.
#
You won't find long tenures.
#
So a younger person getting six years as secretary, I can't recall the last time it happened.
#
And you don't find people spanning across governments.
#
Today, you have to wear your loyalty on your sleeve on Twitter, and then it becomes awkward.
#
I mean, there are a lot of problems with the permanent executive and the way we have these
#
bureaucratic appointments and they're virtually lifelong tenure and things like that, right?
#
I know all the problems with it.
#
It's like a whole yes minister comedy in itself, right?
#
But the single advantage of it is you can have continuity across government, right?
#
And you can have people who can see through reforms past the point of political opportunism
#
So it seems to me like we've taken the worst of every world and we have made sure that
#
the one benefit there is of this kind of permanent executive also goes away because the partisan
#
politics has also been brought into that.
#
The second is there, I mean, seniority was always important and all these things were
#
always important, but people did recognize someone of merit and more importantly, someone
#
of technical expertise, right?
#
So you did recognize then when Mohan Singh has a PhD in economics and he has taught and
#
he is an expert in trade or something else and therefore he should be this particular
#
deputy governor at RBI, he should do this particular role at the finance ministry and
#
so on and kind of circulate.
#
I feel like that has also disappeared now.
#
Now it's more like I need my guy to be at the environmental ministry because I need
#
my guy to make sure that my files can move forward and now multiply that across the ministry
#
of finance and commerce and industry and everything else.
#
So some of the second stage downstream problems of license Raj have also crept into this unintended
#
part of how we treat the bureaucracy.
#
You need your guy there because otherwise things get stuck and there's no way to move
#
But if you put your guy there, you're not always going to have expertise and loyalty.
#
That's a very rare thing to get.
#
And you might even get it in one person, you're not going to get it across the board, right?
#
So that's, I think, really, really important.
#
It's also the same with judges, when was the last time you got a Supreme Court Chief Justice
#
who had a tenure longer than, you know, a year, year and a half.
#
Supreme Court justice, the standard tenure is a couple of years, less than two years,
#
So this is not just a bureaucracy thing.
#
This plague is everywhere inside the government.
#
And a great example of this plague of loyalty, as it were, is what happened after demonetization
#
where every economist either associated with the government or who had otherwise supported
#
it were essentially told that, right, in support of it.
#
Of course, the three of us all wrote opposing demonetization from day one, but there are
#
so many people who definitely knew better, who actually wrote in support of demonetization
#
even though they knew it was a disaster because they had to stay on the good books of the
#
And there are incidents which reveal something about a person's expertise and competence,
#
and there are incidents which reveal something about their character.
#
And I think a lot of that happened around that time where, you know, people who we would
#
otherwise think of as fine thinkers, you realize that their scholarship might be good, but
#
they're deficient in character when, you know, they don't sort of vote with their conscience
#
I want to tell a character story.
#
I had started writing a column in the business standard.
#
Many years ago Ashok Desai moved out of the Ministry of Finance and joined the business
#
standard and he got me going writing a column in the business standard.
#
And there was some situation where I had written something very critical or something that
#
And that day or the next day I bumped into Monte Carlo and I said, I kind of apologetically
#
said, I hope you're okay with the fact that I really disagree with what you've done.
#
And I wrote harsh words criticizing you in the newspaper.
#
He said, you know, on this subject, I happen to agree with you completely.
#
And he said, I am not monolithic, I am one creature out of a complex machine called the
#
Very often I might advocate something internally and I might lose and the outcome that comes
#
out is something that I may not agree with.
#
And I might secretly applaud when you write something in the newspaper attacking the Ministry
#
So he says, you should never worry about offending me when you write in the newspaper.
#
It really gave me comfort.
#
Similarly, I remember the times when I was at NIPFP and we were explicitly funded by
#
the Ministry of Finance.
#
And you know, fortnight after fortnight, I used to be writing stuff in the newspaper
#
about all the things being done wrong by the government.
#
And it was just, it was never a problem.
#
It was an age when knowledge mattered, when arguments mattered, when criticisms mattered.
#
The people at the top were secure enough to understand that this is the part of the process
#
of how we fix things, that it is important to solve problems and criticism is an integral
#
My last funny story is that prior to the 2004 general elections, the Lok Sabha elections,
#
there was a debate between Jaswant Singh and the shadow finance minister, namely Manmohan
#
Okay, so imagine it was a more evolved India where these things could happen.
#
And Jaswant Singh was taken aback when Manmohan Singh said that there is a problem with interest
#
rate exposure of banks in India.
#
And it's not just me saying it.
#
One of your own economic advisors has written a paper, there's this guy called Ajay Shah
#
who's written a paper, which has demonstrated that the banks are facing a lot of difficulties
#
and will potentially have a banking crisis because of the currency mismatch in the banks.
#
And Jaswant Singh came back home and said, who is this guy Ajay Shah and I want his head
#
And it all boiled down to basically him being explained that I've worked on this thing inside
#
the ministry of finance forever.
#
I have always been talking and worrying and writing and writing articles about these problems
#
and I wrote a research paper and this is perfectly okay.
#
And I have been part of the constructive process as an employee in the ministry of finance
#
And I think he was okay.
#
It was absolutely no friction.
#
Also, I think I want to add one more layer to this.
#
So one, of course, now it's all about tribal loyalties and things like that, but even on
#
the tribal loyalty point the other day, I think this was Devesh Kapoor who said this.
#
He said, look at what has happened during COVID, all your so-called liberal elites
#
and foreigners, and this is really people like me in particular, who are constantly
#
criticizing the Modi government and all of that.
#
We are also the biggest advocates that the Biden administration should help India and
#
send vaccines and reduce the restrictions and make sure that exports can go so that
#
India can manufacture more vaccines.
#
So loyalty to a party or an individual is quite different than loyalty to the country
#
So here it's not that those times loyalty didn't matter.
#
It is that the loyalty wasn't to an individual.
#
This loyalty to an individual is a Narendra Modi and Indira Gandhi playbook.
#
It is not a Nehru Vajpayee playbook.
#
It's not even a partisan thing.
#
There are certain individuals who are demanding these very high degrees of loyalty, which
#
are frankly very counterproductive to the overall enterprise of governance.
#
So I just want to flag that out there, that they expected loyalty from Ajay even before.
#
It just wasn't to toe the party line or the individual line.
#
So before we get to the reforms themselves, which I think it's about time we do, but before
#
we get to the reforms, one final sort of meta question about the stuff happening behind
#
Like, you know, on one hand, what you suddenly see in 91 is a lot of people who weren't really
#
speaking out before, at least in the public discourse, about the necessity for reforms
#
suddenly coming out very strongly in favor of it, like, you know, Manmohan in his 91
#
budget speech famously saying, no power on earth can stop an idea whose time has come.
#
You know, Rakesh Mohan in India Transformed describes how Manmohan had a meeting with
#
all his bureaucrats and secretaries as the reforms were being planned.
#
And he told them, quote, if any of you have any difficulty with the proposed reform program,
#
we can find other things for you to do.
#
Quote, which is an act of great conviction.
#
And there are various things that Manmohan, Chidambaram, Jairam Ramesh all said during
#
this period, which showed that conviction.
#
But at the same time, the pace of change after these reforms is a little bit slow.
#
And there is a lot of opposition that they face internally, like Rakesh Mohan describes
#
this cabinet meeting where their initial note about the reforms, which they were planning
#
to bring about in July 24 91, it met with opposition from within the cabinet where people
#
like M.L. Fortedar and Arjun Singh were like, no, this is against everything Nehru and Indira
#
And you're turning your back against our great heritage of the Congress Party and blah, blah,
#
And all this shit happened.
#
And what Mohan describes is that, you know, the the framers of that document got to work
#
and adroitly, they changed a lot of wording to say things like in continuation with Nehru's
#
concern for our economy and Indira Gandhi's love for the poor.
#
So they changed the political messaging, but substantively everything remained the same
#
and it kind of went through.
#
Now this brings in mind that earlier phrase about the liberalization by stealth of the
#
1980s was that stealth necessary?
#
Was this just a bunch of elites who fortuitously happened to think along the same lines in
#
the 80s and 90s, but they were fighting an establishment which didn't necessarily agree.
#
They were fighting inertia.
#
They were fighting institutions and individuals who had entirely different incentives.
#
And therefore did that kind of complicate the whole process?
#
Because what we then saw is we had that burst of liberalization in 91.
#
We had some more under Vajpayee perhaps, but there was a lot of liberalization that didn't
#
A lot of reforms that I'm sure Manmohan and Chidambaram would agree made a lot of sense,
#
but that never happened at all.
#
What is that internal fight?
#
Is there an internal narrative battle within the state as well, which has to be fought?
#
So if you look at history, there has never been a situation where within a party, everyone
#
I mean, when we talked about the 1947, 1950 moment, Congress is like this umbrella party,
#
but it has people like GB Panth who are really closer to today's UP BJP faction.
#
And you also have on the other extreme, people like Nehru.
#
There is always going to be the need for a particular kind of leadership, which is willing
#
to take along people within the party and people in the opposition.
#
The idea that you can have democratic politics without that, and everyone magically agrees
#
upon the same idea at the same time, and everyone's willing to give up their entrenched interest.
#
I mean, this is a pipe dream.
#
So the question is always who are these leaders who are able to make this happen?
#
So we talked a brief moment ago about how Yashwant Sinha, I think a few weeks ago, he
#
said that he had almost the identical speech as Manmohan Singh, because the blueprint of
#
the reforms was ready, but he didn't have a prime minister who could push things through.
#
One of the first few things that Narsimha Rao and Manmohan Singh do as a team is they
#
talk to people within their party and they talk to people outside the party.
#
So Narsimha Rao calls this famous meeting of all opposition parties, and says, look,
#
the country is in deep crisis.
#
The only way to get out of the balance of payment situation crisis is to devalue.
#
And then immediately after that announced trade and industrial reforms, because otherwise
#
you can't capitalize on the devaluation, like it's just not going to matter.
#
In the midst of this, Manmohan Singh is tasked with keeping the internal bureaucracy, the
#
That's why the famous Rakesh Mohan thing of making sure that all the secretaries are not
#
going to create problems and things like that.
#
And you do have to tell the old guard, now imagine everyone who's in the system has gotten
#
a certain amount of status and clout by being in the directorate of technical whatever,
#
the people who are in the cement department, giving you the cement permits and the commerce
#
These people have clout for a particular reason.
#
You're basically telling them that everything they've devoted their life to for the last
#
10 years is complete bunkum and they're going to take it away.
#
And what you did had no purpose.
#
And not only did it have no purpose, you also impoverished the country and led to a balance
#
Now you can't make these people disappear.
#
You got to take them along in some way.
#
So sometimes you got to plead with them like Narsimha Rao did with opposition parties.
#
Sometimes you negotiate with them and sometimes you just plain tell them like Manmohan Singh,
#
you better get in line or you fall by the wayside.
#
So it was a combination of all of these things.
#
And I don't think it's unique to 1991.
#
This needs to happen every time there is reform and it is any reform.
#
So either you do this secretly with no consultative process and do it by ordinance, the way Indira
#
Gandhi nationalizes banks or Narendra Modi does demonetization, or you do this the proper
#
way and the proper way incidentally takes time.
#
So the 91 reforms are also very unique in that in the beginning of July 91, you have
#
two rounds of devaluation.
#
Two, three days after that, you have a huge change in trade policy that's announced.
#
Two weeks after that, you have complete industrial relicensing.
#
This has never happened before.
#
And that pace of reforms is almost impossible to sustain.
#
So the expectation that that's the pace at which it would have happened and in five years
#
we've completely dismantled 50 years of socialism, that is also unlikely.
#
So I think the question is not why did they not continue the reforms or what stopped.
#
I think what people, at least I'm trying to understand, and I've also learned this from
#
the way Ajay writes about these things is try and understand what is the institutional
#
magic which is missing in present day, right?
#
Which is not able to mimic the speed or the quality or the substance of the reforms that
#
happened in those years, right?
#
So that I think is the more valuable way that I would pose the question.
#
I don't have any optimal timeline for how these reforms should happen to actually say
#
that 10 years is too soon or two months is too late.
#
I find it useful to think about the categorization of first generation reforms versus second
#
First generation reforms are like a stroke of the pen where you just get the state out
#
And that's entirely good and appropriate.
#
And if anything was not done enough or we need to think and strategize how to do more
#
I want to talk about customs duties as an example.
#
I thought one of the most brilliant milestones in India's history was when Yashwant Sena
#
pre-announced that every year the peak customs rate will go down by 5%.
#
Now that's just pitch perfect.
#
That's the right way to do these things.
#
Because well ahead of time, you are reshaping the structure of everybody's expectations.
#
Every firm starts going back into their spreadsheets and thinking one year out, this is the change
#
This is a change in my foreign competitors.
#
And what am I going to do?
#
Either I bail out or I match the productivity and the pricing of my foreign imported rivals.
#
For over a multi-year period, the firms were given the credible warning that, look, this
#
It's coming with probability one.
#
It was very costly to fight with people upfront and say, this is happening.
#
You fight as much as you want, sorry, this is going to happen.
#
And as you know, there would be parts of the very BJP that were inimical to this kind of
#
And it just worked magically because it actually ignited investment by firms as opposed to
#
a large big trade reform that just throws firms into disarray and messes up the investment
#
plans of a lot of people.
#
So even better than doing a good trade reform is doing a phased but yet completely credible
#
and predictable trade reform.
#
And the magic of that age was that the announcement by the Ministry of Finance that every single
#
year the tariff is going to be cut by 5%.
#
That statement actually had credibility, which is, again, a very difficult currency to achieve.
#
It's a comment on those people and that community that they were able to make statements that
#
over the next five years, this is what we're going to do.
#
And the whole private sector believed them.
#
It would be very difficult to do those kinds of things today that any statements made about
#
a future date are always up for doubt because everything is so discretionary.
#
So when you are tactical and expedient and tactical and expedient, then you stand for
#
So it is important to stand for a coherent philosophy.
#
And big speeches about philosophy matter because they generate credibility about these kinds
#
of forward-looking designs.
#
So this is an example where it was very important to make a pre-announced stroke of the pen
#
I find it interesting to compare and contrast with the more complex reforms of actually
#
building state capacity, that there is a constructive problem.
#
So imagine you're going to build a regulator like SEBI or you're going to rebuild an organization
#
That is much more difficult.
#
And I think, by and large, that community did not know how to do that.
#
So with all due respect to them, they are my friends, they are my elders.
#
But roughly speaking, I think that a certain amount of decontrol got done and that was
#
But the machinery of how to think public administration, how to draft laws, how to get checks and balances
#
so that in a public choice world, you will get to better functioning state agencies,
#
that process just didn't begin in that period.
#
And so in a way, we've got a partial delivery of stroke of the pen reform.
#
But alongside that, we've got a Kafka-esque state that is creeping every day in terms
#
of clawing back freedom and grabbing power.
#
So I want to tell one little story as an example of what goes wrong in that first-generation
#
reform approach of stroke of the pen.
#
So the economists of that period wanted to announce that we will now have current account
#
convertibility, which means that for you and I to import or export goods, there'll be nothing.
#
There'll be absolutely no friction.
#
And they wanted to begin a process towards capital account convertibility.
#
Certainly, they wanted to decriminalize capital account violations, that it should be seen
#
There's no need to send a man to jail for having dollar bills in the pocket, which is
#
the way it was earlier.
#
So these are announcements.
#
If you ask any economist in India, they will say, yeah, India has current account convertibility.
#
Well, Bhargavi Zaveri and I are writing an article about the legal minefield that is
#
there on the current account.
#
It is not true that India has current account convertibility in the sense of unencumbered
#
movement of goods and money across the border on the current account.
#
For example, sometimes you will see you go to amazon.in, and you try to buy goods, and
#
the merchant happens to be abroad.
#
Amazon will say, give me KYC.
#
For doing a cross-border transaction, they want your identity, one of the very high levels
#
of privacy that you don't want a government organization to know that such and such name
#
and person purchase such and such goods.
#
But there is that breach of privacy that happens, they demand your identity if you dare to buy
#
goods from a foreign source.
#
And that's because we didn't actually do current account convertibility.
#
We just did a bunch of hacks here and there.
#
We didn't get a clear framework of getting rid of all these restrictions.
#
Similarly, on the capital account.
#
So the old fair which was created by Indira Gandhi in 1973 was the rules about capital
#
And the owner and manager of the capital control system, the Reserve Bank of India, was given
#
the job of drafting the 1999 law, which I will always say should be concerning, because
#
the incumbent that owns the system of controls is never going to really decontrol.
#
And in the Constitution of India, it is said that freedom is the default and state coercion
#
to limit your behavior is the exception.
#
Well, the very first sentence of them says all transactions are forbidden unless they
#
So we will show you the method through which we will give you some narrow windows of permission.
#
But by default, everything is bad.
#
And it was the improvement because it was said that, oh, this is so nice because they've
#
removed criminal penalties.
#
So this is supposed to be the improved law.
#
Well, sure enough, some years later, criminal aspects to FEMA violations are back in the
#
It's actually back to a world of criminalized violations of capital controls and a Kafkaesque
#
system of capital controls and not even completely done current account liberalization.
#
And what do I fault the great reformers for?
#
For not being able to think institutionally, for not being able to read laws, for not being
#
able to analyze law, for not thinking it through and actually executing on simple aspects,
#
which at the time could have gone through, but there was a very simplistic economicistic
#
thing that, of course, current account transactions should be completely open.
#
I pushed out some notification while the entire machinery of control was alive and well.
#
I want to compare and contrast, for example, when Thatcher's people were doing the capital
#
account decontrol of the UK.
#
At that time, they correctly understood that it's not just the capital controls that have
#
It's the reporting and monitoring requirements have to go, because if the entire machinery
#
of reporting and monitoring is there, then at the stroke of a pen tomorrow, somebody
#
will bring back the controls.
#
So not only did they destroy the capital controls at a deep legal level, they also removed the
#
machinery of monitoring and reporting.
#
Freedom is where you and I can do whatever we want without needing to discuss or report
#
And you don't really see that in the environment of the 91 reform.
#
So I think that's an important insight into what got done and what didn't get done.
#
A certain incomplete version of stroke of the pen stuff got done.
#
The state capacity building, the refashioning the Indian state to actually produce public
#
goods and do the things that we need the state to do didn't really happen.
#
We kind of started trying to build a SEBI, but we didn't really make progress on building
#
high quality government organization.
#
I would add just one thing to this, which is, so for exactly what Ajay was saying, we
#
managed to do it for industrial de-licensing.
#
So not only did we manage to remove licensing on stroke of the pen for almost all, except
#
I think there was a handful of industries, 12 or 18 industries, which were still under
#
But the more important part is this HR department issue, which is everyone who was supposed
#
to be in the directorate of this and controller of that, now needed another job.
#
These people's jobs had to be taken away and they had to be refitted somewhere in the regulatory
#
state away from the command and control state.
#
So we managed to do that with a certain degree of success with industrial controls.
#
And Ajay is absolutely right.
#
We never did it with capital controls and we partially did it with trade and customs
#
and tariffs, but never completely did it with that either.
#
But I have, I think an even bigger grouse than Ajay, even on the first generation reforms,
#
which is we managed to do the first generation reforms, stroke of the pen in very few sectors
#
So we managed to get basically, you know, I mean, instead of producing spoons, you can
#
produce spoons and forks, which was the broad banding.
#
Then we said, okay, you can expand, then we said we can import steel.
#
But now if you need to produce steel at home to make spoons and forks, you cannot assemble
#
the factors of production in India, right?
#
We never had the stroke of the pen reforms.
#
I mean, we're talking about capital, which is, which is what I just been talking about
#
all this while, but what about labor and land, right?
#
These are your two most important factors of production, which are virtually impossible
#
to pull together without solving the labor and land problem.
#
You're only going to get tech startups and software, like, you know, two people in an
#
apartment in Bangalore kind of growth.
#
You're never going to get like Bangladesh kind of.
#
We have lots and lots of factories, which make lots of cheap t-shirts or cheap spoons
#
or Nike shoes or shoelaces.
#
That stroke of the pen first generation reform is still missing 30 years later.
#
So I think there is another aspect of that.
#
So, you know, there are two kinds of unfinished business.
#
One unfinished business is what we started, we never quite saw through, which is actually
#
propping up a sensible regulatory state.
#
And the second is we never quite removed the permit Raj, what I call permit Raj, but you
#
know, Ajay still thinks of license plus permit Raj in all these other factors of production.
#
And that is where all your chokeholds and bottlenecks are today in the Indian economy.
#
We cannot put up a plant in India.
#
And so many examples come to mind of that.
#
Like, for example, there was a story last year, I think about how it is easier to legally
#
get a gun in Delhi than to open a business.
#
And you know, I remember reading a few years back that the Four Seasons Hotel took two
#
years longer than they expected to open up in Mumbai, because they had to apply for 165
#
licenses, including separate licenses for the weighing scales in the kitchen and in
#
So it's just kind of out of whack.
#
Let's go on to the actual reforms itself of 91.
#
You know, if one is to explain to a lay person, what are these reforms?
#
Why are they so transformative?
#
And I'll come back to the criticisms later, because I feel we should also address that.
#
And not just give hosannas, but also address the criticisms, which I am keen to do, because
#
I think they all have valid counters.
#
But first, to begin with, let's sum up what the reforms essentially were and what they
#
We've mentioned bits of it in piecemeal ways that anybody can buy and sell a phone.
#
You know, anybody can start an airline, though obviously barriers to entry are different
#
there, are high there anyway.
#
But you know, but those are little things we've discussed in passing.
#
If you had to sort of look at it, I was about to say from the top down.
#
But if you had to sort of talk about the reforms in a more systematic way, how would you explain
#
I would put them in three categories, right?
#
One is industrial policy, one is trade policy, and one is, you know, currency controls, right?
#
So these are three main things.
#
So if you just take July 1991, three major things happened.
#
One is there was devaluing of currency, and then a further commitment in later years,
#
which came up with a whole bunch of other committee reports and other parallel reforms,
#
that India would not be this artificially pegged overvalued currency.
#
It would be more in line with what the value of the rupee is globally.
#
So that's number one, and that's really important.
#
Second, the restrictions on people's ability to hold even a very reasonable amount of foreign
#
exchange, those restrictions would go away, right?
#
And the third, initially, those people were criminalized, right?
#
So if you held $200 instead of your allocated $80, Farah would literally put you in jail
#
without any kind of due process, like you would go straight to jail, right?
#
It's kind of really freaky.
#
A lot of the smugglers that you see in Indian movies from the 70s, you mentioned Shashi
#
Kapoor and Amitabh Bachchan, so that's where this is coming from.
#
What are they smuggling?
#
You know, those smugglers are not smuggling drugs.
#
If you notice those movies, those movies are quite sanitized.
#
It's like Nike shoes, Walkman, you know, gold bars, VHS recorders.
#
Those are the sorts of things that they are smuggling, right?
#
And they're smuggling because two parts.
#
One is there is trade controls on what you can and cannot import.
#
And second, there are these currency controls on how you pay for what you import.
#
So one part of it is currency controls, right?
#
On part of trade controls, there are two aspects to it.
#
One is the tariffs, okay?
#
And the tariffs are mainly for imports, right?
#
So now just to give some background on where this is coming from, whenever you have a closed
#
economic system and you say resources are very scarce and we can only use our precious
#
foreign exchange for very specific imports, like we can't just waste all this willy nilly
#
on Nike shoes and Walkman, right?
#
Like we need to import steel or whatever.
#
Now what ends up happening is twofold.
#
You can do this through currency controls, but you also do it by having very, very high
#
tariffs for imports such that they discourage imports, right?
#
So even though there are only two cars in the market, which is your Fiat, Premier, Partnership
#
And if I want to get a different car because I've been waiting in line too long, I can't
#
easily get a car, right?
#
Because the import duties on cars, depending on whether they're basic cars or luxury cars
#
is anywhere between like 180% to 350%, right?
#
This is the import duty in addition to the value of the car, which means you will do
#
You will one, protect the domestic industry of cars so that, you know, there is a dedicated
#
demand for ambassadors and Fiats, even though they're not such great cars.
#
And second, you won't allow people to waste precious foreign exchange by, you know, wasting
#
it on cars and instead use it, you know, for government to bring in steel or oil or whatever
#
That system started getting rationalized.
#
So it didn't completely go away, but I believe the average tariffs are about 115% and the
#
highest tariff band was like 355% or something like just outrageous numbers that make no
#
So one is that started getting adjusted downwards, right?
#
How much can you import and what is the tariff you need to pay for imports?
#
That process started very, very important.
#
Now the reason this is useful in line with devaluation is when you devalue your currency,
#
your exports technically become more competitive on paper, right?
#
But for your exports to become more competitive, you have to actually produce stuff that other
#
And if you want to actually produce things that other people want to buy, you have to
#
be able to import high quality inputs that you require to produce them.
#
This is like Nara and Murti going, you know, 25 times to Delhi to get a good mainframe
#
computer without which she can't export tech services, right?
#
So this is a really important part.
#
So any economy, like right now, there's this big rhetoric in India on make in India.
#
We want to not import stuff in, we only want to export stuff.
#
Any economy where exports are a high percentage of the GDP imports will be a high percentage
#
Because even economies that specialize in say, steel, you're going to be exporting
#
different kinds of steel and you're going to be importing different kinds of steel because
#
you're that specialized.
#
So this is something important to keep in.
#
So that process of rationalizing how we trade and exchange with the rest of the world, that
#
The third part is industrial relicensing.
#
I think this has been the most successful element of the 1991 reforms.
#
Industrial relicensing is basically, you know, what we talked about, right?
#
Like your podcast needing a license.
#
And if you go from 20 minutes to 40 minutes, you need an expansion permit, right?
#
If you need to import a mic, your Blue Yeti mic, then you need to go to another controller
#
to get the foreign exchange permit and then go to the customs offer to get.
#
So none of these controls were mutually exclusive.
#
You had to get every one of them to actually be able to, you know, conduct whatever enterprise
#
That system started getting rationalized, okay?
#
So one, they removed all these control systems, right?
#
You could set up a firm without requiring government permission and any restriction
#
on this is like a, you know, 10,000-crore project.
#
I mean, those numbers were a lot smaller then, but you know, a hundred-crore project or whatever.
#
And then it also brings in the Monopoly Control Act or we're going to put it on a separate
#
Those kinds of very problematic things started getting streamlined.
#
The most important thing is overnight from the default of every industry needs a permit,
#
you went to no industry needs a permit except these 18 industries.
#
I think that was the most exceptional reform that happened in July, 1991.
#
The reason this matters is if you want to engage with the rest of the world and start
#
trading, if you think about it, industrial licensing is like an import tariff is a tax
#
on foreign producers, right?
#
So I am penalizing a foreigner from selling to me domestically.
#
But an industrial licensing system is a tax on domestic producers.
#
Domestic producers can now no longer produce or, you know, need to keep paying bribes and
#
things like that to be able to produce enough to export.
#
So that domestic taxation system kind of lifted overnight, not completely, but in a very meaningful
#
way that immediately opened up things.
#
Now the follow up reform that started in July, but kind of took a little while is they said
#
that foreign investment is no longer a bad thing, right?
#
So that was the other thing.
#
So this is where people like A. N. Verma and all are very, very important because you can
#
de-license industry overnight by the stroke of a pen, right?
#
But to make sure that foreign manufacturers, whether it is Pepsi or General Motors or whoever
#
actually come into the country and are willing to set up plant and are willing to engage
#
with you, that requires a fair bit of government maneuvering, starting with very credible signaling
#
of we are open for business.
#
And they did that very well.
#
So they had like a foreign investment board, which was set up under the prime minister's
#
office and A. N. Verma was like the coordinating person for that.
#
So these were the things that kind of happened immediately in a period of one month.
#
Now a lot more happened before and after that, but this would be my quick summary of it.
#
And I should point out here to my listeners that A. N. Verma is not a relative of mine.
#
And as for import tariffs being sort of attacks on foreign producers, there are also attacks
#
That's a scene in the unseen right there, but that's a whole new story.
#
Because it seems here that people might well ask, oh, you say we've dismantled the license
#
and permit Raj, but there's still so much bureaucracy all around us.
#
For example, I did an episode with our mutual friend, Madhu Menon, long, long back on restaurant
#
And he pointed out that, you know, when he ran a restaurant, he had to apply for I think
#
some 40 licenses a month or whatever.
#
So there was one regulation that he could only have one entry into his restaurant, only
#
And I think that was from the excise people because they wanted to regulate the flow of
#
So only one door and the fire safety regulation said you have to have multiple doors.
#
So the point is, it doesn't matter what he does.
#
It doesn't matter which of those two laws he's breaking, he's paying a bribe anyway.
#
So we have tons of those also.
#
They're a little bit different.
#
I mean, this is union government trying to centrally control who does business, where
#
and how they do their business, which is obviously much easier to reform overnight by the union
#
government, right, versus a lot of land use and, you know, this kind of, you know, restaurant
#
regulation or school licensing regulation, which tends to be usually at the local level
#
and sometimes at the state level, right.
#
So I think there is a fundamental difference between the two, the kind of distortionary,
#
like you know, this is a list of essential commodities and now I'm no longer going to
#
control the price of sugar, which I shouldn't have centrally controlled in the first place,
#
but should I want to decontrol that it's a stroke of a pen versus, you know, 500 different
#
districts imposing their own specific small distortionary permit systems that they have.
#
I think those are fundamentally different things.
#
I don't think the 91 reforms were even aiming towards that.
#
I mean, ideologically and as an economic vision, they would have agreed with it, but I don't
#
think they were aiming towards fixing this kind of restaurant regulation, nor could they
#
It was just completely beyond their purview.
#
You know, that is a certain, some of it is not even legislation amidst, some of it is
#
delegated legislation, right.
#
There'll be like a restaurants management or in safety act, for instance, right.
#
And then the devil is in the details, right.
#
There will be like this one thing that says power to make rules, okay.
#
And they've delegated the power to make rules to the local executive authority.
#
I know those guys are making rules willy-nilly, you know, which is completely bizarre and
#
absurd, which is, you know, you need one, you need a single point of egress or you need
#
two points of egress, you know, so on and so forth.
#
So I don't think that could have been done by this kind of reform.
#
And it frankly can't be done by Modi either.
#
It just needs to be committed at the local level.
#
But the larger question I was getting at is what are the kind of reforms that we didn't
#
do and which, you know, still need to be done in a continuation of the same spirit like
#
land, labor, blah, blah, blah.
#
So as I said a short while ago, there is a stroke of the pen problem, which is just get
#
I feel a lot more needs to be done.
#
There is a highly inappropriate interference by the Indian state in the affairs of everyday
#
You know, there are consenting adults doing things and there is no role for the state
#
And there is a large class of impediments that are on the books or on the laws as of
#
And then part two is the state capacity problem where there are things that will inevitably
#
And it could be financial regulation.
#
It could be land title systems.
#
It would be a taxation system and so on.
#
And we did not begin understanding how to run a tax administration system.
#
So, you know, for some time there was a period where tax rates were coming down and tax laws
#
were becoming a little insane and the tax administration was never really fixed.
#
We didn't build a high quality law to govern the checks and balances of how tax administrators
#
So there is a whole lot of discretion in the hands of tax administrators.
#
And then it depends on the character of the leadership.
#
So depending on how the leadership changes, the demands made upon these agencies can change.
#
And that's a very dangerous place to be as a society.
#
So the checks and balances upon agencies, officers need to be coded into laws, not just
#
Because the first lesson we know in politics is that you can't count on good sense emerging
#
out of a liberal democratic system of elections.
#
If we look at the consequences of the reforms, you know, what are the metrics by which we
#
can say that, you know, these reforms work?
#
Like obviously there are literally hundreds of millions of people lifted out of poverty.
#
Like Nitin Pai once pointed out that with every 1% rise in the GDP, 2 million people
#
I think he subsequently revised that figure to say that it's more, which tells you the
#
enormous power of this 3 million people Shruti points out lifting three fingers, which is
#
At the same time, you have critics saying that, oh, there is greater inequality to which
#
my point is that inequality and poverty are very different things that if you think they
#
are the same thing, you're thinking in a zero sum way that, oh, if the rich are getting
#
richer, the poor must be getting poorer.
#
But actually everybody can sort of become richer at the same time, though obviously
#
the rich will become richer by more.
#
My metric is poverty is Mahatma Gandhi's metric.
#
How will this policy affect the poor?
#
That's the first question that I always ask and poverty has gone down massively.
#
There's again, no disputing that.
#
Has inequality increased?
#
Yes, inequality has increased at the same time as poverty has gone down.
#
I don't see that as a problem.
#
It's the absolute numbers like, you know, Harry Frankfurt has a great book called on
#
inequality where he coined this term, the doctrine of sufficiency, where he said that
#
we should measure human progress by how many people achieve what he called a sufficient
#
level to stay alive, which is again attacking poverty.
#
Like one question I often ask when it comes to inequality is in which of these two countries
#
would you rather be poor, Bangladesh or the USA?
#
And obviously you'd rather be poor in the USA, but the USA has far greater levels of
#
inequality than Bangladesh does.
#
So I think inequality is really something that more advanced societies can afford to
#
But for us, our core problem is poverty and liberalization made a massive dent to that.
#
What do you guys have to say?
#
I mean, economic growth rates increased.
#
We have very robust evidence that since late 80s, say 1988 onwards, you know, the kind
#
of growth that took place and from 1992 until say, you know, continuously for the next 20
#
to 25 years, you have had consistently high growth rates on average and it has lifted
#
Even the numbers you can quibble depending on when you start and finish.
#
But the rough number people have come to agree upon is about a quarter of a billion people,
#
250 to 270 million people.
#
The interesting thing is it's not just this abstract thing.
#
Every single socioeconomic group, the levels of income have increased.
#
Every single socioeconomic group, right?
#
So this is women, this is Dalits, this is minority religions, right?
#
So across regions, even the poorest districts, the levels have increased, the richest districts,
#
the levels have increased.
#
So that is something I want to put out there because I think there's some massive confusion
#
on this issue of like poverty going away.
#
This is across groups and the evidence on this is very robust.
#
And some of the work on this is like Amartya Lahiri has done work on this.
#
You know, Paul Novasad has done work on this with Sam Asher.
#
If you want to look at very specific, like sort of qualitative evidence, you have Chandra
#
Subhant Prasad, who has talked about how Dalits have specifically benefited from liberalization
#
and how like the Dalit entrepreneurial movement really took off and you know, so on and so
#
And there's also upward social mobility in virtually every socioeconomic group.
#
So that's one thing I want to put out there.
#
I'll tell you the margins on which the inequality part bothers me, okay?
#
Just regular wage inequality increasing, you're right.
#
It's not the greatest priority for India or Indians and that doesn't matter to me.
#
For me, the kind of inequality which is very problematic is the crony capitalist inequality
#
You still need so many permits to start a business, right?
#
Or you need this army of lawyers to escape the tax man.
#
Otherwise, you know, the tax authority, their discretionary crap and wiretaps and raids
#
is just going to, the full force of the state is going to be upon you.
#
So only rich people or people who are privileged can afford all that, right?
#
So the main means to economic growth is that regular folks can partake in greater, you
#
know, in the gains from trade, from greater economic activity, right?
#
And if the barriers to entry are so high that regular folks cannot enter that and only people
#
who are from business families or really big businesses and you know, your Adanis and Ambanis
#
and Tatas can get into it, then we are in very, very big trouble long term.
#
That kind of inequality really bothers me.
#
So the second kind of inequality that kind of really bothers me is the barriers of access
#
to entry when it comes to business, right?
#
So for economic growth to lift people out of poverty, we need regular people to be able
#
to partake in the gains from trade, from what's happening in the economy, in this liberalized
#
And if you're going to bring lots and lots of permits and barriers and not only permits
#
and barriers, but like the entire rule book where the state and its coercion comes crashing
#
down on you in terms of taxation and GST and wiretaps and raids, then you are in trouble
#
because it means that regular people cannot enter the zone of private enterprise and make
#
And only privileged people, you know, kids from business families or even large business
#
houses are the only people who can partake in this kind of economic activity and actually
#
That kind of inequality really bothers me.
#
The other thing which I have worried about a lot during the pandemic is when we say we
#
lifted 270 million people out of poverty, it's not like overnight they became rich.
#
It's that, you know, we've eliminated some extreme levels of poverty, we've increased
#
the number of job opportunities and so on.
#
But what we've realized during the pandemic is you have this kind of lockdown or your
#
cities stop functioning or, you know, the top 20% of income earners who are responsible
#
for the, you know, top 45 to 50% of consumer spending, they stop spending money and now
#
everything has come to a grinding halt and all these people have slipped back into poverty.
#
I believe about 60 to 70 million people have slipped back into some kind of poverty over
#
9, 10 months of sustained, you know, lack of employment and, you know, lack of social
#
I think on those margins, some attention does need to be paid to how we think about inequality,
#
how we think about barriers to entry and any system where a very small group of elite people
#
are responsible for consumption and like kind of act as the engines of growth in the economy
#
is not very sustainable, right?
#
And we've sort of seen that through the pandemic.
#
Yeah, that's fascinating.
#
And both the kinds of inequality you speak of are actually inequalities that I agree
#
are problematic and that are a result of not enough reforms of liberalization, really not
#
going far enough and you, you know, it's still treating sort of citizens as subjects only
#
some are privileged subjects, you know, some pigs are more equal than others as the case
#
And even when we speak of rich people benefiting, one of the trends that we've seen in the
#
last few years is rich people actually leaving the country en masse, which tells you that
#
there is still a lot of work to be done.
#
I have a perspective on this problem.
#
I think that every business has a certain fixed cost of lawyers and accountants and
#
And the fixed cost is so high in the modern environment of ever more harsh rules and criminal
#
clauses and electronic surveillance and, you know, dystopian data world that you've got
#
to literally be hundreds of crore to pay for that minimum bar of protection.
#
So conceptually, what has happened is that there was an older, kinder, gentler India
#
where it was meaningful to be a one-crore business, a five-crore business, a 10-crore
#
It's become harder and harder to do that because the machinery of the state is now deeply in
#
the claws of each firm.
#
And then there is a fixed cost of protection.
#
So you've got to be a certain size, then you can pay for that protection or, you know,
#
it's like a Chinese Communist Party situation that you've got to co-opt the ruling party
#
and get that protection.
#
But beyond that, you've got to be very big to pay for those fixed costs.
#
So there's a hollowing out of the middle.
#
And that also links to the phenomenon of the rich leaving.
#
Because if you are in the zone of running a 100-crore business, then you might feel
#
that I'm better off doing this in London.
#
My next question is for you, and it's about something interesting you pointed out, which
#
gives me an opportunity to talk about what might be a distinction that people need to
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Well, at one point in your fabulous opening essay of the 1991 project, you write, quote,
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since 1991, the union government revenue has increased 25 times and state government revenue
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has increased 28 times in nominal terms and about four times in real terms, embracing
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markets allowed the Indian government to increase its welfare spending, stop quote.
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And many people who make simplistic arguments on market versus state just assume that you
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are sort of talking about one extreme, that if you want markets to flourish, you don't
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Whereas my point as far as the Indian state has been concerned is that, listen, the Indian
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state can carry out whatever welfare activities it wants to.
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Just get out of the way of private enterprise.
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Just let private enterprise function.
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And the figures that you came up with seems to indicate that the two can happen together,
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that the welfare state will actually be a better funded and therefore hopefully, you
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know, a more inclusive welfare state if there is growth in the economy, if private enterprises
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are allowed to flourish, because that's where the money comes from.
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So you know, this is fundamental Adam Smith kind of business, right?
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I mean, the size of your pie has to grow.
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Otherwise, what you're going to get into is if the pie doesn't grow and you keep talking
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about how we split it and redistribute it, there are going to be more and more people
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who spend a lot of money and, you know, classic rent seeking literature on how to redistribute
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And the smaller the pie or the less the pie grows, the more conflict you're going to
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have in society on how we split this pie, right?
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If the pie keeps growing, right, yes, it's true that every group may not get the exact
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same share of the pie, may not always get the, you know, may not always partake in the
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same way in the gains from trade, but everyone will benefit.
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And second is, I think it's very important, the kinds of things that Ajay and I have talked
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about so far, we're talking about some fundamental structural changes in the economy, right?
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And structural changes in the economy are never painless.
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I mean, they're painful at the highest levels of privilege to the lowest levels of, you
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So you can be the controller of cement or sugar prices and the next day suddenly your
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position goes away and you don't have a job anymore.
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And of course your job is secure, but you have to do something else, which is not as
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a high status or powerful, or you could be a poor guy who just loses his job because
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now there's a pandemic or something else has happened or now there are no more STD boots,
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you know, for instance, with the telecom revolution.
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So if you were someone who was running an STD booth, now you suddenly find yourself
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out of a job or you're someone who's a typist.
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We do need to think when we are people who are talking about large structural changes
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in society, we do genuinely need to think about how do we manage the structural change
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What do we do when firms go bankrupt?
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What do we do when entire sectors become obsolete or irrelevant?
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What happens when masses of people come out of agriculture and move to cities with no
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social protection whatsoever, right?
#
So of course in the longer run, we need to make sure that our cities are well equipped
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with jobs and housing and everything.
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But in the very short run, what are we supposed to do with these people?
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And these are hundreds of millions of people, it's not a small number.
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When I say that Nehru didn't make investments in health and primary education and we need
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a massive investment, that's going to cost money, right?
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If you're going to spend in a big way on health in India post pandemic, two, three percent
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of the GDP, that's money that the government simply doesn't have.
#
So in some sense, everybody, whether you are a statist or not a status has to have a commitment
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to economic growth, right?
#
You want to have good measures to battle climate change, right?
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Or you want to do greater amounts of mining.
#
You could be on ideological ends of every spectrum, but on whatever you are, greater
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economic growth is probably going to be able to make one or both possible, right?
#
So that is something I want to put out there.
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We genuinely lack a commitment to economic growth in India.
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It's become very partisan and tribal.
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The opportunity cost is just enormous.
#
I mean, the whole, every, you know, one percent increase in GDP per capita lives three million
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people out of poverty, you know, per year and so on.
#
So in about 10 to 15 years, you can eliminate extreme poverty in India, right?
#
So the opportunity cost of not conducting reforms, of not creating the kind of institutional
#
infrastructure that you need for economic growth in India is that you are now leaving
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behind two, 300 million people in extreme poverty that you could have avoided.
#
So this is something that is, it's so difficult to explain to ordinary people who are not
#
economists what is at stake because what is at stake is invisible, right?
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Those people were poor before they continue to be poor.
#
So people don't realize that there was an opportunity to actually lift them out of poverty.
#
So I think that is the big thing when we talk about any kinds of reforms.
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Everything else is detail, right?
#
And even Ajay and I disagree on a lot of these things.
#
If Ajay and I sat down to talk about bankruptcy or SEBI, I'm sure we would like have lots
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of different ideas, but the commitment remains that economic growth is the base idea on which
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everything else must follow.
#
And if you don't have a commitment to economic growth and increasing the size of the pie,
#
which by the way can only be done by greater trade, division of labor and specialization,
#
That's the fundamentals.
#
If you don't have that, if you don't get rid of permits and institutions, which will
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allow for greater trade and the size of the pie to grow, if that commitment is missing,
#
India is just in deep trouble and that commitment is missing and we are in deep trouble.
#
Sorry, I'm just very upset about this.
#
I have a twist on what Shruti just said, which is the same idea, but it's worth reinforcing
#
from a slightly different angle.
#
In the field of public finance, there is a lot of discussion around the tax GDP ratio.
#
So everybody universally believes that higher tax GDP ratios are better.
#
Ela Patnaik has a bracing insight on this subject.
#
She says, suppose you had 14 rupees of taxation on a hundred rupee GDP versus 14 rupees of
#
taxation on a 200 GDP, i.e. that the tax GDP ratio went down by half.
#
The second case is Pareto superior to the first case.
#
In the second case, the people had 200 rupees of GDP and the state had only 14.
#
So 14, 100 versus 14, 200.
#
14, 200 is always better.
#
It is a very twisted kind of development discourse to think that the tax GDP ratio should be
#
And in fact, there are many, many, many aspects in which tax policy and tax administration
#
today are designed in a hostile way, in a way that favors the arbitrary power of tax
#
inspectors and officials.
#
And that precisely expresses this kind of tension, that you're better off letting it
#
You're better off letting a private economy thrive and staying at 14 rupees of government
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If GDP will go from 100 to 200, we should be delighted, we should be exuberant.
#
So we shouldn't obsess on the tax GDP ratio, we should obsess on GDP.
#
The greatest good of economics is to get GDP up.
#
And arguably in a large part of the Indian state today, the way forward is to get the
#
Yeah, that's again a fantastic point.
#
And you know, it's this sort of reflexive acceptance of a metric without even really
#
You know, whenever somebody speaks about tax collections of the government going up, I'm
#
like, why is that a good thing?
#
You have more money in the hands of the predatory state instead of in the hands of the people
#
where I would rather have it.
#
But that's a separate point.
#
You weren't really making that.
#
And I completely agree with both of you that economic growth is the thing and the way to
#
get there is through economic freedom.
#
And the point is, people miss the humanitarian consequences.
#
Like I have tremendous anger for the policies of the past and the policymakers of the past
#
and past decades, which kept people poor for decades, literally.
#
And that's an unseen effect.
#
You don't see that if you're poor today, you don't see the counterfactual of how things
#
might have been had things spanned out differently, which is why it's not about numbers.
#
Oh, it's a number, a percent, woe percent.
#
It has a real human cost on real human lives.
#
And that's something we need to consider.
#
We're kind of running out of time.
#
So I'll end with a final question for both of you that, you know, we can look at the
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1991 reforms either as a beacon of hope that it lifted a quarter of a billion people out
#
of poverty, which itself just for that humanitarian reason is incredible.
#
It empowered so many people with all the knock on effects of that.
#
Or we can look at everything that has happened since and that has happened in our politics
#
and the fact that the momentum has slowed and all of that as a cautionary tale.
#
You know, you can see the events of the past 25 years in both these ways.
#
And you know, one view would be that, hey, OK, 91 was a good moment, but look at what's
#
happened since and we are sliding backwards.
#
Another way of looking at it could be that there was a process, there was a movement
#
The arc of history was bending one way and we've got to work for that to continue.
#
So, you know, are you more hopeful or more despairing when you look at what might lie
#
ahead of us, say in the next 15 years?
#
I feel that the most important thing that changed out of the outcomes of 1991 to 2011
#
is that there was a certain despondence and pessimism about India.
#
So we had a fabulous freedom movement.
#
It was really a historic moment in India's history in terms of the decency and the moral
#
qualities of the people who led the freedom movement.
#
And then after that, while there was a bit of a spurt in Nehru's years of GDP growth,
#
it didn't work out great after that.
#
And then we had this long period, 1962 to 77, which was truly gloomy.
#
Standing in 1977, the Indian elite had run out of the skip in its step.
#
So this was no longer the country of Gandhiji and Nehru and Ramanujan and Tagore.
#
This was a country that was battered and bruised and starting to question itself that is there
#
something wrong with us?
#
So that's why the biting phrase, the Hindu rate of growth, that is there something about
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being Hindu that messes with us and that damages our ability to do well and to be as great
#
and as cool a country as anything else that the world can do?
#
I'm thrilled to bits that the 1991 to 2011 period proves that we in India have the creativity,
#
the energy, the intellectual capacity, the emotional capacity to really do amazing things.
#
The kind of things that got done in India in that period, I think have forever settled
#
that question that there is nothing wrong here.
#
There's nothing wrong with us.
#
We are every bit as good as anybody else in the world, and we just got to get our shift
#
So yes, we've had a difficult time after that.
#
And we need to work hard on figuring out how to put this engine back on the road.
#
But I feel it was just one of the most important episodes in India's history, and it pours
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concrete on the idea of India.
#
It teaches us that the basic machinery of the idea of India can be made to work, and
#
it can deliver growth and prosperity and decency.
#
Yeah, I mean, I, of course, agree with everything Ajay said.
#
I would say what gives me hope is one, of course, India fundamentally changed.
#
But to me, the hopeful thing is it gives power back to the people, right?
#
There is something very basic and happy about that.
#
The idea that my grandmother doesn't have to separate, like, but, you know, conquer
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Or you know, anybody who wishes to get a CD of Pink Floyd, you know, should they be able
#
All these sound like first world problems, but you can imagine this at every level, right?
#
Like a like a school girl wanting to buy a bicycle, right?
#
Or her father wanting to make his own bicycle and sell it or repair it.
#
These are just things that are magical to me, okay?
#
That this transformation happened, that regular folks just had so much more control over what
#
they wore, what they bought, what they sold, how they consumed, right?
#
That they could buy a packet of atta or sugar in a shop without being worried about it,
#
That they don't have to stand in line for hours to get milk to feed their baby.
#
These are things that one should not take for granted given that not too long ago in
#
Indian history, these were just not things that were possible and they were not possible
#
for a very long time and people were very despondent.
#
So that gives me great hope that, you know, imagine if we managed to conduct land reforms
#
and agricultural reforms and labor reforms, like the sky is the limit on when you give
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people control back over their economic choice and destiny.
#
That I think is a very hopeful message.
#
There are two things that make me very despondent.
#
One is just the missed opportunity that we talked about.
#
Every year that we kind of linger on and hang around and have these petty conversations
#
about partisan politics and don't make these big bang, you know, economic changes happen
#
is longer that people kind of, you know, hang around in poverty and lose life and they live
#
a few years too less and women don't get educated as much and, you know, people drown in floods.
#
I mean, it's everything, right?
#
Economic growth and prosperity change everything.
#
But the thing that makes me really despair is for a 1991 moment to happen 15 years from
#
today, where are the Rangarajans and the Montakes and the Wiley Reddies and the Ashok Desai's
#
in government today, where are they, which university are they studying in?
#
Which multilateral or think tank or NGO are they at?
#
Who are they talking to?
#
The kind of political illiberalism we have both in India and globally, right?
#
That I find extremely worrying about what are the kind of ideas that are going to emerge
#
for 15 years from today to have a great reform movement, right?
#
So that I think it just worries me no end.
#
I don't see that pipeline.
#
Maybe I'm just not seeing it because I'm in a different position and I don't live in India
#
and I'm not actively talking to young people and maybe there's some gorilla movement where
#
they're learning ideas through Amit Verma's podcasts and study groups and circles and,
#
you know, how people used to read Solzy Nixon's Xerox copy in during the high mighty days
#
I don't know if there's something like that going on in India that I'm just not privy
#
to, but I don't see it happening in technical economics and I don't see it happening in
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That worries me and makes me despair no end, right?
#
So I think that's what I would say about the 91 reform movement.
#
Oh, and please see our project.
#
That's the other thing I would say.
#
What makes me hopeful is for the next one year, we're going to have lots of great papers
#
and essays and data to enlighten everybody on all these small details.
#
I have a fantastic team, two very young people who are in the right part of the pipeline.
#
This is Shreyas Narla and Prakhar Mishra.
#
They have an excellent essay on how the reforms actually took place.
#
You know, we've put in all the bios of these people.
#
I have a lead essay that you mentioned Amit and generously quoted from, but we have a
#
lot more coming from people like Ajay Shah.
#
So watch out and, you know, hopefully all of us as a community can learn a lot from
#
the 1991 movement and really revive the discussion on what kinds of reforms India needs moving
#
You should, you know, bring up Solzhenitsyn and talk about me in the same breath because
#
great, great writer, but he did spend many years in prison.
#
So I hope I don't quite go down that road.
#
You know, it was great chatting with both of you.
#
I think sometimes we need to look at the past with a dispassionate eye and, you know, not
#
take things for granted.
#
As you said, to be able to see the possibilities of the future and, you know, thank you so
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much for coming on the show and sharing your insights and for building the 1991 project.
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If you enjoyed listening to this episode, hop on over to the 1991project.com.
#
You can follow Shruti on Twitter at S Raj Gopalan.
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You can follow Ajay at Ajay underscore Shah and you can follow me at Amit Verma, A-M-I-T-V-A-R-M-A
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and you can browse past episodes of The Scene and the Unseen at sceneunseen.in.
#
Thank you for listening.
#
Did you enjoy this episode of The Scene and the Unseen?
#
If so, would you like to support the production of the show?
#
You can go over to sceneunseen.in slash support and contribute any amount you like to keep
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