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This episode of The Seen and the Unseen is brought to you by Intel.
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The economy is the lives of real people.
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One of my constant laments is that too often we think of the economy as something abstract
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– numbers and graphs and charts and claims and counterclaims – rather than the story
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of our lives, which is what it is.
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And I find it useful to remind myself of this from time to time.
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We tend to be too glib when we talk about the economy.
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Everything that affects the economy affects our lives.
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Every time a number falls or rises, it affects our happiness.
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It affects whether some child somewhere will have food to eat tonight.
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That is why we must keep talking about the economy.
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It has moral importance and humanitarian consequences.
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Welcome to The Seen and the Unseen, our weekly podcast on economics, politics and behavior.
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Please welcome your host, Amit Verma.
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Welcome to The Seen and the Unseen.
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In today's episode, I want to take stock of the economy as it is right now.
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Firstly, our economy has been going down for over a decade due to the myopia and misgovernance
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of successive governments.
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I've done episodes taking stock of the economy at regular intervals and even before COVID
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struck, things were pretty bad.
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After COVID struck, of course, it all entered a strange kind of twilight zone.
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My guests today have been on this show before.
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Pooja Mehra is the author of the brilliant book, The Lost Decade, which lays out in acute
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detail how our economy suffered between 2008 and 2018 when the book was published.
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She was also my guest on The Seen and the Unseen in an episode that I found so insightful.
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I will link it from the show notes.
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My other guest is Mohith Satyanand, who has been on the show multiple times.
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All those episodes will also be linked from the show notes.
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Now, few people I know can see the big picture quite like Mohith can, and few can capture
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the small details the way Pooja does.
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So basically, in terms of guests for this podcast, Rabne Bana Di Jori.
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I recorded this episode in person with Pooja and Mohith last week in Delhi, and I also
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managed to get Mohith to start a newsletter.
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Mohith is a beast of a writer, so do subscribe to his newsletter at mohitsatyanand.substack.com.
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That's mohitsatyanand at substack.com.
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Now, this episode was recorded before the repeal of the farm laws, so we don't mention
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But I have nothing to add beyond my conversation with Ajay Shah in episode 211 of this podcast,
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which is one of our most popular episodes.
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I'll link that also from the show notes.
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It's such a complex subject, and almost no aspect of it can be seen in terms of black
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Now, before we get to my conversation with Mohith and Pooja, let's take a quick commercial
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Where do we live in this world?
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This is not a question about geography, or at least physical geography.
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The place I spend a lot of time is the internet, where I forge digital connections, take comfort
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and stimulation from virtual spaces, traveling at the speed of light.
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Too much of this, and we can get unmoored from our physical location, a creature of
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every place and no place at the same time.
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But if we don't go overboard, this is so empowering.
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This new way of living and learning and loving has transformed at least me, and it's all
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The sponsor of this episode, Intel, is at the heart of much of this digital transformation.
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Intel's technology empowers users at the edges of this brave new world.
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It safeguards their data, protects their privacy while also enabling them to harness the full
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Whether you're an entrepreneur or an artist or a doctor or an engineer, you are not who
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you would have been 20 years ago.
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Intel made all this possible.
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Where there's digital transformation, there's Intel.
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Pooja and Mohit, welcome to the Scene in the Unseen.
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So, I'm going to begin by referring to this beautiful book I read a few years back, and
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it's a book by an author called Chyna Mevil, who typically writes science fiction and fantasy
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And his mother was a big fan of police procedure rules.
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So at one point in time, his mother was rather ill and eventually she died.
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And he wanted to write a book that would satisfy her, which was a police procedural, but he
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couldn't let go of his innate love for weirdness over what is known as weird fiction.
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So he wrote this book called The City in the City.
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And the plot of the city in the city is that there are two cities inhabiting the same space
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invisible to each other, the seen and the unseen as it were.
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And there's a police inspector, which is where the police procedural angle comes in.
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There's a police inspector who is investigating a murder, which he realized took place in
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the other city, which is actually occupying exactly the same spaces, right?
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And he has to go into the other city to figure out what happened.
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Now, just looking at that as a metaphor for it for our current times, I think we are living
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that kind of dual existence in a couple of ways.
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One way, of course, is a rather obvious one, that some aspects of the economy are obviously
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out of whack and things are going to hell and other aspects like the booming stock market
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and all of that, they look just fantastic.
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And at the same time, where I find this metaphor most potent is perceptions that there are
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people who really believe that India is going to be a superpower, that everything is in
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place and so on and so forth.
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And at the same time, there are people who believe that we are going to hell.
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And I'm much closer to the second category, obviously, as you know, as you know, through
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all the economy episodes that I've done.
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And before we actually start talking about the economy or start discussing what is real
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and what is not, why do you think we are in this situation where there is, so to say,
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a city and a city where there are two realities?
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So I want to throw in another dimension, which is that I inhabit two worlds, which you know
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So one world is the world of the city and the world of the stock markets.
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And we've had more than one occasion to talk about stock markets, beginning with your shortest
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episode, which was about Rupal Benpanchai.
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Which was 11 minutes, my shortest episode.
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So I inhabit that world of which a subset or almost a forerunner of that world is now
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But the other world that I inhabit is the little mountain village in which I've had
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a home for almost 30 years now.
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And I'm not just an occasional visitor and it's not a rich people's own club.
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I've been part of that village.
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And so I've actually seen now two generations living in that village.
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So I'm not a researcher, I'm not a scholar, I'm not even a reporter, but I'm a reasonably
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observant person and I live in their world.
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I don't meet my city neighbors or I live in the middle of the village and these two cities
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are completely different.
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And that's my link with a different reality and it's always given me reality checks.
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And there are a lot of blinking red lights in that city.
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Can you elaborate on that?
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Most of my observations about that city and perhaps we can talk about them later are more
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of the long-term nature because I've seen hopes, aspirations, actions taken as a result
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of those hopes and aspirations, particularly with regard to education and where they've
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But this year I spent six months in the village.
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I just came back 10 days ago and I saw things that I've never seen before.
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The first time ever in 30 years walking on the main road, I had somebody stop and ask
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me whether I could give him work.
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It has never happened to me.
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I felt lousy because I had four staff.
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I wasn't letting anybody go.
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Was this person working in the city, I mean, in urban areas before and he lost his job?
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And I was coming to that, which is that in a radius of four kilometers, now four kilometers
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can mean very different things in different parts of the world.
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Four kilometers radius in South Delhi where we are now would probably be a million people.
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Four kilometers radius in that mountain village is probably about 400 people.
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I know at least six men between 20 and 40 who came back from the city because there
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was no work and they're making do.
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What I liked was the can-do spirit.
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Nobody's just sitting at home and be mourning their loss.
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They're trying to do something.
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They're willing to work with their hands.
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Two young men are running a dhaba.
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I asked them how the dhaba is doing and so at first it was, oh, it's good.
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But that dhaba became my turnaround point.
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When I ran from the house down the road, the dhaba was my turnaround point and I would
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stop there and ask them for a glass of water and I got to chatting with them and they said,
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look, we are making one fifth of what we made in the city, but we know that there's nothing
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in the city and so we're making do.
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The second, which is not directly related to the economy, but I think it has very profound
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repercussions down the line, is that kids did not go to school for a year and a half or
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two and they've forgotten everything.
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Whether you're talking about six or seven year olds or you're talking about kids in
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the 10th or 11th standard.
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Kids were passed from the 9th into the 10th and now they're going into the 11th.
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Having studied for three months in the 9th, not studied at all through the 10th, they're
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now entering the 11th, two months after the academic year would have started.
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As it is in that village, the past percentage typically at the board level is 26%.
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What is it going to be now?
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We'll come back to talking about the immediate aftermath of COVID and a lot of this also
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relates to that and previous guests have also given me some insight into that.
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But just to continue with that question of the city and the city, part of this is really
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a question, not just a division in the economy, say in a place like Satoli or the economy
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in this, you know, in one sphere of the economy, like the stock market and another sphere,
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but also in perceptions and you've, Pooja, been a journalist yourself, you've been active
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on social media and what you must have noticed with great dismay as I have over the last
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few years is that it's become such a polarized space where there is no space for nuance.
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Like no longer is a policy evaluated on the basis of how good or bad the policy might
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be and all policies will contain a mix of good and bad except for demonetization, which
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What we see today is that people choose their tribe, they go by the tribe.
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Everything one tribe, their tribe does is good.
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Everything the other tribe does is bad and therefore it is a natural division where if
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you say anything bad about the economy, you will have defensive screaming and shouting
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and trolling and if you say anything good about the economy or anything good that the
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government might do, you'll have a similar reaction from the other side.
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And you've of course been at the receiving end of this multiple times from all sides
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because you write it as you see it and the world is complex and the economy is complex.
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Tell me a little bit about this increasing trend, like am I over perceiving it because
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I spend so much time on Twitter, you know, or what's your kind of sense, does it become
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more difficult for you as a journalist to do financial journalism, to write it as you
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see it because there is no appetite for that kind of complexity anymore?
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Absolutely, Amit, what you're saying about social media is absolutely right.
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People are no longer interested on the social media in what's going on in the economy.
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They're more interested in who are we going to say is right and who we are going to say
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is wrong and that is almost always, you know, which coterie they belong to or which ideology
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they subscribe to or who supporter they are.
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And so most people who used to earlier come to social media, Twitter especially, you know,
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to read new things, to figure out new things to read about, for conversations, to learn
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about new things, are withdrawing because it's just politics.
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It's no longer about the economy.
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Is this becoming a problem to do financial journalism?
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I think I get trolled for this, but, you know, I have now been a financial journalist in
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during the tenures of multiple governments.
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I don't think this government is more adversarial to me than the previous government was.
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Yes, there is a new rule that the incumbent finance minister introduced soon after she
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became the finance minister, which she doesn't allow us to enter North Block, the finance
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ministry, which is strange because, you know, when a journalist enters North Block and meets
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senior bureaucrats, you're not going to meet junior bureaucrats, when you meet senior bureaucrats,
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sometimes in the corridor for two seconds, you know, almost always, what are you getting?
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You're getting their version, you know, their response to something that is being talked
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about and you're helping them put out their version and, you know, that sort of generates
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a debate or, you know, creates an input into the public discourse.
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It is almost always helping them, you know, so I never understood why she introduced this
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In whatever little one-on-one interactions I've had with her, I've found her, contrary
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to her public image, quite well informed, quite articulate, quite willing to listen
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and very well read as well.
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So I don't understand why she doesn't want journalists to do the job that, you know,
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finance ministry beat reporters were doing earlier.
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And whatever my personal experiences, I've been very critical of this government as I
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was of the government before this, I have not found anybody holding that against me.
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I have not found access being reduced.
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So maybe this is my experience, it is not the same experience with other journalists,
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but you know, it's not made my job as a financial journalist difficult.
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And I also want to say that I've had very, very few instances of editors refusing to
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publish a submission which is too critical or, you know, not in line, maybe praising
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something that they don't want praised, either ways.
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So that is there a bit, at least in Delhi, I find editors are sensitive.
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Sometimes pieces, submissions are not published, but it's not as bad as the, you know, the
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chat on Twitter suggests.
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That said, on television, it's really bad.
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And even in print media, you know, so when I was in day to day reporting, we would almost
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always say that the government today said this, but the actual data is this, right?
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So we would say that we would say finance minister P. Sudha Ambram today said, made
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a claim that this is what it is in the press conference, but you know, the facts are this.
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It doesn't happen like that these days.
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Nobody says the government today said this, it is, this is what it is.
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You know, as if what the government is saying is the ultimate truth, you know, and no facts
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need to be presented to show that well, you know, they're not giving you the full truth.
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Those kind of fact checks, I would call them that were happening at a day to day basis
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on daily reporting have just sort of gone off.
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But I see some newspapers resorting to slightly cleverer tactics.
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So they'll print a piece, which is clearly a government press release, and they'll print
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something side by side, which presents the facts.
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So it's a slightly cleverer way of doing it.
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They're not buried in the same piece, but they're there for the intelligent viewer to
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realize that we are forced to say this because this is what the finance minister, for example,
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has said, but this is our version of the reality, but not every newspaper is going to do that.
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And the other thing, sorry, the other thing I want to say that, you know, which I'm not
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a fan of is that, you know, you have ministers and politicians and bureaucrats, chief economic
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advisors, etc., all the time on the news pages, right?
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They get so much column space.
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Why do they get now so much column space on the opinion pages?
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Everything that they're saying on news is often, I mean, more than often, their opinion.
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You know, why do newspapers, I mean, the prime minister, you know, the president, the vice
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president, why are the opinion pages dominated by these individuals who in any case get to
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say what they have to say?
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Why is this space not being given, you know, to other more neutral, more researched and,
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you know, we want to listen to a variety of opinions.
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These people already get a lot of space in play.
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So I have a slightly weird sounding question, which is, given the changes that you're talking
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about that back in the day, and like, first of all, you know, Mohit, I completely buy
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that I've seen some newspapers do this as well.
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Side by side, they'll print something like the Telegraph of Calcutta famously will print,
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you know, quotes in that manner.
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So which is very clever.
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But my point there is you shouldn't have to do that.
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And you know, which takes me to the question that since people have to do that, since,
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you know, if the government says it is raining, you're not allowed to go to the window and
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say see whether it's raining or not, you have to report what the government said.
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Have the journalists changed or have the journalists changed in the sense that have a different
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set of people who are more pliable, taken over, you know, economic reporting and all
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that or have the same set of people learn to moderate themselves?
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You know, I think that is true.
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Also, I see a rise in the middle career, mid-career, mid-level levels of the hierarchies in newspapers
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of very mediocre people, people who are not specialists.
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This is exactly what happens in television news channels where the anchors, the star
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anchors who, especially the right-wing, you know, government supporters always after,
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you know, one day they're an expert on health, the next day they're anchoring a program on
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the economy, the third day it's on Bollywood, then it's crime, then it's politics.
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They don't want to give space to, you know, specialist journalists who have institutional
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memory and experience of reporting from the ground on these, you know, these are very
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These star journalists want to interview if they're an international economist is visiting
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India, they want to interview the finance minister.
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They don't want to let their economic editors do it.
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That reduces the quality of the journalism being done on TV channels.
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And it's sort of really crashed now.
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And I see similar thing happening in newspapers.
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We don't see, you know, if you look at the economic reporting that is happening in newspapers,
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if it doesn't have depth, much of it is because journalists have become pliable because they
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are risk averse because they don't want to lose their job.
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They don't know, you know, what's going to happen because it is true that what people
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write is very closely monitored.
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It was not monitored in this way earlier.
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In fact, I've heard of people, editors of papers getting calls, complaints.
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Some people got transferred out of Delhi, women journalists.
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So everybody's just being careful.
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But the thing is that, you know, you have to keep testing the boundary, you know, but
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if you're a journalist, you know, who doesn't know how they're going to pay their next EMI
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and all, you're not going to test the boundaries.
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So that phenomena sort of playing out.
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I think this is more for the leadership in the media, for them, you know, to sort of
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create that safe space for mid-level journalists to be able to do a better job.
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I am less willing to, you know, sort of look at the mid-level and the junior journalists
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and say, well, they're at fault.
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They'll do, they take cues from their bosses.
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So they'll do what, you know, they're allowed to do.
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So an interesting phrase I learned recently, which kind of expresses so much that is true
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about the world and interesting phenomenon rather is called the Gell-Mann amnesia effect.
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So it's a phrase coined by Michael Crickton.
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His close friend was a physicist, Murray Gell-Mann.
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And Gell-Mann once made the observation that when I read something in the newspaper about
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a field that I know very well, I know that it is nonsense, but the rest of what is in
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the newspaper about fields I don't know well, I will take it as a gospel truth.
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And he called this, you know, Crickton called this the Gell-Mann amnesia.
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And I feel this about the Economist magazine often.
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A lot of the things that we read about what they write on India are quite off the mark,
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But in general, I think it's true, you know, because even taking into account what Pooja
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said, which is a more relative phenomenon, which is of people not being able to develop
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their speciality, but even otherwise, I think that to some extent, it's a natural phenomenon.
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Because if I'm a practitioner, there's no way that a journalist is going to know about
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as much about that field as I am.
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So that's bound to happen.
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The extent to which it happens is a matter of observation and judgment, but it's bound
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You know, I run a company, an interviewer comes and interviews me about the company.
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When I read it, I say, it's got a few facts wrong, you know.
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He can't know as much, but I think there's a broader point there while I'm not denying
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anything of what you're saying.
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The fear effect, the boundaries being reduced, self-censorship, all of those I see.
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But I think there's another factor at work, which is that all my adult life, Indian journalism
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has been very, very under-researched, under-budgeted, under-researched.
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So you know, you compare it to an economist or a Harvard Business Review or whatever,
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they're going to assign a writer for a month to do something like this.
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Here you do it in two or three days.
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So there's that phenomenon at work as well.
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Often, you know, there are places I've heard of people under pressure to put out two stories
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How can you do anything?
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I mean, the reason I remember the Gilman-Amnesia effect is because of what you said about mediocrity
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And of course, it is true that while every specialist will feel that the journalism in
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the field cannot possibly be entirely accurate and get all the nuances, but what you see
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in journalism in the West, and even there it's true that a lot of the time it's quite
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But what you kind of see in the West is that there is at least that effort, that time given,
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like you mentioned, you have much more time to do stories.
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But over here, it's just rubbish.
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There's just no understanding.
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You go from beat to beat to beat.
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Now, this is okay for a lot of stuff, but I just feel that it is not okay for economics.
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Or foreign policy defense.
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Or foreign policy defense.
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You just cannot have Monday morning quarterbacks, as it were, coming in and kind of giving gyan
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And the sense I got from what you're saying is that there is more of that happening.
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I mean, you know, for somebody who's never studied GDP in college, to begin to interpret
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the GDP data, when economists who have their entire careers worked on this subject are
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telling us that, you know, I'm finding, I mean, Arvind Subramanian, for instance, wrote
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in the economic survey that I'm puzzled by the GDP estimate, but we had political journalists
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I'm very puzzled by the GDP.
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I won't say I'm an economist, but I have studied and I'm very puzzled by the GDP.
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I had a great episode on GDP with Rajeshwari Sengupta.
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The other thing that is happening in the journalistic space is that it is very muddied now by this
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mixture of opinion and news, number one, with all these Monday morning quarterbacks coming
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up with their estimates without knowing what the hell they're talking about.
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And also this need to drive narratives, like that's kind of led to an infusion of bullshit.
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And by bullshit, I don't mean that in a pejorative sense, but...
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Let me tell you the sense I mean it in.
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Harry Frankfurt wrote this great book called On Bullshit, where his theory was that bullshit
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is different from lies.
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Lies are when you know that something is false, you know the truth, and you choose to lie.
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Bullshit is when you don't know anything.
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You're just saying whatever the hell comes into your mind.
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But there's a third very important factor which ties up with the need to be able to
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bullshit, which is that we have seen such a massive reduction in data production of
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Data on the economy is not available.
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India used to have a really sophisticated statistical system.
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It was way ahead of where we were as a country in our GDP, et cetera, et cetera.
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There has been systematic destruction of that whole ecosystem, to the extent that you've
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had people at the top of the statistical system resigning.
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Let me double click on this.
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You know, so we were talking about GDP, so the base is getting into a slightly technical
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The base was revised every five years, right?
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I sort of stay away from most conversations with economy these days because the GDP estimates,
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the base year has not been revised now for 10 years.
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And last time when they revised it, there was such a big noise because they had to sort
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of revise downwards the previous estimates.
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And there is a technical reason why that happens, because how they arrive at GDP estimates, as
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both of you know, is that it's a combination of a few surveys that are done in the base
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year and then a few surveys that are done year to year.
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They keep extrapolating on the basis of the base year, what new information comes in,
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new data comes in, new surveys come in.
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When they extrapolate on the basis of the base year for 10 years, they invariably end
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up inflating estimates.
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You know, there are technical papers that people have written about this.
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My fear is that the estimates that we are going to see now are not very accurate.
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In fact, since you're talking about the technical part of it, the other technical part of it
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is that when you rebase, you also present data for the previous years.
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They didn't do that for two years.
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There's a big question mark around it.
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And when they finally did it, it was to reduce the growth from the previous regime and increase
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the growth from the current regime.
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It's bound to be suspect, you're bound to suspect it.
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But that's the gross data, right?
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But you talk about other data.
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You talk about consumption data.
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You talk about employment data.
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The consumption data was ready.
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It was released and then it was pulled back.
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And they said that it has been pulled back because it has not been approved by the ministry,
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but it has never been approved by the ministry before because it was released by the Department
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I forget the exact date.
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Just before the elections.
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Yeah, so roughly about three years ago.
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It didn't cut a very good picture.
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It was pulled back because the data that it showed was really, really inconvenient.
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And the statistician who was in charge of it, the chief statistician of that one resigned.
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And then along with him, the next guy also resigned.
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So you've completely destroyed.
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Then what happened is when it comes to employment data, same problems.
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As a result, everybody started relying on private data, which is the data released by
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the CMI, the Center for Monitoring the Indian Economy.
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Now when that data is inconvenient, you say, oh, we can't rely on that data because private
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So see how this fits in.
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So there's no data, no official data.
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If the private data is inconvenient, you say we can't rely on private data.
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This lays the road open for any narrative because now it's your opinion versus my opinion
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because there is no data.
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And what that tells us is that all that matters is opinion.
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So my bigger worry is that, you know, why do we seek better data?
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Why are the policymakers not, they should be the ones, you know, louder on this saying
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we need the data, we need better data because we are, you know, flying blind.
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So Pooja, I have a question for you, which is who is the economic policymaker today?
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Who was an economic policymaker today?
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Oh, the prime minister's office.
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And who in the prime minister's office?
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You have somebody who's reporting on the economy, Pooja.
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You have someone like me who's been observing the economy, sometimes casually, sometimes
#
I joined an undergrad in economics when I was 16 years old.
#
I'm now going to be 66, 50 years I've been observing the economy.
#
We're both sitting in Delhi and we're saying we don't know who crafts economic policy for
#
the government of India.
#
What can be a bigger indictment of what is happening in this country?
#
When is the last time that you heard an economic policy statement from anybody who wore a title
#
We used to hear of turf wars earlier between ministers, between bureaucrats, between the
#
prime minister's office and the finance minister's office, depending on the politics, in different
#
We don't hear any of that today because, well, policymaking is not being done in ministry.
#
And I was earlier going to double click on the data question and ask for specifics on
#
what kind of data is no longer coming and why is it no longer coming, otherwise kind
#
So I'm going to sort of combine these two themes and sort of explore this, and this
#
is again sounding like the data and the data, that there's a very big way in which society
#
has changed in the last 30 years, beyond economics and beyond India, which is that 30 years ago
#
you could say that there was a broad consensus on the truth.
#
You had a few mainstream newspaper, mainstream media, there was a broad consensus on basic
#
aspects of the truth, that the sun rises in the east and blah, blah, blah, all of those
#
Today what has happened is one media has become extremely fragmented, and in many ways that's
#
It's empowered individual creators, it's democratized the space, you can have more
#
debate, more space for dissent.
#
But what it's also done is that because the way we consume information is so fragmented
#
and because of the different ways in which social media has increased tribalism, what
#
it often means is that there is no consensus on the truth.
#
You can believe whatever the hell you want.
#
And this then kind of leads me to, one, then I don't know why anyone would suppress data
#
because what difference does it make anyway?
#
But from where you are, one, there is this tendency that the reality doesn't matter,
#
the narrative matters, which in politics, I think is clearly true, up to a point where
#
I think this, I am hopeful that there's got to be a tipping point when the reality has
#
Though we didn't see that with demonetization and we haven't seen it with COVID.
#
But as a journalist, as someone who follows the economy, when you think of data that find
#
all these sources of data are no longer reliable, but these sources were a few sources, some
#
of them were government sources.
#
If you have to think creatively on your feet and say, look, I want to get to the truth
#
anyway, what are the kind of proxies that you use?
#
I mean, there is of course the anecdotal stuff that you bring in that, you know, I was in
#
Satholi and this is what I see around me and that's anecdotal.
#
But otherwise, if you want to make sense of the world, you cannot believe anybody because
#
everybody seems to have an agenda, they're coming from all these places.
#
You know, we've discussed the state of the media.
#
What is then your approach to even get at the truth and within that, is there a warning
#
to yourself to fight your own biases?
#
Yes, Amit, you know, 30 years ago, what you say, if there was a consensus, probably because
#
there was very clearly a very dominating side, right, only the people who got space and whose
#
voices were heard, they got to determine what the truth, so to say, was.
#
We don't know if that was the truth.
#
I mean, you know, it's very difficult for us, for me to, you know, because we've not
#
heard the other side, right?
#
What you're saying, what is happening now is with this democratization of opinion, people
#
stating their opinions, we are getting to hear more and more people who were voiceless
#
So, I'm not so, I don't have this view that earlier, that if we have a view of what the
#
truth was, I mean, whose truth, you know, that question always is asked.
#
No, I agree that it's, I actually think it's a net positive, hugely a net positive.
#
But there is then the negative side of it that the truth almost begins to count for
#
It's what you want to believe that determines what you believe.
#
But as far as data is concerned, you know, specifically this point of data, like I said,
#
I grew up at a time where you trusted government data, number one, and I still do.
#
I still trust government data and two, the data was really good.
#
It was released to a timetable, et cetera, specifics, like what kind of data would we
#
get, which we don't get today?
#
And why, why don't we get it?
#
So like I said, we are not getting consumption data, you know, what is the average household
#
consuming that was, that was stopped.
#
I mean, I don't know who collects this and how they collect it.
#
I mean, I just want to kind of really get to, I'm not very good at that, but mostly
#
by the ministry of statistics and MOSP as it's called, then you have the NSO, the national
#
statistical organization, which has these periodic surveys, et cetera, et cetera.
#
They don't cook up data.
#
The problem is that data releases have stopped employment data from the government consumption
#
data, all of these have stopped.
#
I still trust government data.
#
So if the government gives you data saying that this is the collection of GSD, it's real.
#
I don't think data has been fudged.
#
What is happening in that speaks to the robustness of the statistical system, which is that they've
#
not been able to start fudging that data, but so there are two questions.
#
So what is the data that I look at and what is the data that I think has problems with
#
This ties up to what she said earlier.
#
So if the government is not releasing employment data, I am looking at it through the CMI lens.
#
CMI has been around as long as I've been around and I've never sensed an agenda.
#
They are thoroughly professional.
#
They have a profession.
#
They have a reputation to defend.
#
They don't have an economic agenda as far as I know or political agenda.
#
But you know, you learn to look for continuities or discontinuities in data.
#
When there are discontinuities or the data doesn't square with your view of reality,
#
you're going to question it.
#
So when it comes to employment, I look at CMI data.
#
When it comes to consumption, again, there's some data coming from pyramid studies.
#
There's some data coming from CMI.
#
As RBI does a bi-monthly survey of consumer confidence, that is also an index into that.
#
So you have to look in a more rounded way.
#
When it comes to the meta number, which is GDP, we know that this number is severely
#
Let's even assume it's not flawed by intent.
#
It is flawed by design, which is as follows.
#
As she said, I can collect data as far as the formal sector is concerned every quarter
#
because all the reports that all companies have to submit, the so-called formal sector,
#
there's not an exact mapping, but they have to file their returns every quarter.
#
They pay their taxes, et cetera, et cetera.
#
A good statistician can take that out and say the formal sector has grown by this much.
#
Now in the past, what you used to do surveys every five years, you surveyed the informal
#
And at the end of that, you said the informal sector can be projected to be X.
#
We know that the formal sector is Y.
#
We know the ratio between these.
#
Now till we do this survey again, we will assume that the ratio of X to Y remains the
#
I think that's a good, that's a good method.
#
The problem is that the last time you had a major survey of the informal sector was
#
It should have been done again in 2020.
#
It was not done completely understandable because it was COVID, et cetera, et cetera.
#
Do it in 2021, you do it in 2022.
#
So again, I'm not suggesting there's an agenda.
#
Fact is that you couldn't do it.
#
What we also know, which is touted as a great positive of the various measures taken by
#
the government is that the economy has got formalized, right?
#
What does that mean in mathematical terms?
#
It means that the formal sector accounts for a larger percentage of the GDP.
#
Otherwise you can't say it's formalized, right?
#
This means that the earlier ratio will not apply any longer.
#
The earlier ratio was, as it so happens, almost exactly 50-50, which means that the formal
#
sector was as large as the informal sector, so you roughly multiplied by two.
#
Now, how much has the informal sector shrunk?
#
We know that it's shrunk.
#
It was touted not in advance of, but in defense of demonetization.
#
We formalized the economy.
#
It was again, same situation with GST.
#
In defense of, oh, but the economy has got more formalized.
#
The people who are evading taxes are out of the loop.
#
We know that the pandemic had the same impact because economic activity shrunk.
#
The people with big balance sheets survived, those who didn't shut down, they're more
#
likely to be from the informal sector because they're not banked, et cetera.
#
Those three events within a period of four years have led to the formalization of the
#
We know that that 50-50 number cannot be applied any longer, but the GDP numbers that we are
#
using assume that that 50-50 number still applies.
#
Now, you can say, and that's logical, that we don't know what ratio to apply.
#
Should it be 50-50 or 48-52 or 30-70?
#
But I am certainly going to question a number which says that GDP is growing at 7% if you're
#
blowing up the formal sector by that number.
#
Now, the SBI in a recent survey says the informal sector accounts for only 15% of the economy
#
I don't believe it at all.
#
What I'm saying is that we don't know the number, and therefore I have to look at other
#
But I can certainly say that that 5% growth is bound to be a huge overestimate.
#
And when you combine that with other data that you're getting, because now you're looking
#
for hints for clues from everywhere, we know from World Bank data, which was analyzed by
#
Pew in the US, a study coincidentally was led by a classmate of mine from college, says
#
that 75 million additional people dropped below the poverty line in the last year and
#
You can't have that along with this kind of growth.
#
There would have been some degrowth, even if those people only account for 2% of GDP.
#
But there has been that degrowth.
#
So you're bound to question these numbers.
#
But nobody officially is trying to say, you know, we have to discount this number by such
#
and such, because, as I said, in the absence of data, then narrative becomes everything.
#
We will grow by 10% next year, we will grow by 7% in the long run, then it's just narrative.
#
Also, I think this is part of a larger shift that's happening globally, which is, you know,
#
like you were saying 30 years ago, nobody questioned the truth because there was consensus,
#
because the truth was determined by the experts, you know, the elites.
#
Now, the whole political movement is anti-elite and anti-experts.
#
Everybody hates anybody who's trained to do something, especially in economics.
#
We like bureaucrats, we love historians, I'm not talking about the RBI governor, I'm talking
#
about people who call themselves economists, but write only on history.
#
So, you know, but we don't want economists to talk about the economy, we don't trust
#
We trust anybody, we will trust anybody but an economist to tell us what should the economy
#
For the larger population to feel like this, it is an expression of frustration, not against
#
economists, but against how things have not moved for them as much as they would have
#
liked to, you know, in so many years.
#
People keep discussing about why economists have not delivered because politicians don't
#
So, you know, but the thing is that, you know, when you're sort of discrediting experts,
#
you're opening up space for challenging narratives, you are turning economic debates into political
#
debates, and that's how you're sort of trying to play the game of narratives.
#
And therefore, data is not that important, therefore data collection is not that important,
#
therefore narrative setting is more important.
#
And nobody says, what do you mean when you say formal economy?
#
That question no policymaker, no politician is asking.
#
And people can bring out reports saying the formal sector shrunk without saying what they
#
mean when they say informal economy is shrunk.
#
I mean, I'll give you an example, in 2014, I had done an interview with somebody very
#
senior in the IMF, who said, you know, we are very surprised at how quickly India has
#
exited this grouping of the fragile five.
#
And he gave all the credit for it to the UPA government, the last few months of the UPA
#
government and the RBI governor, Raghuram Rajan.
#
And all the data that he gave was as on March 31, 2014, so this is before the government
#
This story, you know, made me very popular with when, you know, it was done after the
#
government had changed.
#
It made me very popular with people who now troll me because they thought, you know, because
#
they didn't read the details and they thought, well, you know, it's the change of the government
#
that has brought India out of the fragile five.
#
Until today, the popular narrative is that this government has brought India out of out
#
of the grouping of the fragile five.
#
But nobody goes back to that story and reads.
#
Who was the IMF talking about when they said that?
#
So, you know, yeah, the truth data doesn't matter.
#
And so the question that you asked me is, how does how does a journalist then do their
#
Earlier, you know, most of us would only go to the experts, you know.
#
Now this is a good thing, I think, because there are some structural changes taking place
#
in the economy after Covid, especially the amount of digitalisation that is taking place.
#
Sometimes I'm surprised where, you know, so that is, you know, a huge structural change.
#
Now it is going to change how we traditionally see the economy, economic growth, formal sector
#
versus informal sector, you know, the experts must be working on this, I'm sure.
#
But my worry is, you know, your narrative sounds very nice when you talk about these
#
But what is policy doing to build on this?
#
How are you bringing this into, you know, your policy decisions?
#
Are you equipped to do that?
#
You know, everybody, you know, the decision makers just seem so out of it.
#
And to answer that, which is that there nobody that we know was making policy, you know.
#
So yeah, but the digitalisation is crazy.
#
I realised this last winter, I typically spend a couple of weeks in Bangalore over the winter.
#
And last year because of Covid, I spent longer time.
#
And the guy from whom you buy tender coconut water out near Kora Mangala accepts Google
#
I mean, that's really micro payment, right, 30 rupees, you pay by Google Pay.
#
And when I spent this year from April to September in our little village, the hardware store
#
four kilometres away in a village of 500 people, I found that my wife was doing everything
#
She would order the stuff on the phone.
#
The guy would put it onto the bus, which came once a day in the afternoon, it would come
#
And of course, this being a little village, it would just be dumped at the bottom of our
#
driveway and it would be, you know, it's not going to go, it would pick it up in the evening.
#
And the bill would come along with the consignment and she transferred by Google Pay.
#
But like my sense is that this is a good thing.
#
But has the end come closer with the wrong means?
#
I don't think that this particular end has to do with demon or any of that.
#
I think it's because of the shock of COVID.
#
I also feel that, you know, I'm all right if somebody wants to take credit for it.
#
What matters is that something good happened.
#
But when something good happened, beyond using it to nourish your narrative, why not actually
#
study it and, you know, be more, you know, have a more robust response to the change.
#
You've already answered that.
#
Because if you want to study it, you need experts and if you move all the experts out.
#
You know, yeah, the last people you want to listen to.
#
So you're sort of shooting yourself in the foot.
#
My other question is kind of about mindset, like we were talking about formal and formal.
#
You know, I just want to dwell on this particular issue of who's making economic policy.
#
And it's a broader issue.
#
I have a very dear friend who was chief executive of a very large chemical company.
#
And in the process of his work, both as an individual CEO, as well as being on the industry
#
body and therefore lobbying and, you know, he became very friendly with a particular
#
secretary to the government of India and they began talking about policy.
#
This guy said to me, you know, when I have to write a note on policy, it doesn't go to
#
It goes on a blank piece of paper.
#
It's not on my official email.
#
It's not on a letterhead.
#
Who reads it in the PMO?
#
What language do they use?
#
Wait, wait, wait, wait.
#
It comes back with notes scribbled on it, uninitiated.
#
I don't know whose notes there are.
#
Now I incorporate those notes into my policy.
#
Now it goes through the official channels.
#
So that if there was any mistake incorporated into the new policy, they'll say, but this
#
came from the ministry.
#
A secretary to the government of India does not know who is reading his policy suggestions
#
and telling him what to do.
#
So this is not just about economics.
#
It's a black box in which policies have been made.
#
You can open up a black box and figure out what happened.
#
So the question I was coming to is, you know, you mentioned in formal and formal and formal
#
and we'll kind of, we can double click on that later and go into that in some detail,
#
but at a meta level, it, you know, I've always felt that the way that issue, the way that
#
is framed is to me wrong, that people in the informal sector are doing something sinful.
#
They're evading tax, blah, blah, blah.
#
And I just feel that's wrong.
#
You know, the informal is informal because it's been forced to be there because the heavy
#
hand of the law is just, you know, so oppressive that sometimes you don't have a choice.
#
You just, you're in the informal sector, you're outside the system.
#
And of course you're very small and all of that, all those things come into play.
#
Now it seems to me that at some level that there is sort of this mindset within the government
#
that informal ko formal banana hai, number one, so we know exactly what's happening
#
and everything is in the clear light of day and make it formal, not by removing all these
#
restrictions and by enabling ease of business, which allows them to come into the light,
#
but through all these different ways.
#
And secondly, one of the key metrics when people talk about how well the economy is
#
doing seems to be tax collections.
#
And I don't understand why that should be a metric because tax collections to me, let
#
So tax collections to me are an sort of a transfer from the productive part of the economy
#
to the parasitic part of the economy.
#
So I don't know why that should be a metric.
#
But my question therefore is that, you know, in 91, it seemed that a fundamental mindset
#
shift had kind of happened where policymakers figured out that we need to get out of the
#
They care of themselves, you know, voluntary interactions will kick in.
#
It's a positive sum game that seems to, if it was there at all, in any serious way, it
#
kind of seems to have sort of disappeared where we still have the central planning mindset
#
and we want to control everything, not just.
#
And if you can't control reality, we'll control the narrative.
#
So I know I'm rambling a bit, but I have a few reactions to that.
#
Firstly, you know, where I come from in terms of my economic ideologies, exactly as you
#
do, it's not just parasitic.
#
It's also, you know, as Ajay Shah talked about in his book and on your podcast, it has been
#
demonstrated that revenue in the hands of government is one third as efficient as revenue
#
in the hands of the private person, right?
#
So it's not just parasitic, it's grossly inefficient.
#
But to me, the even bigger problem, aside from inefficiency and so on and so forth,
#
is the fact that 85% of the employment is in the informal sector.
#
So when you start bashing the informal sector, first through demonetization, then through
#
GST, then through pandemic, you're rendering vast swathes of the population unproductive.
#
You're putting them out of work.
#
You're taking money off their tables and to some extent, then you're trying to replace
#
it with these grand gestures of princely munificence, which it isn't.
#
But you're taking away the dignity of people who were able to feed their families yesterday
#
And we are about the lowest labour participation rate in the world as in India.
#
Of adults between 80 and 65, what percentage of people take part in the economy?
#
India is about the lowest in the world at 40%.
#
It was 42% before COVID hit, it went down to like 36 now.
#
So if you don't grow, either you find a way to formalize and grow so rapidly, you have
#
GDP growth rates of 10 and 12% like China had for 30 years.
#
That's a different story.
#
You neither have that nor do you rely the informal sector.
#
You've got, and these are the longer term issues that worry me even more, that you are
#
having, you know, she talked about a lost decade.
#
My worries about lost generations of young people.
#
And I see those people.
#
These are not just statistics for me.
#
I understand statistics, I look at them carefully, I'm trained to look at them.
#
These are 35 year old men whom I first interacted with when they were three and four and five
#
And I saw the hopes with which their parents, who were my neighbors, perhaps my employees,
#
with which they put them into schooling and how they emerged with no hope.
#
Two things let them down and the two are intimately related because is education supply led or
#
You know, we've talked about it often, you believe it's demand led, to some extent, I
#
agree, not fully, we defer on that.
#
But on the demand side, if there's no employment being created, your incentive to pursue high
#
quality education vanishes and that's certainly the case.
#
All these young men are either unemployed or underemployed.
#
I saw them when they were five, I saw them when they were 16, I saw them when they were
#
17, they're now in their thirties.
#
And when you speak of lost generations, the point is that losing generations at this point
#
in time, when we are having this demographic movement where what was a demographic dividend
#
is becoming a demographic disaster is even worse.
#
Also, you know, there's more fundamental thing.
#
An increase in GST collections may not necessarily be an indicator of growing GDP.
#
It could probably just be that companies have, you know, raised their selling price.
#
I mean, somebody needs to study that and, you know, decipher the data for us.
#
And you know, the other thing is that, you know, in fact, that data is very clear, which
#
is that the increase in GST over the last two years is barely more than what inflation
#
So in real terms, it's not great, regardless, yes, you will see.
#
And the other thing is that so, you know, multiple things happen and which is why, you
#
know, it's very difficult sometimes even for the experts.
#
People are trained to do it, to understand what goes on in the economy.
#
And, you know, there's all this oversimplification in the narrative that happens is very, very
#
harmful because of that.
#
Like, for instance, for years, there was this whole politics around FDI and retail.
#
Now Amazon is this much hated big company and we have cabinet ministers who have declared
#
the Quit India movement, you know, but well, the only sector in which employment generation
#
is happening as of today is the online retail sector and it is not happening and which is
#
also leading to formalization.
#
All of your small shops, you know, around you have all tied into Amazon.
#
You would have also seen this happen happening and, you know, their business is growing and
#
it's a win-win at the moment.
#
Since Amazon is such a large company, it has such a bad reputation globally, we don't know
#
if this equation will remain win-win, but that's where the role of policy and regulation
#
But so far it has happened organically on its own because the market forces are operating
#
and it is happening in almost opposite of what the concerns of the politicians for years
#
have been and all the support they mobilized from exactly these people, you know, saying
#
that Amazon is your, I mean, whatever, Western retail giants are your biggest enemies.
#
My point is that, you know, this could have happened sooner.
#
It could have happened in a more regulated way.
#
It can happen in a wider parts of the country if policymakers were taking better, well-informed
#
decisions and not simply doing politics.
#
I think almost always on the basis of not even understanding what they're talking about.
#
This is a big example of it and, you know, this is what to me is most worrying.
#
To me, you want to do a narrative, you want to do your politics.
#
As long as, you know, deep in your ministries, you were doing your policy making, you know,
#
like policy wonks and getting, you know, applying your minds to these things, we don't see any
#
And to me, that is more worrying, you know, not the polarization and not everything, because
#
why is it so easy to polarize?
#
Why is it easy to do politics all the time and mislead people?
#
Because that's all that, you know, goes on.
#
People don't see the truth because, you know, you're not doing policy making.
#
I love the phrase you just use deep in your ministries.
#
That sounds like the kind of phrase like China Meville or a fantasy fiction writer deep in
#
Or even Brave New World, yeah, all suitably dystopian.
#
So that, you know, that comes from how the NOLLOC is organized, you know, who sits on
#
the ground floor, you know, who are the people who sit closer to the minister's office.
#
So, yeah, unconsciously, I think that's what I'm talking about.
#
Yeah, it's a very resonant phrase, no, deep in your ministries, you could have like…
#
I've never had the privilege of…
#
Not these ministries, but I'm imagining, like I remember when I first came to Bombay,
#
I was obviously blown away by the scale of it because I've never been in such a big
#
city and I remember going to Dadar station and it took me half an hour just to find the
#
correct platform because Dadar station is where all the different lines, harbor line,
#
central line, which they all kind of converge.
#
And it was like being inside this giant video game, like you remember the video games of
#
the 90s, Prince and all of that, you're navigating on this or Wolfenstein.
#
And it was like being in this giant video game and I thought a video game set in Dadar
#
would be so incredible with this labyrinthine and multi-level shit happening all over the
#
place and of course, the swarms of people.
#
You should visit finance ministry some point in time.
#
That's what you made it sound like.
#
There is a basement, you know, where there are these documents, which I don't think
#
anybody's touched for a million years, you know, there's a sort of kind of a courtyard
#
in the center, on the top floors, you know, all the section officers, it's, somebody
#
should write about it, actually, since we are talking about this, this is not related
#
But an interesting thing is that Lord Mountbatten's office is in finance ministry still, there
#
is a plaque that, you know, where the CBDT chairman sits.
#
So it says the, what was he, the supreme commander of the second world war?
#
That is the office and the balcony sometimes opened, you know, where he used to sit and
#
look at the Viceroy's, this thing.
#
It's all over India now.
#
Mountbatten's office still existing in North York reminds me of CCA, you must be knowing
#
Okay, let me tell you about CCA.
#
So sometime in the 1980s, and to give credit to a creditors, I think, I think, Debeg Debroy
#
first wrote about this in one of his books.
#
So sometime in the 1980s, a department in the Tamil Nadu ministry called the CCA, this
#
gentleman in the Tamil Nadu ministry, who was part of this department called the CCA,
#
they apply for a raise in their budgets.
#
So when it goes to whatever committee looks into these things, they decide to look into
#
what is the CCA, what do they do?
#
So here's the history of the CCA, that the second world war breaks out.
#
We have to go back to that period.
#
The second world war breaks out.
#
And part of the result of the second world war breaking out is that trade routes between
#
Cuba and England are broken.
#
Now, Winston Churchill, you know, who is at the helm of the English efforts to save the
#
Western world, which he successfully manages, love cigars.
#
And the best cigars in the world, according to him, are from Cuba, he can no longer get
#
The second best cigars in the world are from Trichina or Polly or whatever.
#
So a department is set up in the imperial ministry called CCA Churchill Cigar Assistant.
#
Wow, I didn't know that.
#
And the world war ends and India becomes independent and Churchill dies and decades pass.
#
And that department still is getting a budget, is still running until somebody, some mad
#
moron within that department decides to apply for an increase in the budget.
#
So this is what Amit, governments have always functioned like this.
#
This is just a difference in degree, you know, like what you're saying.
#
I also recognize that these problems go beyond the last decade.
#
It's just the slide, you know, has just sort of really become really quick paced and worse
#
You know, I mean, people think, you know, when budget is made, you know, officials must
#
be sitting looking at every entry, you know, how much is this department getting, you know,
#
What they'll do is they'll just take all the heads, apply a certain, you know, increase
#
It doesn't even get discussed.
#
You know, these things are like sometimes done really on the tips of their fingers.
#
And also, you know, all of this, Mountbatten's office in North Block or the CCA in the government
#
seem to me like metaphorically true for mindsets as well, that we stay tied to old mindsets
#
of the past and don't change to recognize new realities, which is incredibly important,
#
especially in modern times where reality itself is changing so fast, the economy is changing
#
The whole discussion we had last time I came to your show on Pranam Mukherjee taking finance
#
mystery backwards, we are seeing that with Atma Nirbhar and, you know, the trade policy
#
and so many other things, you know, the return of the Inspector Raj when these rules have
#
come out for e-commerce, the, you know, how government officials can ask questions, everything
#
is regressing back to the pre-1991 sort of mindset because that is so deeply embedded
#
into the way the rules and regulations are written, shaping how bureaucrats think, shaping
#
1991 happened, but, you know, everybody says that, you know, what it did is they forged
#
And after that, the speed of change in policy, modernization of policy may have varied.
#
But the big thing that was won was that across political shades, there was consensus that
#
this is the direction we will move in.
#
I'm not so sure that, you know, there is that consensus anymore, if it was even in the first
#
There's almost a poignant note in this that Ajay Shah, who's been on the show and has written
#
that great book in service of the Republic, one of the essential books in the Indian economy,
#
along with another one we'll talk about soon, once came on the show and it was very poignant.
#
And he said that the reason I wrote that book, the reason I wrote that book is because, you
#
know, there were a certain number of people within government, within the policy circles,
#
within whatever, who were looking ahead, who, you know, had discarded the dogmas of the
#
past and were looking ahead and wanted to make things better.
#
And those people were dying out.
#
And he said, I want to leave something for the next generation, I want to leave something
#
so that there can be more of us and more to this.
#
And I found that very inspiring and sad at the same time.
#
Some were dying, some were eased out.
#
Some were dying, some were eased out.
#
You know, it's interesting, like there is that old phrase that paradigms change one
#
So you can't change minds, people change and a younger generation will do things differently,
#
except that that hasn't happened, that there was a temporary moment of change and the people
#
who believed in that change are kind of gone.
#
But it's also true, though, of course, there's a much debated issue whether how much we believed
#
in that change and how much it was forced upon us by circumstances, by a fiscal crisis,
#
by a foreign exchange crisis, by the fact that we needed to tap into international
#
And a lot of policy changes were forced on us by that.
#
But I agree, you know, with Montek Singhalwalya, when he says that it just wasn't sold, you
#
see, people are not opposed to change people like we just discussed, people are willing
#
to move into digital forms of payment, for instance.
#
So when it comes to technology, which makes their lives easier, because it's so easy
#
to demonstrate it, people are very open to change.
#
If they're not open to change in wonky policies, it's because it has not been explained to
#
them how it is good for them.
#
And that is the failure of the politicians.
#
The farm law is a clear example, right?
#
You know, people from our side of the fence, meaning who believe that the role of the government
#
needs to be limited, the subsidies need to be limited, etc.
#
The powers need to be empowered with choice.
#
Not just that, that there are several layers over there, and one of those layers is that
#
it was decided at the time of the constitution that agriculture should basically be a state
#
This MSP is not tenable in the long run.
#
We've just accumulated so much dead stock.
#
The fact that it has to go is a given, but it needs to be negotiated.
#
Now you've got this huge political impasse sitting over there.
#
And because that impasse has become so intractable, you have this horrendous spectacle of a cavalcade
#
which is mustered by a central minister's son, mowing down innocent farmers.
#
It's only because of that.
#
It's because you created an impasse.
#
As a policy wonk, I'm the first person to say that agriculture needs to be reformed.
#
Agricultural policy needs to be reformed, but it's got to be political, it's got to
#
It was just announced one day.
#
You see the difference between narrative and actually consensus building.
#
In fact, I did an episode on the farm laws with Ajay and we both agreed obviously with
#
everything that you're saying that that is a tragedy, but you could change a couple of
#
things about the farm laws, but economically it's fine.
#
It's a move in the right direction, but the politics is disastrous.
#
It's just tearing us apart.
#
And it's so ironic because typically what politicians excel at is getting the politics
#
right and the economics wrong.
#
And this is practically literally the opposite in a sense.
#
One is this one, which I agree with 100%.
#
The other is that when it comes to agriculture, because the agricultural scenario is so different
#
in different parts of the country, you can't have one policy needs much deeper study.
#
For example, I would say top down first principles, which is that the government should have no
#
role as far as agricultural markets is concerned, very simple statement to make.
#
Now this agricultural model bill was talked about 2003 or something like that, right?
#
Only one state, the last state on earth you would expect, which is Bihar, took one major
#
element of it and they said no government mandis any longer.
#
From a theoretical point of view, great.
#
It resulted in a lowering of average price for farmers in Bihar because a lot of the
#
And so now the average distance from the farmer to the mandi went up, access to markets went
#
First, the average price came down, secondly, the scatter in price went up because those
#
who were further got lower prices, those who were closer got better prices.
#
Now I can still say that's how it should be.
#
If your farm is not located close enough to markets, you should get a lower price.
#
You shouldn't be farming there.
#
Then this leads to another question.
#
Why are the farmers in that situation?
#
They're in that situation because there's no industry in Bihar and you're not allowed
#
to sell agricultural land anyway for non-agricultural land.
#
So when you have a mess at every level, who should carry the burden for it?
#
You've ended up in a situation where the poorest people are carrying the burden, which is the
#
So from first principles, I can say good thing, but when you actually see the misery on the
#
ground, you have to say, look, there's got to be negotiated.
#
Anybody you need to create an exit policy for them.
#
So you can't do this by railroading a law through and look at the mess in Rajya Sabha,
#
the voice vote, people are saying, and there is confusion about whether the, look how messy
#
it was, were the Rajya Sabha MPs in their chair or not?
#
Were they allowed to vote or not?
#
This is not the kind of stuff which you should be debating, right?
#
Procedure should be clean, transparent.
#
It shouldn't even come to that.
#
At a meta level, major bills which have been negotiated in parliament in the last UPA government
#
something like 46% of bills were sent to expert committees.
#
Earlier on, it was as high as 70.
#
In this Rajya Sabha, 11% of bills were sent to expert committee, which is a larger point,
#
not just economics across the board.
#
That's the whole approach.
#
So there is no space for debate.
#
There is no reason to have experts.
#
It has been decided, parliament doesn't exist, right?
#
In terms of what it's supposed to do.
#
You can run it from an Excel sheet because anti-defection law, you decide how each MP
#
So, you know, it's like shifting from one equilibrium to another.
#
We can agree on what an ideal state of things should be where, you know, you empower farmers
#
You don't have the government playing a part and creating its monopolies and being the
#
But the point is, how do you get there from here?
#
And there is a massive transaction cost, if I might misuse that term, and the poor kind
#
So the best way to do it is in gradual steps and let the states experiment and let the
#
states kind of take that.
#
So I kind of agree with all of that.
#
So, you know, we've sort of, we'll take a commercial break now.
#
And after we come back, like the way I'd, you know, originally Pooja will remember,
#
I'd emailed her at the start of the year.
#
And I said, let's do a three-way episode, like Ajay Shah four-way, I mean, me and three
#
guests, which is Pooja, Ajay Shah and Shruti.
#
And we'll just speak about the Indian economy zooming in all the way.
#
So first we talk about the post-independence to 91.
#
Then we zoom into 91 to 2011.
#
Then we zoom into the phrase made famous by Pooja's great book, The Lost Decade.
#
And then we zoom into the current moment and look at where we are.
#
And the interesting thing is in between Shruti with the marketers started the 1991 project
#
that they have about, you know, what life was like pre and post liberalization.
#
So I did an episode leading up to 91 with Shruti and Ajay.
#
So what I want to do after the break is actually ask Pooja again, though we've done an episode
#
on this and I linked that, but ask Pooja again to kind of take us through the last decade
#
and then come to the present moment and start talking brass tacks, including how things
#
were before COVID and how COVID has affected that and how things kind of look.
#
And by the way, for those of you who are interested in sort of a deeper dive into all of what
#
we just spoke about, what Mohit was chatting about, I've got a bunch of episodes on agriculture
#
that I'll link from the show notes and earlier episodes with Mohit also where, you know,
#
you would have touched upon similar themes, but first let's take a quick commercial 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.substract.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.substract.com and subscribe.
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Once you sign up, each new installment that I write will land up in your email inbox.
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You don't need to go anywhere.
#
So subscribe now for free.
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The India Uncut newsletter at indiancut.substract.com.
#
Welcome back to The Scene in the Unseen.
#
I'm chatting with Pooja Mehra and Mohit Sathyanand about the wonderful state of India's economy.
#
So the reason I feel your book is so important and Pooja, I mean, I don't know if you listen
#
to my podcast, but I keep talking about your book in almost every economics episode I do
#
because one reason it's an essential read is that narratives have solidified in extreme
#
positions to the extent today that there is one side that will believe that history ended
#
at 2014 and nothing after it matters.
#
Everything is Nehru's fault.
#
And there's another side that believes the opposite, that history began at 2014 and,
#
you know, nothing that happened before that should be counted and everything that is going
#
And where your book works so wonderfully, it shows that the truth is much more complex
#
It shows that things started going wrong much earlier, that, you know, the culpability lies
#
with various combination of circumstances and people really.
#
And there's just this larger narrative playing out there.
#
So again, we've done a great episode on this, which I'll direct listeners to and therefore
#
for that reason, we won't talk about it for two hours like I think we must have then.
#
But tell me essentially, you know, what is a narrative?
#
What is the last decade?
#
Why do you call it the last decade?
#
And what are the key events that kind of set it off?
#
Yeah, Amit, what you're saying is absolutely right.
#
Just like we are saying, experts are not heard now, their views are not taken into account,
#
technocrats are unimportant.
#
Well, you had the most distinguished economist India's ever had Dr. Manmohan Singh as prime
#
minister in the previous government.
#
You know, were his views taken on board on important economic policy matters?
#
So really, there's no difference between you know, the previous government and this government
#
and therefore I don't understand this polarization.
#
I don't understand people who defend the previous government and I don't understand people who
#
say this government is any great because you're doing the same thing.
#
You don't want to listen, you know, to people who know about things.
#
And that's why we've had a last decade, you know, problems in the economy may have started
#
before 2008, which is where my book starts, but I began to record it in 2008 with the
#
shock of the global financial crisis, before which the global economy was booming and therefore
#
the Indian economy was booming because of the kind of links between the Indian economy
#
and the global economy.
#
And what the shock did is that, you know, it was not as severe for India, number one,
#
because India did not have a financial collapse like the Western world did.
#
But also because whatever response and crisis management to make sure that there's no financial
#
collapse, the experts were allowed, that's that one exceptional occasion where experts
#
were allowed to take those decisions and the economy, there was a dip in growth and the
#
Some politics happened, some things happened which were beyond control, such as the Mumbai
#
terror attacks and Prime Minister Manmohan Singh's health, which took him out of office
#
And the terror attacks led to a change in portfolios, Pranam Mukherjee became the finance
#
As I was saying earlier, he comes from a certain ideological background.
#
He was somebody in this government who could do things in defiance of what the prime minister
#
The prime minister's personality was such that, you know, he wouldn't instruct the finance
#
minister to do things in the way he would want them done.
#
And therefore some very incorrect policy decisions were taken.
#
Fiscal stimulus that should have been ended was not ended.
#
Banks were instructed to be very liberal in giving loans.
#
Whatever loans, loan defaults were taking place because of changes in calculations,
#
because of the collapse in global demand, because of the global economic crisis.
#
Those calculations didn't happen because banks were very willing to extend further loans
#
and evergreen loans to avoid defaults.
#
And so that led to the NPA crisis.
#
There was this whole tax terrorism with Vodafone, which is again Pranam Mukherjee's decision
#
in defiance of not only Manmohan Singh, but also Sonia Gandhi, as he documents in his
#
And on top of all of that, there was this whole policy paralysis thanks to a very, very
#
enthusiastic CAG who has since gone quiet and has been apologizing for things he said
#
And bureaucrats didn't want to take decisions.
#
There was a political crisis in parliament.
#
There was confusion within the UPA because the Congress had not had a situation where
#
the prime minister and the party president were two different individuals.
#
So as Salman Kurshid had given an interview back then that they didn't know how to handle
#
And all of that just meant that the economy, which had recovered from the shock of the
#
global financial crisis, actually could not recover from these self-created, self-inflicted
#
So when the second global shock of the taper tantrum from the US came, there was a run
#
on the rupee, there was macroeconomic instability, your current account deficit and fiscal deficit
#
reached proportions that created a scare that we were going to have a 1991 type balance
#
India got into the fragile five, which I was earlier talking about, and the recovery was
#
Actually post global financial crisis recovery.
#
And in those situations, the politics played out, government changed, a new prime minister
#
came who everybody had a lot of hope from.
#
Initially he announced a whole lot of policy initiators, which really sounded good to just
#
make in India such as an intention to sort of reorient the economy, pull it out of the
#
But that doesn't, that never happened.
#
At some point the politics, what do you want to say something?
#
Yeah, I want to say that, you know, this point that India recovered, it was a false recovery,
#
Because of the second fact that you mentioned, which is evergreening of loans.
#
And so the NPAs balloon and so on.
#
So in fact, I would say that because of the very, very prompt measures that were taken
#
in the West, the death of companies, the buying over of companies, the speed with which all
#
that happened set the stage for a recovery here.
#
It was all papered over completely, you know, so there the recovery was a false recovery.
#
It wasn't a real recovery.
#
And so it was bound to the chickens were bound to come home to roast from a structural point
#
of view, I want to go into a few numbers here.
#
I'll try not to be before we do that.
#
Shall I let her finish?
#
So, you know, we should first talk about this and then I just want to cover that period.
#
So we had got used to a situation for decades where banking problems and debt problems
#
of the government were papered over by inflation.
#
Banking cures all debt problems, right?
#
Because loans are designated in rupees, which is an artificial measure.
#
So prices go up by 20% that rupees worth 20% less, but the amount I owe you doesn't go
#
It only goes up by the interest that I'm paying, right?
#
So in the past, we'd been able to deal with all ills by inflation.
#
However, what happened at this point in time was that inflation became intolerable.
#
And they had to ramp down on inflation.
#
And therefore, now you had a situation where you couldn't have inflation to solve these
#
And so all of these bank loan problems came home to roost the usual means that we had
#
for dealing with debt problems vanished from the armory of bankers, of borrowers and of
#
And so it came back to bite.
#
Yeah, that's absolutely right.
#
And so what to continue with what I was saying, initially, this government announced what
#
What they more they could have done is, you know, health and education policies because
#
even the IMF at that point in time was saying that, well, you know, you can every now and
#
then give fiscal stimulus and, you know, create this bounce back.
#
But, you know, there's only so much that will do for you to have a sustained job creating
#
You need to focus on your education and health policies.
#
And that's where you need to work those kind of reforms.
#
But nobody paid attention to that advice.
#
And soon we found that all the interest, at least in the announcements that we were seeing
#
about cleaning up the banking sector, focusing on manufacturing, land acquisition, cleaning
#
up the land acquisition side, all the reforms related to the factors of production.
#
Those intentions did not materialize into concrete gains for the economy.
#
And because the banking crisis was not handled as well and as quickly as it should have been,
#
the economy kept the upturn in growth that they had inherited, they could not convert
#
And the reason for that upturn was also because oil prices suddenly changed and that helped.
#
They were very high, globally oil prices corrected, and they could not sort of capitalize on,
#
you know, those things.
#
And even before demonetization, the economy started slowing.
#
Demonetization made it worse.
#
We discussed last time and the book discusses, there is, you know, I still don't have answers,
#
but what I speculate on why demonetization was thought of.
#
But we can talk about that if you want to later.
#
But so demonetization and a very, very poorly designed GST were further shocks to, you know,
#
especially the informal sector of the economy, which was already sort of suffering one shock
#
You know, when exports demand went down, the informal side of the economy also suffered
#
because informal workers tend to get employed in these small units, which are linked to
#
And so we, you know, by the time and then, you know, farmers were also not getting remunerative
#
So, so your informal workers, your farm labor, your small and marginal farmers and industry,
#
everybody, you know, was sort of not doing very well.
#
And the economy was not in great health.
#
And if you recall before the 2019 elections, even companies like Maruti had announced production
#
cuts because there was no demand in the economy.
#
And at that point, that was, that should have, you know, voters should have forced cost correction,
#
but voters did not force cost correction.
#
And we haven't seen after that, you know, after elections, any significant decision
#
making that would address either the problems that this government had created or the problems
#
that they had inherited, including the structural problems of the economy, where the kind of
#
economy that was created post 1991 is just not delivering for such a large proportion
#
of the population, even if your GDP numbers look good, because the GDP numbers are drawn
#
from like we discussed earlier, a very small part of the economy, which is, you know, the
#
So we can keep feeling happy that, you know, our GDP is such and such percentage, but how
#
many people's lives is it really representing?
#
And our per capita income levels are very low and not even right now, not even at the
#
So that's where we are and, you know, that's what's happened in the last.
#
So I want to go back to, just to emphasize the point that this is not just a pre 2014
#
You know, I want to go back to that.
#
And I have been trying for the last two or three years to understand what was the nature
#
of that boom that we saw pre demonetization as somebody who gets what you call high frequency
#
data, which means that you're working in a company and you see sales, et cetera, et
#
I saw the slowdown happening in about eight, nine months before demonetization.
#
So it's not as though demonetization brought it on.
#
It was already coming demonetization worsened it a lot.
#
And then I tried digging back further and I see a few things.
#
Firstly, if you look at the period 2008 to 2013, because all of this false euphoria was
#
generated by papering over loans, et cetera, et cetera, there was an injection into the
#
And you had rural wage growth 2008 to 2013 of 15% per annum unprecedented, unprecedented
#
in nominal terms, which meant 7% per annum in real terms.
#
Now that had an upside and it had a downside.
#
The upside was that it created rural demand, which became the buzzword for every single
#
Rural demand is moving.
#
Everybody from Hindustan Lever to Dabur to everybody said rural demand is booming.
#
It was because that real wages were going up.
#
The downside of it was that it was achieved largely by MSPs going up.
#
And so it fed back into higher inflation.
#
And at some point in time, that higher inflation became intolerable and they had to cut back.
#
So that was the first issue.
#
And since then, what has happened is that if you look at the terms of trade between
#
industry and agriculture, they have deteriorated hugely for agriculture.
#
So all of those people who are living in rural areas, their purchasing power of goods coming
#
out of the cities has gone down.
#
So that rural demand has been knocked.
#
We don't know how to bridge that gap because as we've seen, there's a trade off.
#
You give them higher remuneration, you create inflation.
#
Now this is something that we have known since 1980.
#
In 1980, the World Bank published a very influential report which said that the problems of the
#
agricultural sector cannot be tackled in the agricultural sector alone.
#
You have to move people from the agricultural sector to wage-paying jobs in non-agriculture.
#
And this we've singularly failed to do.
#
It came from this realization that you've got to create a manufacturing sector.
#
It was the massive flagship program of the government.
#
The first big program they announced, she said, in 2015, we're now in 2021.
#
It was supposed to be a five-year program.
#
There's been not one report analyzing why it didn't work.
#
The share of manufacturing to GDP in India has come down rather than going up.
#
It was supposed to go from 17, 18 percent to 25 percent.
#
Instead it has gone to 16 percent or 15.
#
We don't know the number exactly, but it's gone down.
#
There was no analysis of this.
#
The flagship program of the government was never analyzed.
#
We don't even have a policy commission here.
#
We don't have planning commission.
#
The think tank has not analyzed the first thing that they thought about.
#
And the seven-year vision, which the prime minister released, is no longer talked about.
#
The second point is that if you look at any nation, at least over the last 50 or 60 years,
#
which has moved from being a low-income nation to a middle-income and an advanced economy,
#
has grown on the basis of manufacturing exports.
#
We had a boom in exports for roughly the same for five years.
#
What are the policy implications of that?
#
I can point to three or four reasons, but these are not being discussed.
#
The first is, and this now comes down to politics, which is that you have a measure which is
#
called the REER, which measures the real exchange rate, the real effective exchange rate.
#
Now, obviously, if your exchange rate, if your currency is weak, that means it's cheaper
#
for people to buy from you.
#
If it's strong, it's more expensive for people.
#
For decades, China was accused of manipulating its exchange rate downwards.
#
It was considered an exchange manipulator.
#
It was on the basis of that that they were able to grow their manufacturing.
#
I'm not suggesting that we should manipulate it, but at least it needs to be discussed.
#
Throughout that period of 2005 to 2012, our REER was around 105, based on 2005.
#
So 2005 to 2013, it was around 100, 105.
#
So we remained as competitive in terms of exports throughout that period.
#
It's not that we have tried to make it less competitive.
#
It has become less competitive due to a variety of reasons.
#
It's something that needs to be discussed, right?
#
It's not being discussed.
#
Why is it not being discussed?
#
I suspect one reason is a very early narrative, which is that we will make the rupee strong.
#
Therefore, you can't make the rupee weak because you can't make the rupee weak.
#
So your manufacturing doesn't grow.
#
That's only one part of it.
#
And it finally, it all goes down to politics, which is you look at economies that export.
#
You may be producing in the hinterland.
#
How cheap is it for you to move your goods from the factory to the port?
#
You look at any exporting nation, 70, 80% of their exports.
#
Go from factory to port by rail.
#
In our case, the percentage of goods going by rail has kept going down.
#
Should be much cheaper.
#
Why aren't people sending my rail?
#
Number one, your rail systems are inefficient.
#
Number two, pricing terms.
#
Railways are running both freight and passenger.
#
You don't want to raise passenger, you have to run the railway, so you raise freight.
#
So you are, the politics of passenger traffic is one more component in making your exports
#
The seen and the unseen.
#
Your ports are inefficient.
#
They're becoming more efficient.
#
We've become much more efficient.
#
Point is that you're not living in a static world.
#
You can't compare yourself with what you were in 1970.
#
You've got to compare yourself with Vietnam or Bangladesh or Taiwan or whoever than you.
#
You're not as efficient as them.
#
Number three, what is the cost of your utilities, your electricity?
#
On each of these, you are not competing with what you were or with the next state.
#
You're competing with the rest of the world.
#
These are issues which are not being discussed.
#
And so you have a situation where your exports are not growing.
#
The real wages of the agricultural sector are going down.
#
Your formal employment, there used to be a period where every 1% increase in GDP resulted
#
in a half percent growth in formal employment.
#
Today, you know what that figure is?
#
That means you need to increase GDP by 10% to add to 1% of employment.
#
So you're not creating formal sector jobs.
#
Now that also needs to be understood.
#
I don't know the answer.
#
I know some of the answers for exports.
#
I don't know the answer.
#
You can point to labor laws, there are also certain discontinuities, which is that if
#
I am going to produce cars, for example, I can't produce cars in a different way from
#
I can't produce cars in a more employment intensive way.
#
I've got to produce it with the robots because only the robots will give that kind of accuracy.
#
Nobody's going to take a creaking car just because I want to employ more people.
#
But there needs to be in-depth study of this.
#
How do we increase employment in the formal sector?
#
None of these issues are being discussed, but the economy has changed and is changed
#
in ways which is making it more and more difficult for us to catch up and to convert that demographic
#
dividend of 15 or 20 years ago into reality rather than the disaster which it is becoming.
#
So I want to add a few points to this and then kind of move on to my next question.
#
One is while you were talking about all this moving people from agriculture to sort of
#
wage pay jobs, just to give perspective around 50% of India, give or take a little bit here
#
and there is dependent on agriculture for their sustenance and in developed countries
#
like the US and Europe, it's a single digit percentage figure.
#
And what you'd expect a country like India with cheap labor to have really evolved as
#
you have massive manufacturing like China, Vietnam, etc. did.
#
People move from agriculture to the manufacturing sector and that's how we kind of grow.
#
And that never happened in a bunch of reasons like, for example, our labor laws which hurt
#
workers more than they help them.
#
So it was one of those things I found rather amusing a few months ago when UP spoke about
#
changing labor laws were so many people jumping suddenly to the defense of these labor laws
#
as if they actually help labor, you know, going by intention and not outcome while they
#
have been such a disaster and so on and so forth, a variety of reasons on that.
#
Now I want to quickly do a Cliff Notes version of the last decade and before I get to my
#
next question and make a few things explicit and also come up flippantly with a couple
#
of sort of conclusions and my first flippant conclusion is that Pakistan is responsible
#
for our economic crisis and the first act of happenstance that happens in the last decade
#
are the Mumbai terrorist attacks because at that point Shivraj Patil is revealed to be
#
a duffer as a Home Minister.
#
So therefore it is decided that somebody competent is required there and Manmohan Singh says
#
to Chidambaram who is then Finance Minister and is doing a really good job of, you know,
#
rebounding from the economic crisis, he tells Chidambaram that boss, we need a dude in that
#
ministry so to say, you are my dude, you take Home Ministry for a while, we will put you
#
At which point Sonia Gandhi raises his hand and says my boy Pranab Mukherjee, he is going
#
Now Pranab Mukherjee is full on Indira Bhakt from the 70s and Indira of course destroyed
#
this nation's economy, kept millions in poverty for decades longer than, I mean he is a fossil,
#
he should not be allowed near any position of power or even a utility like a tap or something
#
because God knows what damage he will do.
#
So Pranab comes over and he shakes up the whole thing, he does all these things Pooja
#
described so eloquently, the tax terrorism, retrospective taxation, the whole phone alone
#
schemes and you know which kind of exacerbated the situation that led to today's banking
#
crisis and then Manmohan had his health crisis so he couldn't really fight back and therefore
#
it is not a temporary measure, you know Pranab stays in the Finance Ministry for a couple
#
At which point I come to my second flippant conclusion, my second flippant conclusion
#
is that Pranab could have been our Finance President, why do I say that?
#
Because he would then not have been in the Finance Ministry, doing the damage he did,
#
just because of that he could have been our Finance President.
#
So what Manmohan and Chidambaram finally decide is, ki isko bhagane ka ek hi tariqa hai, president
#
In which case you know biggest culprit is Sonia Gandhi, if she had made Pranab Mukherjee
#
Prime Minister and Manmohan Singh Finance Minister, things may have been different.
#
Pranab Mukherjee could have you know been a little more autocratic about you know, he
#
could have been giving orders to Manmohan which is such a horrifying thought, so anyway
#
so this dude becomes President, Chidambaram has a few months before the 2014 elections
#
but there's a course correction but it's too late, there's not much.
#
Now interesting thing, Modi takes over, Arun Jaitley comes and they all, Jaitley, Chidambaram,
#
their respective staffs, it's the same Ministry, they get along wonderfully well, there is
#
They are you know under Jaitley, the Finance Ministry is doing the similar kind of good
#
work that they did under Chidambaram.
#
The pipeline of policies is being cleared.
#
Then the next act of happenstance which is, which leads me to my third flippant conclusion
#
that India mein suit nahi pehna chahiye because Modi dresses up in that suit with his name
#
on it and immediately that suit boot ka sarkar Jaib goes and he decides ki you know I want
#
to keep the people with me, you know sab ka saath, sab ka vikas and all that but whatever,
#
he changes course and over a period of time obviously it's not the only trigger but it's
#
Kejriwal also but over time he changes course and then disaster after disaster including
#
demonetization which is Pooja wrote so eloquently in her book would be because of you know that
#
thing that something has to be done and this will be shown to hit the rich and the black
#
money people and all of that and we basically go to hell after that.
#
Now two thoughts come to mind.
#
One is incredible role of happenstance in all of this.
#
Ki yaar if Pakistan had not send those roads and all of that or if our coast guard had
#
worked a little better we may not be here today.
#
Chidambaram could just have continued and even Shivraj Patil could have continued.
#
You know and his grandson was in college with me.
#
Anyway I don't know why that's an irrelevant aside and the other sort of so the role of
#
happenstance is the other thing that really dismayed me and that speaks to what you were
#
just talking about Mohit is that these decisions seem to be happening because of all the wrong
#
Economic decisions are not happening because of economic reasons.
#
They're happening because of political reasons sometimes a grand political reasons like what
#
image Modi wants to project.
#
Sometimes a petty political reasons like Sonia decides ki nahi finance ministry me I want
#
my little bulldog to you know run the thing and fans of Ranabda I won't even say please
#
excuse you can go to hell.
#
So that's you know is there a solution to that because you know I don't want to think
#
that our economic future is dependent on getting lucky with the politics and the circumstances
#
So ideally I would think that there should be a quarter of people which at one point
#
with people like Vijay Kelkar and Ajay Shah whether it seemed that there were that there
#
are people who are serious people who are thinking about these things and making decisions.
#
Is there something like that today or are we essentially dependent on where fortune
#
takes us in terms of what policy we have talked about that earlier which is that this government
#
So and then you know it's like what you talked about that family of dons where Italian dons
#
where each don was shorter than the rest.
#
I told a story in a previous episode about this mafia boss where this mafia boss is five
#
foot four or something and then all the successive guys are shorter than him because he's only
#
picking people who are not a threat to him.
#
So you know that's that's what we're seeing today right.
#
If you don't have people who understand economics at the top you're not going to have a cadre
#
They're all going to leave right.
#
I don't have any problem with Harvard versus hard work if you think how hard work can substitute
#
for Harvard I'm all for it but are you doing the hard work our entire discussion today.
#
I'm sorry I don't agree you need both of course of course you do need both but I'm saying
#
I'm willing to give you a chance to prove that you're right but you're not doing your
#
part of the equation you're not doing hard work right you're only doing politics narrative.
#
So so fine if you if you don't like people from Harvard and you want to bring in people
#
you know who like this they are Indian economists or whatever you know historians fine.
#
I mean if if if their hard work can do things for us all right let's give them a chance
#
but who's doing the hard work nobody's doing the hard work nobody is even talking about
#
these things like Mohit said which is a fundamental point we're talking about history we're rewriting
#
No but really what dismayes me is that if I were to look at the building blocks of the
#
economy and what it is today these are some of the factors that I look at right which
#
is the effective exchange rate the terms of trade between agriculture and industry rural
#
employment versus what is the what is the agricultural income of the average agricultural
#
family how are our exports growing how competitive are we in terms of exports what are the factors
#
responsible these are 20 things that I would look at I'm not a practicing economist right
#
I'm somebody for whom this is a hobby my main business is something else but even I know
#
that we should be talking about these things forget the ministries forget the governments
#
I don't see these issues being discussed in the press and that's going back to where
#
In fact I did an episode with Shivam Shankar Singh recently and he pointed out that he
#
was in the BJP for a while and he had bought into the development rhetoric when he realized
#
it isn't working out he left so credit to him for that but he pointed out that what
#
he was told explicitly within the BJP when they were planning for the 2019 elections
#
was we will not talk about development we spoke about it in 2014 now if we talk about
#
it they'll ask us for our track record so we won't talk about it because it's implicitly
#
you're admitting there is no track record they won't talk about national security yeah
#
I mean yeah they won't I mean that's already clear right now the enemy is within yeah this
#
is what Doval and Rawat are saying right civil society is your enemy he's not outside and
#
China's built a village in Arunachal Pradesh so there goes that yeah so you can't talk
#
about that so you talk about the enemy within the national convention of BJP just finished
#
there was no economic resolution they don't even have a economic cell in the party and
#
if they did it would be it would have historians in charge so what can we say let's get back
#
to kind of talking about the economy though of course their economy and politics are coupled
#
in this really toxic way give me a sense of where things were before covid like one narrative
#
that is going to be spun is that things that have gone wrong have gone wrong because pandemic
#
aagaya hum kya kare and I've done various episodes before covid including you know one
#
with Vivek Kaul on the economy in 2019 and we've kind of discussed it endlessly and throughout
#
it was very obvious that things are really bad and so give me a sense of what things
#
were like before covid what was the banking crisis like you know what was employment like
#
what was you know in general where would you say are the fault lines where were we headed
#
in a good direction where were we getting far worse what would you have been most worried
#
about so things were already bad before covid hit right as I said things were bad even before
#
demonetization they got worse so again let's not talk impressionistic let's talk about
#
numbers and numbers that are public again we know for example that household debt there's
#
a measure of misery right in a sense living beyond your means household debt has gone
#
up from 33 percent 31.5 percent in 2015 31.5 percent of GDP it is now 38.3 percent now
#
as in at this moment at this point in time okay it was about 36 percent before covid
#
hit so it was already going up right I did a very interesting number crunching this morning
#
very minor you can say it's just an anecdote but as far as I'm concerned what is the purpose
#
of an economy the purpose of an economy is for people to consume everything else is an
#
instrumentality towards that right and partly for reasons of loyalty because my first job
#
was with them partly because they are the biggest consumer company in the country I
#
looked at Hindustan Lever data okay Hindustan Lever turnover from 2010 to 2015 went up by
#
75 percent about 14 15 percent per annum from 2015 to 2020 maybe I should have done the
#
inter-population as well it has gone up by 25 percent which means four or five percent
#
per annum okay so the slowdown is massive now sure I've taken 2014 2015 it doesn't
#
matter it was just a rough sum just to see like what is the level of deceleration the
#
level of deceleration is massive and I could see this you know as I said high-frequency
#
data I'm looking at high-frequency data from two points of view one is sitting on the board
#
of consumer goods companies etc and second is an investor I'm paying for future right
#
so growth is not happening I'm worried I've got to take money out of the table thirdly
#
and this is I would say one of my favorite measures which is what percentage of adult
#
able-bodied people are productively used in the economy because of a high percentage is
#
used gradually yes you will improve productivity etc but they must be there to contribute to
#
the economy we were already among the lowest in the world 42 percent we dipped to some
#
36 or 37 we are back to 39 percent countries which have become miracle economies they have
#
70% 72% of adult working-age population employed in the economy we have 40% so we have not
#
been able to figure out how to fit those pieces together as a system I'm not taking stocking
#
top-down I don't believe in that but our system has not been able to fit those pieces together
#
that my availability as a body and a mind can contribute to the growth of this economy
#
so they were already bad I think that's because of the politics you know there is no need
#
to figure out the answer to that because I can just go to the water and promise them
#
an NREGA handout or I mean that's not call it a handout you work for 10 hours hard manual
#
labor I'll give you you know 150 rupees or 200 whatever the wage rate is currently at
#
the end of the day for as long as you do 10 hours hard manual labor day after day every
#
day you will get this money the day you don't do it you won't get to eat because you can't
#
really save on those wages and because you can't save you can't educate your child you
#
know you can't skill your child your child will do the same thing and generation after
#
generation you will be tied to NREGA NREGA is very good because you know I agree that
#
you know it set a floor to wage rates which also fed into the rural wage rates which we
#
talked about how that helped the growth rates earlier but is it an anti-poverty program
#
no it's a safety net but we treat it like we will compensate you for our failures of
#
growing the economy and creating jobs for you and developing the economy by giving you
#
NREGA that is one model the competing model is that we will because of our failure to
#
do economic policy right to fix the economic model to not create enough jobs to not generate
#
enough growth for that failure we will compensate you with a cheap loan which we will you know
#
call a mudra loan and not ask you to give it back back to us we will give you the scheme
#
where they give toilets we cooking gas with one cylinder you may not be able to refill
#
it and what is now called the Modi government's welfare paradigm why you know are you doing
#
this paradigm pick this welfare of narrative because you're not doing the first thing you're
#
supposed to do the government is supposed to fix the economy you're not doing that
#
so you're compensating people for your failure by giving them this which is better than you
#
know what happens in the state politics where you give saris and television sets etc but
#
it's still just the same thing so on MNREGA in fact what has happened is that the wages
#
paid on the NREGA have not been going up they're supposed to be inflation indexed yeah but
#
they're not and today the NREG payment is well below minimum wages so I have a quiz
#
for you registered households in UP one of the poorest states of the country as per the
#
program you're supposed to get hundred days per household right last year what was the
#
average number of days that a household got wage labor under NREGA I haven't checked the
#
data but the average demand is higher supposedly around the country so it's not working right
#
there's a there's a phrase I learned from our mutual friend Mohit Kumar Anand which
#
is PPP perpetually planned poverty which sounds exactly like that the dependency that you
#
described can happen under MNREGA where you don't save anything so you're always just
#
dependent on that and you can't educate yourself you can't build human capital your kids are
#
also going to do the same damn thing it's perpetually bad the point I'm making is that
#
even that has not worked and even what did a hundred days they were getting seven eight
#
ten eleven the poorest states in our country Bihar and UP they were getting seven eight
#
ten eleven days and they may not be getting paid for those eleven days also let's assume
#
let's take everything yeah on the basis of facts not assume anything these are this is
#
data available parliament questions this is data and why because doing you know changing
#
the economic model understanding deeply what the economy needs is all hard work it's seriously
#
wonkish work why do you why would you do that when you can you know get votes by doing some
#
very simple things and you don't trust experts anyway so there you go so let's go through
#
the last few months how has covid exacerbated this like you know where's covid kind of taking
#
us like like one image that I have in my mind from pre-covid from before from three or four
#
years ago was again our friend kumar traveling through bihar and all of that he came to you
#
know he'd visited mumbai just after going through bihar and he painted this dark image
#
of me he said that wherever he goes you know on railway stations or at the panwala or on
#
the road outside he sees groups of young men who are just standing there doing nothing
#
and it's almost like a frightening thought and and obviously you know this speaks to
#
the unemployment this speaks to the loss of hope this speaks to law and order law and
#
order it just speaks to so many i don't think that that has changed drastically it was always
#
the case throughout our decades the image i see for the last 40 years we are recording
#
this in south delhi yeah two kilometers from my house between this place and my house there's
#
a place where 40 years every morning there's a market it's a market not for flowers not
#
for vegetables not for meat but for human beings this is daily wage labor who is gathered
#
over there i've seen seeing who will come and employ them for daily wages you can go
#
and pick them up at whatever the prevailing the hardy is meaning the daily wage whether
#
it's 300 or 400 or 250 you know as it's moved and obviously they're not skilled right because
#
they wouldn't be standing there they'll come they'll move boxes they'll swab your floors
#
some of them claim that they can paint etc etc but they're just bodies it's almost like
#
a slave market because their bodies on hire for the day and at 10 o'clock or 10 30 when
#
it becomes obvious that they're not being hired they may or may not have money for the
#
rest of the day to feed themselves because these are largely people who've left their
#
villages and come here looking for this kind of work this has always been a feature okay
#
after covet what happened you had two things one is that a lot of them went back home but
#
at the same time the employment market bottomed out so the people who were left over here
#
they had no dignity left no hope left and a very close friend of mine who lives in delhi
#
university started a masdur kitchen daily feeding program for those who got left behind
#
and i was a little bit involved with it and the idea was that we will need to do this
#
for three months the three months became six months it is still continuing 17 months later
#
and very recently i was in delhi on a trip from the village i drove from delhi university
#
back home uh and i saw that even though the distribution was going to begin at four o'clock
#
by two o'clock there was a line of 500 people going all the way from isbt to redfort just
#
waiting for that one daily meal so i'm saying two things firstly this always existed but
#
secondly it's got worse in fact i i wrote a column last year talking at the start of
#
covet in april talking about how we are faced with two disasters and one is covet 19 and
#
the other is the ongoing disaster of the dysfunctional indian state you know where and you know like
#
some of the figures i gave was you know 3000 children die in india every day from starvation
#
one in four indian children are malnourished and so on and so forth you can go on and that
#
figure is probably increased possibly but the larger issue is that there are so many
#
things that are a fact of life today if they were caused by a natural disaster like a cyclone
#
or a virus or whatever we would say this is a national moral emergency we need to do something
#
but it's been normalized it's been like this for you know 75 years and it's just normalized
#
now and we don't and so that's a very kind of important point where it's not just about
#
uh talking about the state of the economy today but it's also talking about how we've
#
normalized so many of these things and as you just pointed out this is you know not
#
something new we've normalized the fact that 60 or 70 percent of young people routinely
#
give up hope of getting a job if you look at the data and you see how they move out
#
of the labor market they don't say they're unemployed the way in which the data is collected
#
they don't say they're unemployed because they're not looking for a job and they're
#
not looking for a job because they tried for five years and they didn't find a job so in
#
terms of their own peace of mind they now need to say we're not looking for a job and
#
they make do and these are the people who i see every day in the village young able-bodied
#
men of between 20 and 40 who are making do they don't have a job it's a bit like you
#
know women suffer violence at home it's it's almost like that one of my earliest reporting
#
assignments was um i think i'm talking about either rajasthan or mandip radesh rajasthan
#
i think on nrga so i was asking these workers in this village uh have you been paid and
#
um they said some of them had pending payments so i said you know under the provisions of
#
the law if you're not paid for this period of time you know you can go and make a complaint
#
and this is guaranteed you know this is not allowed amongst the people i was speaking
#
to was this one village woman and she said uh um you go and make this complaint for me
#
if you're asking me to do it you go and do it she was very polite and you know that's
#
how you learn you know you're so naive so i said no why can't you make this complaint
#
she said you know i'm a widow and i take care of two little children uh when these men you
#
know do things with me even then i can't go to the police station and make a complaint
#
so i can't go and make any complaints to any of the adhikaris because it doesn't work like
#
that in the village here and you know so when we think we've come up with these great policy
#
solutions to problems do we really know what the ground realities are when we talk about
#
them in delhi as journalists and commentators do we even know what we're talking about you
#
know so the hard work is missing uh at every level at every level yeah let's pick up on
#
the thread that you mentioned at the start of the episode mohit where you spoke about
#
how you're walking in satauli and for the first time in these 30 years someone stops
#
and asks you for a job and i remember i read an episode with tamil bondu padhya who'd written
#
pandemonium led book on banks and one thought it will be a dry episode about banks but i
#
always love having these personal chats before we start and it was very moving he was very
#
moved because i just started by to break the ice by asking him about about how his covid
#
months were and because i was like literally my first physical recording uh you know before
#
the second wave happened but in in i think january this year and he spoke about going
#
out in the streets of bandra and there were these little kids who would earlier be selling
#
things but now they were begging and there was a well-dressed guy who took his hand and
#
he got worried but took him into this lane where there was a biryani wala and said please
#
buy me biryani that's all i want i just want food and uh you know and it's it's and these
#
are new things you know and covid to me it seems that it is almost common sense that
#
there is a fundamental shift what is the movement of humanity the movement of humanity is from
#
villages to cities where people are where larger economic networks are you want a job
#
you go there you're full of hope you know that's a movement it's a great movement right
#
that's what lifts people up and what we had in covid was millions of people having to
#
take the reverse journey back when they lose hope and they have to go back and in villages
#
like you know like the person mohmet where there's no hope there's there's nothing it's
#
just and i can't imagine myself in that position that how do you then live like you know i
#
recommended this film to you by rameen biryani called goodbye solo and there's a great review
#
of that by roger ebert where ebert says he spoke to biryani and biryani said that the
#
fundamental question of his cinema is how do you live in this world and i think there's
#
just such a fundamental shift there and i can't fathom some of this you know the film
#
was about how these two people shift during the film that too that too but it's a fundamental
#
question and at one level it's an existential metaphysical question how do you live in this
#
world but at another level it's a real sort of question of how do you live in this world
#
where do i get my next meal from all these people come to cities jobs are gone nothing
#
is there there's no transport they have to go back home and they're going back home and
#
what's happened after that like what's the scene how does it affect the economy we like
#
the economy seems like this dry thing but the economy is a collection of people who
#
are living these real human dramas so give me a sense of how you think covid changed
#
things like was it less fundamental than it seems in the dramatic way that i'm perhaps
#
describing it now no it's the connection between so uh the word i'll use for this part of the
#
economy is the informal economy it's not that your informal economy is shrunk my senses
#
we don't know until we measure it my sense is that the connection between the informal
#
economy and the formal economy is broken down so you're not capturing information about
#
them because they've all gone back to their villages some units have shut down you're
#
only looking at the formal economy your consumption base now largely is government and people
#
who draw salaries and pensions inflation indexed from government psu etc etc that is your consumption
#
base those are the people who are cushioned from what happened because of covid they're
#
driving you know their savings and investments are driving the stock market they are driving
#
the pent-up demand you know that we talk of that led to this mini bounce and eventually
#
our gdp will only estimate their gdp and we'll just feel that you know we have recovered
#
so i i have a couple of reactions to that the first is that losses in the informal economy
#
are real yeah when you know it's not just the connections breaking the losses are real
#
units have shut down yeah so that's number one units have shut down shops have shut down
#
dhabas have shut down uh roadside stalls have shut down so there is a real diminution secondly
#
that when people talk about the formalization of the economy and they say that you know that
#
production has shifted to the formal economy yes it has but everybody who's a producer or an
#
employee of a producer is also a consumer and if he's lost his job or if the factory owner
#
has lost his monthly profit their ability to spend in the economy has also gone down
#
so on a static basis you know if you say yesterday and today the demand of those 10 biscuit factories
#
in the informal sector which shut down will shift to a britannia right but those 200 people and
#
those 10 factory owners their income has gone down their consumption has gone down a year later
#
it will reflect in lower growth for britannia also you won't see that at first you'll see a bounce
#
but later it will reflect so that's the first point surprisingly as far as a human point
#
which you were talking about this is something that really struck me in my interactions with
#
individuals over this last uh summer is that they've been very philosophical about it
#
because at least these individuals i'm not talking about the people who couldn't go back
#
who are lining the streets of uh uh daryaganj and isbt etc these people who've gone back
#
they're quite accepting of that reality because in the village nobody is starving at least
#
i'm only talking about my home you know the villages are all nobody's starving
#
so we earned better income we could send money back home
#
now we're back home we don't know whether we'll go back to the city we re-adjust recalibrate to the
#
fact that now we're going to live off the land etc etc recalibration is showing in the slogans
#
from aspirational uh indians to atma nirbharta whoever has made that transition in the village
#
is obviously you know observed what what you're what you're seeing yeah great point but the
#
resilience is quite remarkable no nobody is nobody is desperate you know it's like
#
shalo yeh bhi we are so fatalistic amit you know thik hai yeh bhi ek reality hai gaye hai wo bhi
#
aaj mahaliya aapis aage hai chalo yeh bhi we are so fatalistic amit you know thik hai yeh bhi ek reality
#
gaye hai wo bhi aaj mahaliya aapis aage hai chalo yeh bhi thik hai you know every time mumbai is hit by
#
something people will talk about the spirit of mumbai and i'm like what are you talking about
#
people are going back to work because they have no choice it's not their bloody spirit what are
#
they gonna do and i think this fatalism really kind of also explains a little bit of the puzzle
#
behind political accountability ki government de-monetization kiya yeh kiya ya emergency kiya
#
ya wo kiya ya yeh kiya but people still vote them back and i think part of the reason is that
#
people just assume that their lives are hellholes and this is how it is and they don't kind of make
#
that connection necessarily between governance and politics and it and then they just choose
#
their tribe and it's a separate thing and they assume every government that comes is going to
#
be a bad one which is kind of true so to some extent it's true so looking at the economy as
#
it is now right how do you feel are things all bad are there you know are there are there silver
#
linings there are silver linings of course there are silver linings but
#
is the gdp going to grow by six or seven percent once we get out of covid i don't think so
#
because we were already suffering before we're suffering now now if you look i don't want to
#
get into data but if you look at the broad structure of an economy i of course believe
#
that the starter always for economic growth is investment okay which is of course the
#
high akin way of looking at it now in a situation so the rbi compiles this data regularly what is
#
the capacity utilization of manufacturing let's start with manufacturing okay and the thumb rule
#
is that somewhere when it starts creeping up from 70 towards 75 you start getting investment
#
because now i can see that a year from now i'm going to run out of capacity now it's now at 60
#
percent so private sector investment is going to be very very very low it was really low before
#
covid okay if you look at the numbers if you look at and in if you look at the economy wide
#
we've never seen the level of investment that we saw in 2011 where what is called gross fixed
#
capital formation was almost 40 percent it's now at 30 it's a huge drift if you look at corporates
#
it dropped every year from 2010 to 2017 so this is pre-covid right i have the figures it went from
#
15 percent to 10 percent to 9.8 percent to 7.5 percent and of course the year of demonetization
#
is reached 2.5 percent right so this is hard data now you can say 2.5 percent maybe an accident it
#
may be an accident it had nothing to do with demonetization fair enough the fact is that
#
that's where it was post 2011 investment by corporates was going down down down down
#
so you don't have capacity utilization why will they invest they're not going to invest
#
or it can come from personal expenditure personal expenditure has also been going down
#
before the pandemic before the pandemic when it became apparent that the economy is slowing
#
what did the government do as its major economic measure it reduced taxes for corporates
#
you had a wrong diagnosis therefore you had the wrong problem the problem was not
#
that people are not investing because taxes are too high people are not investing because
#
there's no consumer demand now and this is very important for post-covid
#
when covid happened people lost jobs economy production also went down etc etc etc
#
what did they do in the west one is of course you know making sure the bank survive loans etc but
#
if you look at the u.s they injected something like numbers vary but let's say about 12 percent
#
of gdp was injected as personal support money into your money into your bank account
#
and in many cases for people who were working at minimum wage the amount that they got by way of
#
income support was more than their earnings they were getting 2400 dollars a month whereas if you
#
were working at minimum wage even if you worked 200 hours a month you may have been making only
#
1800 because minimum wage varied from state to state and you may not even be working 200 days
#
varied from state to state and you may not even be working 200 days hours a month you may be working
#
people had excess savings as a result of the support by the government what it leads to in
#
terms of debt and fed balance sheets and so on is different matter not relevant for this discussion
#
the point was that you kept consumption going
#
what was bound to happen was what you see today which is excess demand
#
because people got more money than they were used to for eight ten months they couldn't consume
#
they couldn't go to restaurants they couldn't travel etc etc once all of those open up
#
they want to do it with a vengeance so you've got that pent-up demand production has suffered
#
and some of those people don't want to go back to work because they're making money
#
back to work because they're making more sitting at home so you have inflation people say supply
#
chain disruption or nothing we learned a long time ago that inflation is everywhere a monetary
#
phenomenon right you pumped so much money into the system you have inflation now we have the
#
worst of both worlds because we are not self-sufficient in many things most of all
#
the two oils edible oil and crude oil both of them we depend in one case 70 percent in the other case
#
80 percent on imports now we're in a situation where we are having to pay much more for these
#
because of supply chain disruption stroke government-fuelled inflation there over here
#
reduced incomes a double whammy consumer demand is not going to go up we've seen that private
#
consumption expenditure has gone down this data is available not contested though they try to
#
suppress it we see that that's gone down investment has gone down so you only have one source of
#
one source left to stimulate demand which is to stimulate the economy which is government expenditure
#
but at the same time we have reached a situation where at the end of this year
#
the debt to gdp ratio of india is going to be 90 percent whether it ends up at 88 or 89 because
#
we have fiscal buoyancy etc a different matter it's going to be 90 percent by these broad
#
international thumb rules once a developing country's crosses 70 75 percent it runs into
#
dangerous problems it's considered to be in difficulty we already so where is the kicker
#
for the revival of the economy going to come from i don't see it there's only one way to do it
#
and that is politically so difficult which is to kick start exports by devaluing the
#
rupee massively you can't do that and you definitely can't do it in a situation where
#
you are importing inflation today we are importing inflation right with with crude oil at atl became
#
a political hot potato finally the government had to bring down excise duty which i said was
#
paying for free vaccines so they had to they had to withdraw that right they had to drop the duty on
#
edible oils again for the same reason which is that we are importing inflation if you are
#
importing inflation that inflation is not because of money into the hands of indian consumers you
#
are importing it because other governments have put money into the hands of their consumers
#
now you're stuck between the devil and the deep blue sea you can't grow the economy internally
#
if you try to grow it externally your imported inflation goes up because if for example you
#
weaken the rupee from 75 to say 100 rupees the cost of all the hated experts have been pointing
#
this out for two years but nobody paid attention to them and our central bank is so proud of their
#
what they like to also you know informally called quantitative easing but the quantitative easing
#
was done in the u.s because they were trying to avoid deflation and they have ended up
#
they have ended up you know yeah overheating the economy we were already to begin with you
#
know above the tolerance band and we the rbi was doing qe over here i mean nobody ever asks
#
why this liquidity you know massive liquidity operation was done the finance ministry should
#
have asked them they haven't asked them the commentators should have asked them they haven't
#
asked them the economists in the finance ministry should have asked them they haven't asked them
#
but to be fair there's another problem okay and that problem is that it's not as though the
#
government is artificially keeping the rupee higher or keeping it uncompetitive one of the
#
reasons that it's happening is because all of that flood of liquidity across the globe is coming into
#
india in the form of investment and that's driving the rupee higher not allowing it to depreciate
#
and become cheaper therefore weakening the rupee would actually require more intervention from the
#
government than its current rate so it's not easy to do and anytime you try and do something
#
drastic like that it can have massive second and third and fourth order effects so i'm not saying
#
it's easy to get out of this i'm saying the opposite i'm saying it's going to be really
#
difficult to get out of this it may be forced on you for example supposing like the us fed and
#
europe etc are talking about the taper which means reducing the support to the financial markets less
#
money going in complex issue but supposing that works supposing they're able to go ahead with
#
their intention and as a result and we've seen this before we saw it in 2007 2008 we saw it in
#
2013 who suffers first when liquidity shrinks is not your home market which is the us it's people
#
who had the furthest end of the pipe which will mean india vietnam etc etc so you could have that
#
happen tomorrow beyond your control so if i was in charge of managing foreign exchange rates in
#
india i would know what to do you know i'm not saying that's an easy answer it's very very
#
complicated so i'm just trying to underline the fact that we are in a really really difficult spot
#
but i don't see any easy answers this is shocking because at the start of your answer mohit you
#
spoke about yes of course there are silver linings i'll come to the silver linings so you know the
#
question is whether you cut the coat first to fit or you cut the lining first so i've cut the coat
#
first i thought you're going to cut the client so now i'll talk about the lining the one silver
#
lining and i'm not sure if it's going to solve the problems or not the one silver lining is again
#
coming from deep personal experience which is the quality the passion the drive the ambition
#
of our startup culture it is just mind-blowing i've worked not worked you know what my life has been
#
like right but in some sort of measure i've been a working adult for now 44 years
#
i have seen and experienced and learned more in the last five years than in the previous 40
#
because of the deep thought and the hard work so you know harvard and hard work no not harvard
#
no not harvard that's the other incredible thing that's the incredible thing that with almost no
#
exception all these young entrepreneurs that i've worked with they come from all across india but i
#
was telling you this morning for the first 35 years of my life everybody who was a business
#
partner in some shape or form went to one of four delhi schools and one of five institutions
#
and that was my world that was the world i knew over the last five years i've worked with people
#
who were born in tundla have you even heard the name of the place tundla there you go sounds like
#
a bad vegetable yeah okay it's a railway junction in up somewhere near agra someone from agra
#
dhanbad pune a small a town in a district in bihar i don't remember which one you name it
#
and the quality of thought of passion and the the tenacity with which they run their businesses i
#
would have thought that given the severity of the pandemic that half of them would get wiped out
#
i have direct investments in 40 startups amit and 10 indirectly during the pandemic not one is
#
shut down that is it's more than a silver lining which i want to save it for the last that gives me
#
a lot of hope but you can't do anything when the macro is out of work but there is red spirit there
#
is red drive there is red hard work and and again like i was pointing out to him in the morning that
#
the fact that these people from small towns made it so far that they're heading startups obviously
#
there's a selection bias there as well they are the outliers already so they're like they're likely
#
to be outstanding so puja tell me if you were you are of course not now being allowed into
#
north block though one would hope that there are these mysterious ways you found of sneaking into
#
their labyrinthines libraries of old parchments and manuscripts and are kind of writing more books
#
from those but if you were in charge of not block you know you know just putting on the hat of a
#
policy person or rather forget not block if you were in the pmo and you were the person that mysterious
#
person that is that mysterious person who speaks and writes gujrati if you were that person how
#
would you look at this like where would you begin solving it at a purely economical level assume that
#
modiji and amit shah ji have sat you down and told you ki dekho puja ji hum politics ko manage
#
kar lehenge aap economically batao kya karna hai so what do you do i'm sorry amit if it was that easy
#
they would do it it's a thought experiment i don't know i don't know the answer to this question i'm
#
not trained to find solutions thinking about it like what are the questions that we are not asking
#
ourselves so the first thing i would do is i would call the experts set up a committee and tell them
#
please give me action points and i will set up a committee of people who think these people know
#
nothing and ask them to give me action points i would study the two i would spend break my head
#
over studying what the two are saying and i would call people from the ground from the districts
#
maybe officials maybe politicians maybe representatives of pharma groups and you know whatever
#
and i i would tell them that if such a thing was done you know a consultative process if such a
#
thing was done you know are these people just sitting in ivory towers and telling me these
#
things what do you think how will it work and then do pilots and then begin to you know take
#
policy decisions i will not do schemes you don't do schemes in center in the center you do schemes
#
in the state i i will call the rbi and tell them that you know i want macroeconomic stability all
#
the problems that mohit has just described i want you to get a handle on this and i want you to you
#
know find ways of i know it's difficult and i but i want you to find ways of handling this and when
#
you don't know the answers you get the people you delegate you know you get people who know the
#
answers and who know the problems to sit and talk and find solutions that's what i know that's a
#
great answer because the answer lies in processes and that's just what she outlined and i wish more
#
people thought like this i want to go half a step back you sure which is first somebody's got to
#
acknowledge that there's a problem there was no second wave all is well here and whatever
#
problem is it is do it yourself you have to solve it solve your problem for yourself like
#
these group of startups are doing so another question about something that is outside our
#
control which you kind of referred to earlier which is the flow of easy money which is coming
#
from the west now one reason that stock markets are buoyant and i'm sure you can point me to other
#
reasons but one reasons that stock markets are buoyant and there is in fact so much money going
#
into crypto even which i'll come to later though i don't know if it's actually relevant for this
#
subject is of course the easy money coming in from outside and it seems to me that there you know
#
like of course if you just print money and give it out there's inflation but before that there is
#
something called the cantillon effect where the money goes out to a certain set of people at the
#
top and they benefit first and then it kind of percolate downwards and when i look at sort of
#
the way the stock market is doing and so on you know it seems to me that it's kind of like the
#
cantillon effect at play and please tell me if i'm wrong and i'm just being a monday morning
#
quarterback myself and the show releases on monday and it seems to me that there is that kind of
#
effect on play and the danger of that is that it exacerbates inequality like typically i have also
#
you know written a piece on how india should worry about poverty not inequality and poverty is our
#
key concern and that's in the context of the overall economy but in this case it seems to
#
me that inequality is a big concern because all of this easy money is coming essentially to the
#
richies first who are kind of you know expanding their wealth in real terms you know by the time it
#
goes down the ladder and you actually have inflation in the real economy the poor have
#
just gotten even more sort of i can't think of a better word than the word i almost did not use
#
but absolutely right so this is a different form of inflation right this is as is bias inflation so
#
it's inflation and i think there are several problems with this firstly i think the point
#
that you made which is that you know i'm not bothered by inequality i'm typically bordered
#
by poverty let's just stick to poverty earlier on in the show i said that rakesh kutcher of the
#
pew foundation using world bank data has demonstrated that 75 million additional people in india have
#
dropped below the poverty line let's talk about that if the rich get richer that's fine it's not
#
a problem for me except if i don't get into the stock market at the right time then it's a problem
#
for me but otherwise it's not a problem right uh and um but i think there are that too can have
#
its own problems the first problem is that it encourages the continuance of a false narrative
#
of all is well and everybody sitting in the cities which is where all the news is produced
#
actually thinks all is well because they didn't lose their jobs they're easily able to pay their
#
emis if they work for the government they've got cost of living adjustment etc etc plus their wealth
#
is going up so you have a very peculiar problem which is i talked about earlier the fact that
#
household debt as a percentage to gdp has gone up so you have a very peculiar phenomenon which is
#
that the number of people seeking gold loans has gone up because that's the only asset you have left
#
the only bankable asset you have left is gold so the number of people seeking gold loans has gone
#
up at the same time the sales of jewelry at tanishq have also gone up the city and the city this is
#
the k-effect what we call care shape recovery the city and the city so you're creating a false
#
narrative the second problem is going to be a longer term one which is we have seen this time
#
and time and time again which is that the maximum number of new investors coming at the top of the
#
market people like me who've been watching and involved in markets for 25 30 years they may not
#
get the timing right but they'll rarely get caught with their pants down and they'll know when to
#
scoot so maybe i should be out of the market already maybe i'm not maybe i am that's not the
#
point i can dance better than you can this is a reality reference to the chuck prince quote when
#
the music plays exactly reference also to the fact that i'm a better dancer than you
#
i'm going to call anything anyone says about me which i can call fat shaming i call fat shaming
#
so i can get out plus i've been making money from the stock market and from
#
my assets for 25 or 30 years i know that there are ups and downs but if i have become
#
an investor in financial assets for the first time during this bubble it is a bubble it is an
#
asset price bubble i'm going to be hurt so badly that i'm never going to participate in financial
#
markets again i'll go back to fds so that's so you are actually going to hollow out the
#
stock markets as a result if you have a massive drop that's that's the second problem
#
and then it's going to have all kinds of other because today
#
and this is a danger which you know it's on my sort of agenda for topics to discuss with startups
#
this quarter i typically the startups i mentor i have monthly meetings with them some which i
#
don't have such an active relationship i have quarterly meetings larger group of investors
#
this month's reviews have got delayed because of diwali they're going to all start in earnest
#
tomorrow is this question more funding second round third round fourth round of investment is
#
very welcome go out and get it but if the music stops can you survive
#
or are you in a situation where you're just growing your business based on the fact
#
we'll grow it and let profits look after themselves today that's working
#
nobody is asking whether a paytm is making money or not big basket is losing money or not zomato
#
zomato lost more money this quarter and its share price went up it's absurd right at one level
#
or you can discount the future infinitely by 2041 they'll make money fine sounds logical if you believe
#
that what happened last year and the year before will continue but we've seen talib fooled by
#
randomness right this was random it's not going to be the same right for 365 four days the turkey
#
gets fed on the 365th day he gets slaughtered for thanksgiving thanksgiving is around the corner by
#
the way you know so there may be this may happen it will happen it will happen it will happen
#
you know so there may be this may happen it will happen will it happen tomorrow it
#
happened next month will it happen a year from now we don't know but if you believe that what
#
has happened in a sense all the way from 99 from the dot-com bust more money more money more money
#
the green span port and then the global financial crisis more money has been created in the last
#
15 months than in the entire history of mankind that's a staggering fact well there is at one
#
point in time the number has gone down there was 17 trillion dollars i want to put that in perspective
#
that is eight times the gdp of india in negative yielding debt
#
that means people had lent out 17 trillion dollars and were paying to lend it out there's that much
#
money okay if you believe that the conditions of easy money created by that are going to continue
#
you deserve to be slaughtered the day before thanksgiving the problem is that nobody is
#
telling them that this can happen everybody is saying wow wow wow you know at some level
#
my sympathy is not even with the guy who gets in at the top of the stock market and gets blown away
#
my sympathy is with all those people who never even participate for whom the music doesn't play
#
at all correct you know and that's kind of my sort of so my concern is more
#
macroeconomic you know these people i'm working with those people who over invested yeah i see
#
your point but what are the long-term repercussions of that is that faith in the financial markets
#
dries up and compared to other large economies in the world india has a very low participation in
#
financial markets that's what i'm talking about puja your response
#
i agree with everything he has said i totally don't have anything much to add to he said it all
#
he said it all so you know you guys have been with me for almost three hours so again very
#
grateful for your time we'll sort of uh wrap up with a number of questions not immediately i
#
won't make it so easy but first i'll ask you guys i mean there are two versions of this question
#
what is what makes you hopeful what makes you despair and the other version would be if you
#
look at india say in 2031 uh after another decade that may or may not be lost uh you know what's
#
your what's the best case scenario or what's the worst case scenario so you could answer it either
#
way you sort of prefer i you know it's so difficult to sort of crystal ball look into the
#
future because we have such little information about so many things and we are going completely
#
by you know our anecdotal understanding of the situation and we are seeing these two
#
contrasting things the resilience of like for instance the startups the the uh the young men
#
in the villages villages who who are willing to look at things again and see what they can do
#
and if they can be atmanirbhar and i hope they are and i hope you know they will find solutions and
#
they will you know do well despite the government and the economy will do well despite the government
#
and um somehow um you know the state will retreat um because without that really how are you going
#
to sort of uh you know come break this cycle you know that we are in and more shocks will keep
#
coming a fun kind of the other uh with every shock your ability to be resilient also keeps
#
diminishing i don't have hope at all from the policy system i don't have hope at all from our
#
politicians all all politicians every shade of you know the political spectrum i uh i just have no
#
respect for any of them and all that i can hope i mean for is that individuals and people will
#
sort of find ways of doing things where all these policy challenges and policy mistakes
#
and the politics is sort of less of a dampener on their spirit and their ability to
#
cope with economic hardship and their economic success but definitely the potential is going
#
to reduce i'm quite sure of that the economic potential of the economy and therefore a number
#
of individuals um will they get a voice will will will they say this will we get to hear what they
#
say i don't know will this will this become an input into any corrections any politics i don't
#
know without that can things change i don't know in a sense i told you your silver lining yeah my
#
silver lining and as i said it's not big enough to rescue the economy because the kind of numbers
#
we're talking about are not going to be addressed by uh startups etc etc so there's lots to despair
#
about amit to my mind the biggest thing that i despair about is and you and i have differences
#
on on education you know what is the answer to education but the question i always ask myself is
#
so i went to a school which was an elite school it was reckoned to be one of the best schools in
#
certainly in the city and if you look at the board results it was crazy you know 10 out of the top
#
10 out of the top 20 people in the icsc board came from this school the gap between the education
#
that we got and the government schools was this much you know 80 percent there were 20 we were at
#
100 my son went to a great school in delhi and i look at the government schools had the gap
#
increased or decreased it had increased that hundred percent was now a new number it was a
#
thousand those kids their exposure to the world was that guy could step out of shiram school
#
and the next day he was in a highly competitive university in the u.s northwestern he was able
#
to take a grad course at kellogg management school one of the top management schools in the world
#
and he was comfortable there from day one which was not true 30 years ago kids even who went to
#
a prestigious college in du they had a lot of trouble adjusting this guy could day one
#
he was on his own surfing the system he was prepared for that has the gap between his school
#
and the kids who go to the local school in my village has it increased massively
#
the quality of those government schools has improved but may have gone up by 40 50 percent
#
in the last generation the quality of the school my son went to compared to the school i went to
#
has gone up many fold so i despair i despair about the gaps being created
#
as you know i don't believe in tackling this kind of problem you need to tackle it at the policy
#
level nevertheless as a humanitarian it it makes me weep when i look at my caretakers children
#
what are they going to be equipped for what place are they going to have in 2035
#
are they going to be able to walk into chicago and work in the finance obviously not
#
but there's a statistic which says take it to the pinch of salt that in india it takes on average
#
seven generations to move from being for a family to move from being unskilled to being part of the
#
ruling elite i can believe that in denmark it takes one generation we have to create a country
#
through policy whether by government intervention or freeing up where you make this kind of mobility
#
possible because that's for the good of everybody right there must be 10 million guys who are as
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smart as my son out there who are not getting a chance he's not like he's an einstein or something
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there are lots of people who are given the same with nature but they didn't get the nurture
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that's lost potential for the country i'm not saying the government must do it my money must
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go to those separate issues this makes me despair because when you have this kind of
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persistent inequality you create social tensions and then those social tensions create further
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economic tension so that is a huge source of despair and i don't see anything happening out there
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i work with several schools i don't see anything happening out there that's going to
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correct that one small thing i will say which is that there have been genuine efforts in delhi
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to improve the quality of government schools and that's welcome
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is it going to happen in up tomorrow no is it going to happen in bihar tomorrow no
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it's going to happen in uttarakhand no
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at the policy level at the macroeconomic policy level the big things that we talked about
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exchange rate government debt foreign exchange reserves are competitive in the market competitiveness
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in the marketplace again i don't see anything happening there's not even any dialogue now when
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you talk to somebody like an ajay shah for example they will say that a lot of reform may have
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happened in 1991 but it was facilitated by the fact that there had been a lot of dialogue about
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what can be done etc etc for seven eight ten years before that today i don't see it happening
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i can't say it's not happening i don't see it happening puja doesn't see it happening right
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so how is it going to happen it's not going to happen by magic
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if and the global economy is in completely uncharted territory we've never seen this
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before like i said whether in absolute terms or even in percentage terms never has so much
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money been created before so much debt and we know what happens when debt balloons we know there's a
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i actually believe and i'm not happy to say this i actually believe that we will see massive change
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massive change only if we have another crisis because till then the investment of this government
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is simply as we saw with the latest party convention all is well
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if you continue to say all is well the starting point of solving a problem is to accept a problem
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what can be a bigger crisis than the second wave exactly yeah so exactly so the point is that it's
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not going to come from their realization that we've got to do something it's got to come from outside
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meaning that only if you have a financial crisis
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will the problem get solved for as long as lic is there there'll be no
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no no no those numbers are small those numbers are small if you have a global
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retraction of liquidity yeah yeah but is a global retraction of liquidity even possible because
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i assume that in any so i don't want to go there yeah globally i think they will move
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towards universal basic income because you know i think they're increasingly moving into robotic
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and artificial intelligence and all that a lot of people will fall out of the labor market they're
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already seeing that and this printing of money is going to carry on probably it can't continue
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it's because something will give somewhere right yeah because money is nothing right it's only a
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medium so if that happens if you know money continues to swim around the globe etc something
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will happen right you'll have a crisis of inflation then and like i said we are the
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takers of inflation we're we're not beneficiaries of inflation saudi arabia will be it should be a
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matter of proud duniya ka best inflation yaha hum laate hain bahar se the biggest inflation
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final questions but before that an observation that you mentioned the phrase loss potential and
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obviously all of us know that the biggest loss potential in india is that women are essentially
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treated as second-class citizens 50 of the country just cut off from this entire conversation that
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we are talking about of human capital employment all of that i mean i had an episode with namita
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bandari a while back on you know women participation in the workforce but that's just one aspect of it
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and the issue is just way bigger than this and too big for this episode so we'll leave it for
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another day couple of questions and the last one is a nice one so in the sense a cheerful one so
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i'll ask the not so cheerful one first which is that given that all of us in different ways
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are invested in thinking about this country as it is today we write about it we care about it we
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comment on it to what extent is the texture of our personal lives affected by the texture of the
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society around us for example and i'm conflicted about this for example often i feel great despair
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but sometimes i am chilling i think not my circus not my monkeys i think you know as famously
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expressed in kashi kasi right so these are two sort of extremes i kind of swing back and forth
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between them what is it like with you guys like puja for example i mean you you actually live
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in delhi where the air is also a problem but that's another matter but you know how do you
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manage that is this something that you think about no i i do often think about it and i think one of
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the reasons whoever's continuing to be a journalist in this country is you know because they think
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about these things and they want to in some way contribute to keeping the dialogue going otherwise
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it'll you know whatever little way one can at least one tries but i mean you know you despair
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and then you know you say well like the young men in the village you know we'll do what we can
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i mean that's all yeah that's it it's a great question amit and so my answer is at several
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levels and it's something that engages me quite deeply at one level so one is you know unlike
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unlike puja who's a professional journalist etc i'm not uh i have a very very small contribution
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to twitter and i try and try and make sensible comments over there sometimes one despairs is
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anybody listening yes they're not but that's as much as i can do right i can't i'm not going to
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become finance minister tomorrow and uh i'm not suddenly going to have uh 50 million followers so
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whatever it is you know you contribute but that's tiny the second which has been sort of an abiding
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theme of my life is uh what can you do in terms of uh social engagement i mean broadly you know
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these get political so i just want to so you call it charity or you call it social work or you call
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it development or whatever it is so you know what can you do over there and so there was a period
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of my life where i did a lot of work there set up organizations for example to work with street kids
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or um and the other aspect of my life which has always concerned me is a performing artist
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at some point in time the the hobby and the profession sort of came together
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so i at one level i was working with musicians running a club helping independent musicians at
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the other level the company which i co-founded sort of moved towards supporting the performing
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arts and eventually became a big performing arts manager now i'm not actively involved with them
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but you know i'd reached a stage about uh five or seven years ago when uh i reached the age of 60
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where i was sort of getting to this kind of stage you know bhajao harmonia you know go and live in
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my beautiful little cottage in the mountains and forget all of this but it doesn't work
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you have to you know you have to continue to be engaged with society otherwise i might as well just
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go to switzerland and get a euthanasia injection if you all you want to do is sit and look at the
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mountains you know got to be there is a sense of i've got to give something back and uh i was also
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very clear just like in my professional life also in social work i'm not capable of starting up
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another front as far as social work is or contributions in that direction are concerned
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i've become very passive in the sense that there are organizations i've worked with in the past
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or set up or whatever it is and i support them both financially as well as in terms of
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the one skill which i have a little bit of is understanding how to run organizations a little
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bit of management a little bit of planning etc etc during the pandemic
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two things happened one is that i realized that my wealth and my my income was unaffected my wealth
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was going up because of what we talked about stock markets my expenditure was dropping one of my
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one of my largest items of expenditure has always been travel no travel and so i said that amount of
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money which i used to spend on travel now that all my liabilities are taken care of you know
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parents have gone son is independent i don't need to save any more money try and find productive
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ways to put that back into the system so all of these things give a little bit more money
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to the street kids support artists artists you wouldn't have needed support earlier
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because they were practicing performance space is shut put money back in there
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similarly when it comes to the startups that i'm working with
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i became proactive in terms of is anybody feeling a financial crunch that they're going to run out
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of money two three four months down the line i became proactive in terms of asking them
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pressing them to tell me what's happening what's happening to your cash flows
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and becoming the proactive guy out there saying look i see a problem three months down the line
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now let me get the pool of investors together and say okay what do we need to do in order to make
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sure that you survive this phase so the amount of money that i'm putting on the line is small
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you know it's in proportion with what i've invested earlier or maybe a little bit more
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but what i'm doing is becoming also a lever of bringing a whole lot of people together and
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saying look i've been working with these guys they are cash strapped this is what has happened
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i think that they are well positioned to get out of this so i became the lever for a whole lot of
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more sort of you became a hindustan lever i became a i became a hindustan lever correct these all
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you know you can do as much as your role in the world is and i've this is this is what i could do
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this is what i could do but i think actually if you look at a post-covid world then i think
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that this role that i have begun to play i came into the startup world we've talked about this
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earlier as an investor just a way of diversifying my portfolio and found to my utter surprise
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that as much as the checks that i wrote a lot of young entrepreneurs valued me as somebody who was
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listening prepared to commit time and intellectual energy and be an honest mirror to them and that's
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proved to be immensely rewarding both to me because like they say you want to really learn
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something teach it so in a sense teaching all those 30 years of my experience running businesses
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starting up etc comes to play it's really easy it's much easier than running a business telling
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somebody how to run a business it seems to work because the kind of relationships which i've
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developed with some people if you had told me five years ago that i would have this kind of
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relationship with young entrepreneurs people i didn't know typically by the time you're 40 45
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you stop making new friends you know or building new relationships i formed such deep relationships
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over the last five or six years so it's accidental it's not that there's something i but i think that
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i'm actually giving something back now and this i will continue to do i'm never going to go into
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a situation where boss i'm now inspecting my roses i don't think that's going to happen essentially
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the way to not despair is to do what you do you know continue doing what you do do a little more
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than that by way of being a good citizen and staying out of trouble because it's very easy
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to get into trouble if you do your if you do what you do and especially if any babu has heard him
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use the phrase inspecting my roses just now they might get the idea for a new department
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okay my final question which is the final question i kind of ask all my guests and
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recommend you know one or multiple books which you are so excited about on any subject which
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have meant a lot to you in your life or which you just read and really like but books that you want
#
to you know sit on a soapbox and stand on a soapbox and tell soapbox is that the right word soapbox
#
stand on soapbox and tell the world read this i love it so much the dharma forest oh okay i think
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it's a really good book yeah it's his take on mahabharat is the first of a trilogy it's his first
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book uh he's an economist who um i i think he's he's uh i don't read indian authors too much but
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i think he's these days i'm recommending it to everybody he uh his use of language and his
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interpretation of five characters but especially the way he interprets the relationship between
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arjuna and krishna whatever little i i have not read much uh you know about the mahabharat but
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whatever little i know about it uh it's fascinating i i really liked it a lot
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without a shadow of doubt the better angels of our nature without a doubt because it gives you hope
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it forces you to look at the really really long arc of history and uh does it through
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data very very carefully assimilated data basically to show that the long arc of history is
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a reduction in violence demonstrated irrefutably now people can say that you know it'll reverse
#
etc etc etc and the one thing which really remains with me from that book is his takeaway very
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difficult to substantiate but i love it that one of the reasons that we have less violence
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is the obvious one which is that the state that states have become more powerful you have
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state monopoly over violence that we anybody who studied a little bit of political theory will
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tell you that but the other which goes to hearts of people like us who love books is one of the
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one of the reasons is the invention of the printing press and the publishing of novels
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and the popularization of reading and what it did was what does a novel do it allows you to
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experience somebody else's life and when you experience other people's lives you develop
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empathy and as you develop more empathy you're capable of less violence i thought this is such a
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beautiful such a beautiful philosophical thought irrespective you can't back it by theory it's just
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you know correlation is not causation but i love the thought but the data is clear which is that
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despite all of the narratives and if you look at newspapers you think that all that's happening is
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that people are murdering each other on a global meta basis we have become an increasingly less
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violent society i think that's just wonderful it's a wonderful book in fact when when i asked
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myself the question about a book that changed the way i look at the world it's pinker's book
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the blank slate which was just remarkable you know i was like one person before it another person
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after it but thank you so much both of you for coming and playing harmonia with me
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hopefully we can keep these conversations going thank you amit and i shall now go back to the
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mountains and look at my begonia the begonia inspection department
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if you enjoyed listening to this episode head on over to mohit satyanand.substract.com and subscribe
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to the writings of one of the wisest people i know you can follow mohit on twitter at mohit satyanand
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you can follow pooja on twitter at pooja mehra and you can follow me on twitter at amit varma
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a m i t b a r m a we all just write our names except i have to specify what the spelling is
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you can browse past episodes of the scene and the unseen at scene unseen dot i n thank you for
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