#
I've always distrusted the state, especially the Indian state.
#
I was born in the 1970s, I grew up in the 80s and 90s, I had a close-up view of government.
#
My distrust of the state was given an intellectual framework when I got into political philosophy
#
and when I learned public choice theory, a branch of economics that studies how everyone
#
in politics should be looked upon as a human being responding to incentives.
#
The incentives of a politician are always to win the next election.
#
They need money for this, money demands are quid pro quo.
#
The next election is always nearby, so all the incentives are short-term incentives.
#
And politicians soon realize that governance doesn't matter, especially when its benefits
#
are unseen, and narratives matter.
#
Voters are also self-interested, and their apathy is irrational.
#
Since their one vote will seldom decide an election, why waste too much time educating
#
yourself on governance and economics and policy and so on?
#
When they do vote, it may be because of other incentives, like signaling loyalty to their
#
tribe, or just to get a free bag of rice.
#
And the third piece of this puzzle are bureaucrats.
#
Bureaucrats also respond to incentives.
#
According to the economist William Niskanen, what they really care about are quote, salary,
#
perks of the office, public reputation, power, patronage, and the ease of managing the bureau's
#
They also want to play it safe.
#
Continuing the status quo is a safe option, and reforms are risky and could backfire.
#
From all this, we can conclude that the state is an oppressive beast that just grows and
#
It accumulates power and never gives any of it away.
#
Every state is on a slow lurch towards becoming a predatory state, akin to a colonial power
#
And yet, despite these dark words, there is hope.
#
Because human beings contain multitudes, and they respond to a multitude of incentives,
#
not just those that arise from their position.
#
Some are animated by principles they hold dear, some would genuinely like to make the
#
I would hold, in my cynical way, that this is an exception.
#
But when these outliers express themselves, my god, it's beautiful.
#
This is what happened in 1991, when we opened up large parts of our economy.
#
For once, the government got out of the way of society, and immediately, our economy boomed.
#
And in the next 20 years, hundreds of millions of people were lifted out of poverty.
#
I used to mistakenly believe that these reforms happened only because of our balance of payments
#
crisis and the conditions the IMF set to bail us out, and so on.
#
But I have since discovered that a group of bureaucrats and wonks within the government
#
spent almost a decade the whole of the 1980s preparing the master plan that was eventually
#
I've had episodes on the reforms and on PV Narsimha Rao, who made them politically viable.
#
And right now, I want to draw your attention to the following names, many of which you
#
may not even have heard of.
#
Rakesh Mohan, Amarnath Verma, IG Patel, Vijay Kelkar, Ashok Desai, Naresh Chandra, Montek
#
And there are many more like this, unsung heroes whose actions put food in the plates
#
of unseen millions and gave hope to a nation.
#
My guest today is one of these remarkable men.
#
Welcome to The Scene and the Unseen, our weekly podcast on economics, politics, and behavioral
#
Please welcome your host, Amit Verma.
#
Welcome to The Scene and the Unseen.
#
My guest today is Montek Singaluwalia, who lived the Indian dream of the 50s and 60s
#
and 70s when he went abroad, studied at Oxford, got a job in the World Bank, escaped his circumstances.
#
But Montek then did something unusual.
#
He came back to India and joined the government in the late 1970s, determined to be a force
#
He bided his time for a decade, pushed reforms where he could, made alliances, combined thought
#
and action wherever it was possible, and came out with a legendary policy paper in 1990
#
It laid out a detailed roadmap of what India needed to do to lift the country to a better
#
He got his chance in 1991 and worked closely with his friend and mentor, Manmohan Singh,
#
to carry out many of these reforms.
#
He remained a key player for the next couple of decades and even wrote a fabulous book
#
about his experiences called Backstage, the story behind India's growth years.
#
His wife, the late Ishar Jajaluwalia, was also a formidable economist and I recommend
#
her memoir as well called Breaking Through.
#
Montek is 78 today and still full of ideas, still full of hope for our great nation.
#
I learnt a lot from my conversation with him and I'm sure you'll enjoy it as well.
#
But before we go there, let's take a quick commercial break.
#
And as so often I don't actually have a commercial, but what the hell, let's do this for love.
#
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In the course itself, through four webinars spread over four weekends, I share all I know
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There are many exercises, much interaction, a lovely and lively community at the end of
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The course costs rupees 10,000 plus GST or about $150 and is a monthly thing.
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Being a good writer doesn't require God given talent, just the willingness to work hard
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and a clear idea of what you need to do to refine your skills.
#
Montek, welcome to the scene in The Unseen.
#
You know, I just want to, I don't want to embarrass you, but I want to start off by
#
saying that to me and to many of my listeners, no doubt, you know, you and that your entire
#
band of, you know, reformers who did what they did 91 onwards are heroes for us.
#
I mean, we might live different lives if not for you.
#
So very nice, very nice to hear good things.
#
And it's such a privilege for me that, you know, you made the time to come here today.
#
I'd like to sort of start by asking you about your early life, because one of the things
#
that sort of fascinates me and one of the themes I examined with my guests is, is sort
#
of the texture of their lives and their growing up years, because one of the mistakes I made
#
and I'm 48 and one of the mistakes I make sometimes is that I assume that the things
#
that I know and the things that I've lived through are shared experiences by everyone.
#
But I think more than 60 and close to 70% of the country is actually born after liberalization.
#
They don't have lived experience of the times before it.
#
And I was just struck with this factoid when I was reading about your life, that actually
#
the US civil war is closer to your birth than we are now.
#
You know, that's kind of, I'm sorry, I didn't mean to make you kind of feel old, but I'm
#
and you are older than India, you are older than our nation state.
#
So tell me a little bit about, you know, where were you born?
#
What was your childhood like?
#
Well, you know, I was born in Rawalpindi.
#
That time it was part of undivided India and my parents moved from Pakistan without my
#
father was in any case posted in India, as we now know it.
#
And he used to be in defense accounts.
#
He joined the civil service as a clerk in those days, British times, that was probably
#
a higher up the ladder than it is now.
#
But you know, we were not privileged, privileged family, typical, what would then be called
#
a middle class, lower than the middle of the middle class, if you like.
#
I have no recollection, therefore, of partition.
#
My earliest memories are really of Sikandar, not Sikandarabad, Ambala.
#
Just after independence, we were in Ambala and then after the police action in Hyderabad,
#
the army moved into Hyderabad and my father being in defense accounts, the accountants
#
had moved in the wake of the army.
#
So I was there in Hyderabad.
#
That was really when I grew up in Sikandarabad, which is a twin city, as you know.
#
And I was there till 1957 when we moved to Delhi.
#
So tell me a little bit about your father, Mr. Jagmohan Singh.
#
I was struck by this paragraph in your book backstage where you write, my father Jagmohan
#
Singh graduated from Khalsa College Amritsar and joined the department of defense accounts
#
He was a reclusive person with a strong moral conscience and an abiding sense of duty.
#
He put whatever little savings he had in a bank account, strictly avoiding investments
#
in stocks, which he viewed as a form of speculation.
#
And you know, one thing that I sometimes speculate on is how much our character and the things
#
that we do is determined in a sense by circumstance.
#
That when you are in a circumstance like that, where you have a family to look after and
#
the nation's going through so much turmoil, you would in a sense naturally be inclined
#
to be cautious and to be careful and to kind of, you know, give importance to all of those
#
Later on in your book, you mentioned about how when you were in Oxford, when that phase
#
got over, you'd been offered a plush job in the private sector over there, but you chose
#
not to do it because you felt that you had to give something back to the country and
#
in some way work within the government, work in development economics and so on.
#
And that again being something that I think you mentioned in your book that your wife
#
speculated that you probably got it from your dad.
#
So in hindsight, when I look back on my own childhood, I can see the various ways, good
#
and bad, in which I was sort of shaped by my parents.
#
And one is of course shaped by many things, not just parents, peers and so on.
#
But as you were a traveling family, you know, first Saharanpur, then Ambala, then Sekundarabad,
#
then at the age of 14, Delhi, I guess that your parents must have been a really big influence
#
So tell me a little bit about that, that when you look back in hindsight, what are the,
#
when you, you know, look at the young Monte kind of growing up in that kind of house in
#
those kind of times, what do you see now?
#
Well, I think my upbringing, both my parents are very concerned to bring us up as best
#
It was a mother who actually did most of the, what you would call child caring.
#
But my father was very concerned about our education also.
#
I mentioned in the book that, you know, my mother lost her younger brother, who was actually
#
a lieutenant in the army.
#
He died to an accident in a mountaineering expedition.
#
So we came to Delhi for about 10 days and my father felt, I mean, I was like at that
#
time, maybe only about nine or 10 years old.
#
But my father felt that missing out my school for 10 days is bad.
#
And he was very concerned that I shouldn't slip in mathematics because like many people,
#
he regarded that as critical.
#
And I was really surprised that he got permission from his office.
#
I mean, he, he was very dedicated, office going type to take two hours leave in order
#
to sit in my class and take notes so that I wouldn't miss anything on the maths front.
#
It was my first indication that he really cared a lot about what happened to my education.
#
I mean, the next similar indication was, you know, towards the end of his service.
#
He was very well thought of and he had worked his way up from being a clerk to being a officer,
#
but he was not in the Indian defense account service, which is the grade A service of that
#
And so they said to him that, look, we'd like to make you a promotee.
#
So you know, for those guys becoming and having IDAS after your name was a big thing, but
#
they said, look, if we make you IDAS, you'll be in charge of a defense accounts office.
#
You're here in Secunderabad, but you'll be sent to a much smaller place where, you know,
#
the head of the office is the junior most IDAS person.
#
The alternative, if you don't want that, is we could send you to Delhi for the last two
#
years of your career and well, you'll be able to settle your family before retiring and
#
And you know, my father thought about that and he said that he chose that consciously,
#
giving up the IDAS because he felt we would get a better education.
#
And I mean, he was right that I moved into Delhi public school.
#
It was a better school than the school I was in in Secunderabad, results and all were better.
#
And you know, when I look back, it's quite possible that if we hadn't moved, I don't
#
think I would have had as good an academic career as I ended up having and may not have
#
got the Rhodes Scholarship and all that.
#
So really a very critical decision on the part of my father and I'm the biggest beneficiary
#
So there was a lot of concern, a lot of principles, deeply believed in simple life.
#
And I think that did influence me.
#
You know, you mentioned this business of giving back to the, that's not how I viewed, I think
#
I belonged to the generation immediately after independence, which actually believed that,
#
you know, the government was going to, so to speak, develop the country.
#
So the task of joining a development oriented government that would remake the country was
#
And you know, I, when I went, even when I went to Oxford, I thought I would just sit
#
for the IAS and I even began preparing for it.
#
But you know, I'd done well in Oxford and job offers came.
#
I wasn't at all interested in the private sector.
#
It just wasn't my thing.
#
But I got tempted when the World Bank started recruiting and they said, well, we need people
#
who can work on what's going on in different developing countries.
#
So I felt that that might actually help me in my desire to work on development.
#
And I thought I was going there for three years and stayed on for nine, which was quite
#
But anyway, I didn't regret it and I thought I enjoyed, not nine actually, I think I stayed
#
for 11 years between 68 and 79 and then finally came back.
#
I think both my wife and I wanted to come back and she was particularly concerned that
#
as soon as our kids were born, we should come back.
#
I mean, she also wanted to do work, her own work.
#
She was an economist, was in India, but I think the bringing up children was crucial.
#
So our oldest son had been born and the younger one was about to be born and she felt this
#
is the time to go and an opportunity opened up in the finance ministry and I took it.
#
Going back to your childhood, one of the things that I was sort of struck by while reading
#
backstage is you describe how after DPS Mathura, you had to wait for a year before you could
#
join Delhi University because you were too much short of the minimum age.
#
So your right quote, I use the time to delve into some books and economics that I borrowed
#
from the British Council Library on Rafi Marg.
#
This gave me a feel for the subject and helped convince me of for the BA honors course in
#
economics in Delhi University, stop quote.
#
And I was struck by this because I've had many economists on the show.
#
No one read economics for fun when they were kids, right?
#
So it's almost as if, you know, you would expect people to read racy novels or comics
#
Remember I had a whole year to waste.
#
So compared to these other economists that you're talking about, I had more time and
#
I didn't want to spend all that time reading novels and comics.
#
So having time, I said, look, economics was a new subject.
#
We never did any economics in school.
#
So, you know, before taking the plunge into economics, I really wanted to see what, what
#
would the books be like?
#
Actually, I don't come to think of it wasn't one of these standard textbooks.
#
It was this older generation of, you know, things written in the 1930s and 40s.
#
For example, I don't remember reading Alfred Marshall's principles.
#
That was a kind of heavy textbook of the time.
#
And you know, people like Samuelson and so on hadn't quite made the impact that they
#
obviously they dominated textbooks later on.
#
But it wasn't textbook so much as books on economics.
#
Not very interesting, but it sufficiently convinced me that it's a subject that I think
#
I would enjoy basically.
#
Tell me a bit more about that period, like what is the other stuff you were reading?
#
Like I enjoy sort of looking back on, you know, just thinking about how every 15 year
#
old holds a seed in a sense for the 40 year old, for the 75 year old, you know, when you
#
look back on the young 15 year old, you or the 12 year old, you or whatever, you know,
#
And at one level, that seed leads you to the part that you took.
#
But are there other seeds that lead you down other parts?
#
Well, I think I was quite interested in history even then.
#
And again, I owe that a little bit to my father.
#
I mean, when we were in Sikandarabad, for example, he had brought home from his library,
#
K. Nilakanth Shastri's history of South India, which, you know, later on we never read.
#
But it was interesting in Sikandarabad reading about the history of South India.
#
I think it's one of the gaps, if you like, in the regular educational process that we
#
don't give enough attention to the fact that there's not necessarily an Indian history.
#
I mean, this is a big country and different parts of it have sort of had different histories.
#
So I was always interested in history and then historical novels.
#
But of course, most of the historical novels I read were really Western.
#
And actually my favorite in those days, I read through the whole of Alexander Dumas,
#
And what was your conception of yourself at that time?
#
Like, what did you want to be?
#
I mean, I don't think a 14 or 15 year old ever says I'm going to be an economist, I'm
#
going to be a policy wonk, I'm going to do all these things.
#
Oh, I think at that point, I didn't really think I wanted to be a policy wonk.
#
I think at that point, I just thought I would sit for the IAS and do good and participate
#
in the development of the country.
#
The realization that there's a profession that one could follow came quite a bit later.
#
In your wife's excellent autobiography, she mentions that when she first met your dad,
#
they bonded immediately because of his, because he could talk about both English literature
#
You know, so one senses that there is a multilingual kind of upbringing happening here that at
#
one level, you are sort of rooted, she's spoken and I think you've mentioned as well, you
#
know, being part of the Sikh community and it's something that you take seriously.
#
At the same time, there is a certain westernization also in that upbringing where like you mentioned
#
you're reading Dumas and later on when your wife mentions in a book that you would watch
#
a lot of European cinema when you were in the US, you'd watch, you know, the Sika and
#
Fellini and all of that.
#
And it's just a sort of mixture of these two.
#
So that, you know, when I look back on how I kind of grew up and I also had a privileged
#
upbringing, my dad was an IAS officer, born a couple of years before you in fact, again
#
in what is now Pakistan.
#
And one of the things, one of the negative aspects of my upbringing was that it was unfortunately
#
so westernized that I wasn't too rooted as a young person in the sense that I would actively
#
look down on, you know, I'd have this snobbish attitude about say Hindi cinema or about other
#
aspects of our culture.
#
And then it took to kind of getting a little bit older and with time figuring out that,
#
you know, that attitude was fundamentally wrong, that on the contrary, it's a privilege
#
to be surrounded by the richness of different languages and different cultures and all of
#
So how did you sort of navigate those different cultural influences and do you think therefore
#
that in a fundamental way, it makes an Indian economist different from say a European economist
#
in the sense that they have one language or at most two, while you have different languages
#
and a much richer web of sort of influences to draw upon?
#
That's a very good, very good question.
#
Let me give you a considered answer.
#
First, you know, when I was growing up, I don't think I was adequately aware of the
#
richness of this cultural tradition to a large extent that came to me through my wife, because
#
Isha used to say that she herself was what they used to call a Hindi medium type.
#
She was not comfortable in English through most of her school days because she went to
#
shikshayat and school in Kolkata, which had Hindi medium.
#
It's only when she went to presidency in Kolkata that she started getting an education in English
#
medium and she felt that she was a little behind the other kids.
#
She worked hard at it, of course, and made up, but she was very conscious of that.
#
And you know, part of the bonding between her and my father was that he was very interested
#
in Punjabi poetry, not religious stuff, but Punjabi poetry.
#
And since he read, he could read, he used to do the reading of poetry.
#
He read it in the Arabic script, Urdu script, because in, you know, Punjabi men in those
#
days, the women would learn the Gurmukhi script, the men would learn the Arabic script because
#
after all, a lot of the official recording, et cetera, was in Urdu.
#
In Ranjit Singh's court, the official language was Persian.
#
So you know, it gives you a sense that we don't kind of adequately realize.
#
So I think Isha interacted very nicely with my father because she had a very strong grounding.
#
In her case, Punjabi in terms of what she got from Gurbani, the religious part, and
#
he was much more interested in Hir Ranjha and that kind of stuff.
#
So I think they bonded quite well.
#
Now, you know, linguistic variety is of course one thing.
#
It reflects a much more substantial economic structural variety in the country.
#
I mean, you know, people don't realize that the difference between the richest states
#
of India and the poorest states of India in terms of per capita GDP, something like five
#
So I mean, and these are huge areas.
#
So each one of them in the United Nations would be a separate country.
#
So when you're running a country with such a wide disparity of economic structure, you
#
need to have a different approach to how all this is going to pull together.
#
And you know, in my book, I do mention when I was deputy chairman of the planning commission,
#
it struck me that we were not analyzing the structural constraints of each state, which
#
There was a tendency to basically describe economic problems as the same.
#
I mean, everybody has to have infrastructure.
#
Everybody has agriculture that's important.
#
But you know, in some parts of the country, agriculture is very powerfully influenced
#
by extreme shortages of water.
#
In other parts of the country, water is not a problem.
#
And I don't think that we took adequate, paid adequate attention to these differences.
#
So in that sense, I think that's partly a reflection of how much the country varies.
#
And you know, this has to be then combined with the fact that there's a lot of migration
#
So people from the poor parts of the country migrate to the richer parts of the country
#
and they send back, if you like, messages or perceptions about what's it like elsewhere.
#
And this is a very strong sort of substructure, cultural interaction that's taking place,
#
which as an economist, you should know more about.
#
And this is where sociology also comes in.
#
And I would say that when I think about it, we should have been more aware of these things
#
Manmohan Singh is saying in the book at one point that you can't take 10% of the population
#
into the 21st century, leaving the remaining 90% in the 19th century.
#
And this is one striking thing about India that there are parts of it in the 19th century,
#
20th, and a small set of elites who are fortunate enough like us to enjoy the 21st.
#
And because we normalize it, I sometimes feel that we may be blind to the fissures that
#
sort of develop in our society because of these differences.
#
And these differences go deeper than just talking about, say, economic inequality between
#
states like you mentioned.
#
But they exist at a social level, a cultural level.
#
And of course, our society these days is deeply divided in different ways.
#
But there are divisions that have kind of always sort of existed.
#
And I don't even mean in the pure sense of the potential for conflict or all of that
#
or the adversarial nature of some of these divisions.
#
But just in the sense that there is then a danger for an elite governing class, for example,
#
to have an idea of India that is based too much on what they kind of see around them
#
and what they study in books and so on and so forth.
#
And this is almost in some senses, it seems, even if you're well-intentioned and you try
#
to make an effort, you know, the nuances and complexities are way too much.
#
And therefore, just thinking aloud, this would even be an argument for a much greater degree
#
And in some senses saying that a country as large and varied as this is fundamentally
#
ungovernable from the center, from in a top-down kind of way.
#
And that might be a fundamental mistake that we made.
#
So I'm just thinking aloud.
#
But what are sort of your thoughts?
#
Well, no, I certainly that when you have a country with wide differences within it, and
#
it starts to open up and interact with the world, that is likely to increase the extent
#
I mean, the country as a whole benefits.
#
And those that benefit early are the ones that are already in a good position.
#
Hopefully the others watch what's happening and they start emulating them and they also
#
But the conclusion, in my view, is not that you shut yourself off.
#
It's certainly true that if you shut yourself off, you can just keep stagnating.
#
But here you open up the ideal thinking, of course, is that when you open up, so an economist
#
will say that, look, your growth rate will go up from 5% to 7%, which is what happened.
#
But you know, in a politician's mind, when he's addressing a big audience, he'd like
#
that to mean that every one of you was benefiting at 5%.
#
Now you're all going to benefit at 7%.
#
Inequality is one thing, but you know, if everybody is benefiting, that can kind of
#
But the truth is, that's not what happens.
#
Some of you are going to benefit not 7%, but 8%, 9%.
#
And some of you probably only 2%.
#
And you know, in an extreme case, you can even theoretically imagine that you might
#
Although, of course, as a family, you don't necessarily get worse off.
#
I mean, in the sense that the guys who used to run tongas in Delhi basically lost their
#
Maybe some of them found some other jobs, but their kids probably run taxis.
#
There's a bit of an internal redistribution within a family, which tends to moderate that.
#
And we have to accept the fact that in a market economy, it is very difficult for a change
#
that will do well for the economy to actually lead to an equal benefit across the country.
#
That's why you have to be watchful.
#
What are you doing for those that are left behind?
#
And to be fair, in all our thinking, that's been driven home to us right from the beginning.
#
I mean, this whole focus that poverty must be a focus, you must reduce poverty and all
#
this kind of stuff, which was there for the last 20, 30 years, reflects that.
#
But I think poverty tends to focus only on the bottom 20, the bottom 30, the bottom 40%.
#
It doesn't reflect the unevenness of benefits in, let's say, the top 50.
#
In a structure where somebody was maybe not poor, maybe they were in the 50th percentile,
#
but they don't do very well, and somebody in the 60th percentile does very well, poverty
#
is not affected, but you can get a sense of discomfort, and that can lead to social tension.
#
Now this is why the only factor that you have that can counter that is a well-functioning
#
democratic system, because democracy sends that message back, and politicians know how
#
They know that some things they can manage, and some kind of things they can't manage,
#
and therefore how fast they respond to those things determines the end result.
#
And I mean, we have to recognize that whoever's running a complex country like this has to
#
Now the second issue which you raised is, does all this have to be looked at by some
#
centralized government?
#
You know, in India, it cannot be because the Constitution itself allocates certain things
#
entirely to the states.
#
I think the real issue in India is that we don't have really good devolution below the
#
I mean, the largest state in the country is 200 million people, that's too large.
#
I'm very much in favor that we should multiply the number of states.
#
If every state was kind of reduced to maybe, if the largest state did not exceed 30 million,
#
we would be a lot better off.
#
And frankly, if you think about it, that's probably the only way of getting a lot of
#
cities developed, because if you produce another 30 states, you'd have another 30 capitals,
#
and automatically a kind of energy would go towards developing these capitals.
#
And frankly, India needs, I mean, you know, in the next 30 years, urban population is
#
I mean, most estimates suggest that from about 300 and something million in 2011, the urban
#
population will be 800 million by 2050.
#
Now, this is going to, just to accommodate this, you need many, many more of our medium
#
cities to become bigger cities, and the best way of making them bigger cities is to create
#
And we've created a few, but, you know, we could create many more.
#
Yeah, I mean, I couldn't agree with you more, and just to underscore that point about the
#
importance of local knowledge, of governance being as local as possible, I did an episode
#
with Abhinandan Sekri, the journalist, and he was telling me about this experience where
#
they went to some village in the Northeast with a TV crew, they were shooting something,
#
and he asked the people there, okay, what do you really want from your government?
#
What is the one thing you want?
#
And you know, somebody sitting in Delhi would imagine they want schools or they want hospitals
#
or they want roads or whatever, those kind of things.
#
And they said, we want a cinema theater.
#
And he said, why do you want a cinema theater?
#
He said, because all the boys in this village, they have nothing to do in their spare time.
#
So they go to the nearby place, nearby, nearest city to watch movies, and the roads are so
#
bad and there are so many accidents that the mortality rate is too high and they keep dying.
#
So we don't want them to go, we want a cinema theater here.
#
And there's such a profound insight which, you know, can only arise locally.
#
I have a very nice story of a parallel kind.
#
When the Soviet Union cracked up in 91, all these new republics were created.
#
I was sent to some of the the stans around our neighborhood because they'd become independent
#
countries and we had long relationships with the old Soviet Union.
#
So we wanted to let each one of these know that, listen, is there something we can do
#
So I was told to tell them that, you know, maybe you want to send some of your people
#
to our banking training school, our diplomatic training school, all kinds of things.
#
And you know, the one thing that they all said was, you know, what would be really good?
#
Why don't you be more Indian movies?
#
Because they're incredibly popular.
#
I mean, this was an extremely low cost thing to do.
#
But I was struck that in places like Turkmenistan and so on, when I had gone to I think some
#
carpet weaving outfit and there was the person weaving a carpet and they had a few of our
#
film stars photos on the looms.
#
So Indian soft power was there.
#
I think we have a very goods and manufacturing oriented approach to life, but actually services
#
is becoming an extremely important part of the economy.
#
So entertainment is a very critical service.
#
And I can well imagine that, mind you, this must have been before smartphones and so on.
#
Because today, I mean, all these kids who want to see movies, we'll see them on the
#
smartphone through Netflix and not really go into a theater.
#
So that's another factor which you have to keep in mind.
#
Another sort of question which comes up from what you were, you know, speaking about earlier
#
about the nuances between poverty and inequality, like one point I often make is that inequality
#
is a sort of a Western obsession and what is a moral imperative in India is to focus
#
And you know, the philosopher Harry Frankfurt wrote a book called Inequality, where he pointed
#
out that for him, it wasn't inequality so much per se as what he called the doctrine
#
of sufficiency, which is a moral responsibility of a state to make sure that each of his citizens
#
has, you know, however you define it, a sufficient amount to sort of live a reasonable life.
#
And you know, what the reform certainly did in India was that, you know, my friend Nitin
#
Pai gives a figure that for every one percent growth in GDP, two million people came out
#
And that has such moral force to me, that is, you know, just so much.
#
There's no question that the removal of poverty should be a moral imperative because the case
#
for doing that is the belief that the society owes everybody a minimum standard of living
#
and you should run your economy in such a way that nobody falls below it.
#
But that doesn't mean that inequality is not important because inequality is relevant if
#
you want to bring in a concept of fairness.
#
You know, you could have a situation, for example, that on the poverty front, you're
#
doing quite well and that every year you're taking more and more guys above the poverty
#
But as you know, when 70 percent are below the poverty line, that's the most important
#
Once you get maybe 20, maybe 15, I don't know what is the number correct, it depends on
#
what poverty line you use.
#
But if 85 percent of the people are above the poverty line, you cannot say that how
#
these guys, the relative outcome of these guys is of no importance because it's of importance
#
Now remember here too, see inequality, static inequality is one thing.
#
But in a statically unequal system, suppose you had a situation where everybody's kid
#
sort of just gets stuck in the same groove and nobody improves.
#
The other is there's a lot of churn.
#
Many people lower down and kind of move up and some guys higher up move down.
#
Actually people will regard the second as a little bit fairer.
#
So I think the whole concept of justice and fairness is actually very complex and I think
#
a society always tells you what's bugging it.
#
You may get hung up on poverty and say, look, poverty is going down, so what's your problem?
#
The fact is in a democratic society, what people want will manifest itself in their
#
And as long as you're watching those and responding to them, you won't go too wrong.
#
One question I often ask people when I think about inequality and poverty is that where
#
would you rather be poor today, in the US or in Bangladesh?
#
And of course the answer is you'd rather be poor in the US, but the US has a far greater
#
inequality than Bangladesh does, for example.
#
So the dilemma here is that often these go in sort of different directions.
#
That inequality may increase as poverty goes down because everybody is getting better off
#
but at a different rate, where the people at the top are getting better off very fast
#
and people at the bottom are getting better off but not quite as fast, so inequality kind
#
And for a policy person then that creates a dilemma because there are trade-offs involved.
#
On the one hand, like you say, there is a moral imperative that we have to do something
#
But on the other hand, there is also the imperative that you might have political constituency
#
that are demanding different kinds of policies and the two might often go in opposite directions.
#
It would seem to me that, and correct me if I'm wrong, that inequality probably went up
#
after reforms but I'd say poverty went down so much that that was your immediate sort
#
And then as you stabilize, like you said, you then start focusing on fairness within
#
But most of the popular demands that I see from electorates in India are really not about
#
It's more about different kinds of scarcities like lack of jobs or poverty itself and so
#
Well, you know, these are ways in which the deficiencies surface.
#
I mean, I would agree with what you just said that before the pandemic, it was probably
#
true that poverty was going down, no doubt about it, and inequality was probably increasing.
#
This increase in inequality is a pretty universal phenomenon around the world.
#
So it's not just in India, it's been happening elsewhere.
#
And societies partly take care of it through taxation.
#
I mean, after all, taxation is a very powerful way of redistributing from the top to the
#
bottom and a lot of public programs are essentially financed by taxation.
#
So you could argue that we should use the taxation instrument a little bit more effectively.
#
That is a legitimate point.
#
But I think the issue of what's happening above the poverty line, I mean, a lot of the
#
unhappiness today, again around the world, is that there's an incredibly faster growth
#
You know, in the old days, people used to talk about the top 20%.
#
What has happened is that for a variety of reasons, the incomes and the wealth of the
#
top 1% have really shot up and that is causing unhappiness everywhere.
#
Now, you know, how to respond to this in a sensible manner is an open question.
#
And one can go into that.
#
Is some of it perhaps because of bad policy in the form of easy money?
#
Like I think about the Cantillon effect and I'll just explain that for my listeners and
#
if I get it wrong, you can correct me because who better.
#
But the Cantillon effect basically is that typically you would imagine that say when
#
a government prints money or money floods into the system, you're going to have inflation
#
because the money supply goes up and the goods and services at that moment are the same and
#
therefore the price of everything goes up.
#
But what the Cantillon effect does is that money doesn't percolate down to society at
#
It's people at the top who get hold of it and they benefit first while people at the
#
bottom are basically having their wealth sucked away because inflation after all is a tax
#
And therefore, you know, this easy money would therefore explain what is happening in say
#
what has happened in the past, this normal correction of course happening, but what has
#
happened in the past with stock markets where the economy does really badly, but the stock
#
And as you mentioned, people in the top 1% are making a lot of money, but nobody else
#
is really seeing the benefit of the easy money coming in.
#
And that is the kind of inequality I do worry about.
#
And it's kind of caused by government policy, by central banks taking the easy route and
#
I mean, you know, for a long time, people used to think that monetary expansion by the
#
central banks, if it's not actually leading to inflation, shouldn't be a cause of concern.
#
In the United States, they worked out that inflation doesn't include the inflation and
#
asset prices, so it's commodity prices that are measured.
#
If you have a huge expansion of money and a credit system where actually it's only the
#
rich that can access this, and they put it all into assets, either real assets or financial
#
assets, and assets are only held by wealthy people, poor don't have assets, you can have
#
a very big increase in inequality suddenly taking place.
#
And I think what in the US, after the great financial crash 2008, the real anger was that,
#
you know, the economy was badly hit after the Lehman Brothers collapsed, output contracted,
#
but the guys at the top were completely unaffected.
#
And even Christine Lagarde, then I think managing director of the IMF, commented that nobody
#
went to jail, and yet what was going on in the financial sector was gross mismanagement,
#
very often more than mismanagement, but wrong intentioned fiddling, and no one suffered.
#
I think this has been a bit of a lesson.
#
It does show, the other thing is that public opinion now can be whipped up much easier
#
than was the case earlier.
#
So it's not just that you're affected, but you're subjected to a great deal of social
#
media messaging on what's going wrong.
#
So I mean, people have to be careful that the opinions of people are now being driven
#
by actors which earlier didn't have that much influence on opinion making.
#
That's an extra factor.
#
Yeah, like a friend of mine recently mentioned that he's never going to invest in crypto
#
as long as Elon Musk has the power to make prices go up and down with a single tweet,
#
which kind of speaks to what you're saying about how everybody's in the narrative battle
#
Let's kind of go a little back in time.
#
One of the things that you mentioned, which I completely agree with about the need for
#
greater urbanization, is something that would have been frowned upon by economists maybe
#
30 years ago, or at least the sort that you would get in India.
#
And also there was the notion here, and this is still a widely held notion, that our population
#
Where to me, you know, people's our brains, not stomachs.
#
Population is our greatest resource.
#
And throughout history, you know, people move from the history of humanity is a history
#
of migration from places with less population density to more population density, from villages
#
And this notion of population being one of our problems strikes me as, you know, one
#
of those little bits of conventional wisdom that we kind of grew up believing and that
#
we can now reconsider and we sort of know it isn't true.
#
So you know, in your early years, when you're getting an education first at Stevens and
#
you know, then at Oxford and you're learning about economics and all that, how much do
#
you think the economics you learned back then is at odds with what we know today?
#
Because it's very easy in the benefit of hindsight to judge the actions of people back then.
#
But I think you have to also view the actions of people back then in the light of what the
#
available knowledge was and what the available conventional wisdom was.
#
So tell me a little bit about, you know, that sort of.
#
Yeah, I mean, there's no question that economic perspectives have changed.
#
You know, some basic things don't change in the sense that if you want to grow, you've
#
got to have investment.
#
But in those days, the only concern was investment.
#
It was felt that the simplest way of having investment is to expand the public sector.
#
The government can get the resources and invest.
#
There was very little concern that the government would be a very poor investor and would not
#
be able to ensure efficiency.
#
So what economists call the capital output ratio would rise so you could have more investment.
#
But with a higher capital output ratio, you wouldn't get more growth.
#
So that was the when I was in St. Stephen's College, this was not even an issue.
#
I mean, it was just assumed that, you know, growth, the higher domar model, you want higher
#
growth, you have more investment.
#
The government is there to do the investment.
#
Why do we want the private sector?
#
Then I think over time, the fact that the private sector was much more efficient began
#
And so a kind of shift took place in the rest of the world.
#
Now, you know, in the rest of the world, the shift took place very early.
#
I mean, in the 1980s, I think Reagan, Reagan in the US and Margaret Thatcher in the United
#
Kingdom kind of led this sort of anti-public sector, bringing the private sector move.
#
We never did anything like that.
#
But you know, in a fact, we did it much more slowly.
#
It's possible they did it too fast.
#
Reagan's famous comment that the nine most dangerous words in the English language are
#
I'm from the government and I'm here to help.
#
So created an atmosphere in which the government is the problem.
#
Now, we I never thought that that was the right thing for India.
#
I think the problem in India was that government had to do more in certain areas, health, education,
#
building infrastructure, especially in rural areas and so on.
#
The government didn't have to do what it was otherwise trying to do.
#
Even steel, for example, we wrongly, I think, called steel infrastructure.
#
You know, my definition of infrastructure is that which is not tradable.
#
If it's tradable, it's not infrastructure.
#
I mean, roads are infrastructure because you can't import roads.
#
You want roads, you got to build them.
#
So you can if you make that distinction that what you can't import is infrastructure.
#
In that case, since we're not next to any surplus electricity producing nation, generation
#
of power is infrastructure, because if you don't generate it, you're not going to be
#
But if you were a small country next to a very big country, even electricity doesn't
#
have to be infrastructure because you can buy it from a neighbor.
#
Now, I think we needed to redefine the role of government, not to scale it down.
#
In fact, by any metric, you know, like the size of total government expenditure to GDP,
#
I mean, elsewhere in the world, people have social services, pensions, old age pension,
#
more education, more research.
#
A lot of the research that led to the US's dominance in so many commercial areas was
#
actually funded by the government, probably connected with defense.
#
So instead of doing these things, our government was building hotels, not just ridiculous.
#
I mean, if somebody were to take a decision today to privatize every single hotel owned
#
by the government, I have the slightest doubt that the country would be a lot better off.
#
But if you said that publicly, you will not get much support.
#
And I think the main reason you won't get support is that those employed in the public
#
sector somehow feel that privatization will make their jobs insecure.
#
I think we have to address that question.
#
I mean, if the thing becomes more efficient and therefore expands, more jobs will be created.
#
But it's quite possible that they'll expect you to do some work and you won't be able
#
to just kind of sleep on the job and have an easy time.
#
So that's kind of trade off that is necessary.
#
I think those are the changes that we needed to bring in.
#
I don't think we did enough.
#
But you know, I have no hesitation in saying that in 91, the reforms that were brought
#
We should have done it in the mid 80s.
#
As a matter of fact, Rajiv Gandhi said in parliament, and I quote that in my book, I
#
mean, he said that, look, how can we be competitive with other countries if we are running systems
#
that are 20 years out of date?
#
But the sad thing is he wasn't able to change any system.
#
All that happened was little incremental changes.
#
The start of systemic change happened in 91.
#
Narsimha Rao as prime minister, Manmohan Singh as finance minister.
#
Even they didn't actually get done in the first three years all that could have been
#
Again, because a country that's been fed for 40 years on a certain approach to policy takes
#
But the good news, I think, is that when other governments came in, the Narsimha Rao government
#
was succeeded by the United Front government, sort of a more left oriented government.
#
But it had Chidambaram as the finance minister, sort of an element of continuity.
#
The Communist Party of India was a member of the government.
#
CPM was not, but CPI was.
#
But still, they more or less continued the same strategy of the previous government.
#
When Mr. Vajpayee formed the NDA government, there was concern, look, will they continue?
#
Because they were critical of certain aspects of the policy.
#
Not other aspect, but certain aspect.
#
But actually, the Vajpayee government also continued the same thrust.
#
So from 91, right through the end of Vajpayee government, then you had the UPA, which had
#
the same characters coming back, a long continuity of change, in my view, in the right direction,
#
but in my view, too slow.
#
I mean, like what we did over a period of 20 years, we should have done in 10 or 12.
#
I'm not a believer that we should have done it in one year or two years, but we should
#
have done it twice as fast.
#
I love the way you, you know, mentioned UPA and said, which had the same characters coming
#
up because you were one of those characters as well.
#
Yeah, it was continuous.
#
In the UPA, I had a political appointment, although I'm not a politician.
#
So I used to sit in the cabinet and observe coalition balancing off different parties
#
and different interests and so on.
#
So we'll talk about all this in detail.
#
And I also want to continue talking about your life story, but I'll take a digression.
#
But before I take a digression, you know, you were speaking of about Rajiv Gandhi wanting
#
to modernize and there's a lovely anecdote in your book about, which is almost like a
#
metaphor for this, where you speak about how Madhav Rao's India came to him to make a presentation
#
and there were a lot of numbers involved, you know, he wanted to play around with the
#
numbers and see what effect it would have.
#
So he said, why don't you just get me a spreadsheet, right?
#
And as you point out, this is three years after Lotus Notes has been released and all
#
And the next day, Mr. Shindia and all the bureaucrats come with these actual physical
#
spreadsheets and Rajiv is like, what is this?
#
And that almost seems in a sense metaphorical.
#
I want to take a digression into talking about the state itself for a moment.
#
Like, there are two frames that I find useful when I think about the state.
#
One is Francis Fukuyama's frame of thinking about the scope and the strength of the state,
#
where my argument would be that in terms of scope, the Indian state is far bigger than
#
it should be in the sense that it does a lot of things it should not, like you pointed
#
out from running hotels to, you know, making sex toys and condoms, there was a company
#
But leaving that aside, the scope is much larger than it should be, but the strength
#
is much lower than it should be.
#
So it does a lot of things and it does them very badly.
#
While what it should do is it should do a few things like the ones that you mentioned,
#
you know, rule of law, public goods, all of those things and do them well.
#
And we have this mismatch where both in terms of scope and strength, we've kind of got
#
The other frame that I find useful is James Buchanan's public choice theory framework,
#
where a state on the one hand is supposed to be protective and productive, but the natural
#
tendency of a state because of the incentives of the people within a state to accumulate
#
power, can take it to a point where it becomes predatory.
#
And you know, predatory to me defines the Indian state much better than the other terms
#
do when most common people on the street will kind of tell you that as well.
#
And also one, what do you think of these frameworks and two, my sense also is that most common
#
people when they think of the state, they are apathetic to it.
#
They know it is dysfunctional.
#
They know it is, you know, they know that it's wrong at so many levels, but they also
#
feel that abhi toh kuch nahi badlega, apna dekho, you know, and that again itself becomes
#
an impediment to fundamental change because fundamental change will only happen when there
#
And if people are apathetic, there won't be a demand for it.
#
No, I think this is absolutely correct.
#
One view is that people don't care about education, but that's not actually true.
#
I mean, even the poorest person scrounges around in order to get a good education for
#
They need not spend that much money if they could make sure that the government provides
#
I think some of those messages are now coming across, but it's very late in the day.
#
You have to remember that when when Pandit Jwala Nehru made his twist with destiny speech
#
in 1947, that's 75 years ago, more or less, the phrase he used, what are the things we
#
should do, and he talked about the age old burden of ignorance, poverty and disease.
#
So poverty, of course, we've been trying to do, and I think we've done something about
#
But you know, ignorance and disease, these are the that's health.
#
I mean, education and health.
#
These are things that the state by now, I mean, if the Indian state had done half as
#
good a job on education and disease as it has in many other areas, we would be in much
#
One answer, by the way, is that theoretically, this is the neither of these is controlled
#
They're actually controlled by the states.
#
I think part of the problem is that politics at the state level does not subject the politicians
#
to a kind of performance accounting in those areas that are squarely in their hands.
#
And I think we need to think why, but the solution really is better education.
#
I mean, if people are scrounging from their meager budgets to send kids to private schools
#
in the belief that private schools are actually better, they may not be, but that's the belief,
#
then why don't the same people say, look, make the public schools that much better?
#
Very often it's connected with bad systemic choices.
#
I mean, for example, for many years in many states, state governments would not allow
#
English to be taught at a young enough age in school.
#
And yet most people felt that if you want to become employable, facility in English
#
Now many people felt that there were contradictions in state behavior.
#
The local politicians would be sending their kids to private schools where they'd be learning
#
English, but for the armed junta, they're enforcing a completely different system.
#
I mean, state governments now have changed so that kids are learning English at a much
#
But I think this requires, there's no substitute to states simply deciding, A, the public deciding
#
that look, we're going to judge you by what you do in this area.
#
And states also politicians deciding that they're going to give this top priority.
#
And that hasn't, it is beginning to happen, I believe in some states, hasn't happened
#
I mean, that point you make about the poorest of the poor sending their kids to private
#
schools is one I keep making repeatedly because people have this impression of private schools
#
that it's all, it's for the richie riches, it's like DPS Mathura where you went and that's
#
sort of the stereotype.
#
But the truth is that studies have found in Delhi, Hyderabad, Chennai, that the poorest
#
of people, people who live in slums, auto drivers, domestic help, they would, instead
#
of sending their kids to a free government school, they'd rather spend money that to
#
them is a lot, but in absolute terms, it's not that much to send their kid to a budget
#
private school, which is operating outside the ambit of the law and very often is illegal
#
if you look at the kind of regulations on it, which is where the whole school choice
#
movement comes from, which argues that, you know, instead of spending our money on schools,
#
we should give school vouchers to parents so they can choose the school their kid goes
#
to because who better than a parent to decide.
#
And that at least puts the incentives in the right place, that only the schools that provide
#
quality can sort of survive.
#
I had a long episode on education with the economist, Karthik Moolidharan, where one
#
of the things he did point out was that you're right, that private schools aren't necessarily
#
better off in terms of quality of education, it's pretty much the same as studies seem
#
to show, but they provide far more bang for the buck.
#
And there's just a lot more money getting wasted per student in government schools and
#
people, you know, and poor parents just used to spend money and vote with their feet.
#
You know, a final sort of follow up question on the nature of the state in that case, that,
#
you know, when it comes to, say, changing economic policies and all the profound ways
#
that you did, part of it in 91 was that there was a crisis.
#
Some of it you've termed as reformed by stealth and, you know, and there was some gradualism
#
also happening there and we'll discuss all of those concepts later also.
#
But now in hindsight, it seems almost like low hanging fruit when compared to the massive
#
task of transforming the Indian state to reduce his scope and to increase his strength in
#
the things that it should do.
#
So you know, you've been part of the state for decades.
#
You know, what is your sense of the enormity of the problem and is it even possible when
#
the incentives of the people in power will always be to not give any of it away?
#
Well, you know, that's a good question.
#
I mean, first point I want to make is that many of my structuralist friends, when we
#
started the liberalization, said that there's no way this is going to succeed because these
#
ministries will never give up power.
#
But that's not what happened.
#
In 1991, I mean, we just got rid of import licensing big time and that was a huge amount
#
of power in the Ministry of Commerce and it was the ministry itself that was willing to
#
So I think the intellectual atmosphere was such that and we were in the middle of a crisis
#
that faced with the crisis, the technocracy at the time, and it's not just me, this would
#
not have happened if we didn't have at least five or six key players at different levels
#
of seniority who more or less were convinced that this needs to be done.
#
And it did lead to a change.
#
So I remain of the view that if you zero in on the key things and you can't change the
#
state in every dimension, but if you know that for the next 10 years, this is what we're
#
going to concentrate on, I think you can.
#
To do that, by the way, at the political level, there has to be a comparable perception that
#
this is the important thing to do.
#
And if you look at health and education, these are not central government subjects.
#
These are state government subjects.
#
So it's only if political heavyweights are put in charge of education and health and
#
driven to perform by a chief minister who highlights these areas as the areas by which
#
he's going to be judged and a political process that encourages the electorate to say, look,
#
these are worthwhile things to do and we're going to do them.
#
I don't think it's not possible.
#
But I think we have to recognize that it won't happen in every dimension.
#
That's why we need to, in the 91 reforms, there were two or three things that we zeroed
#
We want to move to a flexible exchange rate, get rid of import controls and get rid of
#
industrial licensing and open up to foreign direct investment.
#
Now this foreign direct investment took a long time because there was a lot of hesitation,
#
but the other things were done very quickly.
#
So similarly, I think we ought to prioritize what we want and put it at the center of the
#
The problem is most of the crises that we have, people do not link those crises to fixing
#
I mean, nobody thinks, for example, that if we can get a much better educational structure
#
in place, much better educational outcomes, then with everything else, growth rate will
#
be higher and employment will be higher.
#
On the other hand, the demand is give us jobs, which usually means either you do some reservation
#
or you announce some government jobs.
#
Nobody says, look, we need to improve the quality of education.
#
And I think there's a bit of a lag there, which we need to somehow overcome.
#
So many aspects I'd like to double click on.
#
And the first of them is about 91 itself, like I've done an episode on the 91 reforms
#
with Shruti Raj Gopalan and Ajay Shah.
#
I spoke with Vinay Sitapati recently on his book on Narasimha Rao, I've read the different
#
books on that period, including your wonderful book.
#
And what strikes me is that there is a series of happy accidents happening there in terms
#
of this confluence of remarkable policy minds and economists who happen to be coming together
#
and who happen to be building the groundwork for this to happen right from Rakesh Mohan
#
writing a note in 86, your M document in 1990, people like Amarnath Verma and, you know,
#
Naresh Chandra and later Ashok Desai joining the cabinet, you know, you being in the right
#
place where you're in the commerce ministry to begin with, with Mr. Chidambaram and then
#
you shifted to the finance ministry.
#
And even at a political level, you know, Narasimha Rao getting the job instead of say other contenders
#
like an ND Tiwari or any pick any compromise candidate like that.
#
And you know, one of the things that Vinay Sitapati told me, you know, reveals in his
#
book and talks about is that Pranab Mukherjee was angling for the post of finance minister
#
because he had supported Narasimha Rao for the presidency of the Congress party after
#
Mr. Gandhi's assassination.
#
And somehow because of the cabinet note that he got from Naresh Chandra, you know, off
#
the bat, Mr. Rao realized that this is a crisis and this is not a time to mess around.
#
We need the right people for the job.
#
And he initially offered the finance ministry to YG Patel who was in at LSE and he said
#
no and then he offered it to Manmohan.
#
And then this remarkable team comes together and all of this happens.
#
So the question here is that, you know, in hindsight, what has happened seems inevitable.
#
But to me, it seems like, like, my God, we are so lucky that this and I'm not trying
#
to flatter you, but just in terms of where my own life is, I feel lucky that this group
#
of people was there at the right time, at the right place.
#
Is there a counterfactual to this where, you know, you change just one figure in all of
#
this and like dominoes, it just doesn't kind of work out?
#
That's a good question.
#
Look, I agree with you that I think Narsimha Rao understood.
#
He was not so wedded to the by then frayed old Congress kind of perception of ideology.
#
Praramogaji was much more firmly in that camp, Narsimha Rao, no.
#
I think he was aware of what was happening in the world.
#
I think we are fortunate that he chose a finance minister who probably had more credibility
#
internationally than anyone else could and who had thought about these things and was
#
also aware that big changes are needed.
#
Given the finance minister and the close relationship between the prime minister and the finance
#
minister, the team that was then put together, you can credit it to Manmohan himself, they're
#
always good people in the system.
#
I mean, if a message went around that, look, we want the kind of guys who will help us
#
do A rather than B, but you've got to be clear that it is A rather than B. Just a broad statement
#
of we want some good people doesn't help.
#
That part is not difficult, but yes, how do you get a political outcome where the two
#
or three key people at the political top pointed firmly in a particular direction?
#
I agree that the crisis concentrates the mind very substantially.
#
I think both Narsimha Rao and Manmohan Singh had to show that whatever they were doing
#
was bringing the crisis under control, which they did.
#
But I don't think it was just controlling the crisis that constituted the reform.
#
The lucky thing is that they saw this as an opportunity both to bring the crisis under
#
control and to bring about economic reforms, which would change the longer term growth
#
I mean, the crisis would have been brought under control even if the reforms hadn't happened.
#
So I think crisis itself, but it was an opportunity to bring in something.
#
We need situations like that, but in the end, what it really means is that governments have
#
to be very clear that their performance is going to be judged on the basis of performance
#
And as long as that is known, they will know whether they're performing well or not performing
#
I mean, you can fudge things here and there, but not for too long.
#
So three things I want to double click on.
#
And one of them is this.
#
My good friend Ajay Shah, who's been on the show many times and you obviously know him,
#
has lamented to me that back in those days, the late eighties and nineties, all the way
#
through, you know, you talk about the continuity through government.
#
So all the way through the end of Vajpayee's regime, then all the way through UPA.
#
You had this carder of people who believed in reforms and good economics and good policy
#
who were sincere, who were kind of working hard.
#
And his sense is that in a sense that is, I don't know what's the right word for it.
#
Perhaps that's gotten dissipated away, that he worries that, you know, you mentioned that
#
there are always a few good people in the system.
#
And his worry is that there may not be that many good people in the system anymore.
#
People just think differently and so on and so forth, that there is that tradition that
#
comes down from people like yourself and Vijay Kelkar, who co-wrote that book with Ajay.
#
And that that tradition is kind of dying out and that's sort of.
#
I mean, it's always nice to think that one's period was the best and, you know, you shouldn't
#
even mind thinking that.
#
But I would make one or two other points.
#
One is, it was relatively easy for us, given the state of play at that time.
#
What was conventional wisdom at that time?
#
That's not so today, because let's face it, if you read almost anything, people are bemoaning
#
the fact that the old consensus appears to have frayed de-globalization.
#
The economist called it globalization.
#
We're not in a world at the moment where it's very clear what is the right way to go.
#
This makes it more challenging.
#
This means that in a way, you need to you need to look at what's happening and then
#
decide what is it that you want to do.
#
I mean, take an extreme case.
#
Many people are beginning to think that maybe since the rest of the world is fracturing,
#
India should not be pursuing an open strategy and maybe if the United States is kind of
#
shrinking, maybe we should also shrink.
#
You can argue against that, by the way.
#
I mean, we are pretty small potatoes when it comes to the global economy.
#
You could argue that in a world which is fracturing and in which the big powers seem to be looking
#
inwards, we may well have an opportunity to cash in because although they are looking
#
inwards, none of them is going completely isolated.
#
In a world where China is somehow being shunned and people are suspicious of China, it creates
#
a space for us because people are ultimately going.
#
It's not that people are going to going to sort of reject China as a lot of people say
#
it's going to be China plus one.
#
In other words, they want to balance off the risks.
#
Don't just put all your eggs in one basket, have another one.
#
India could be another one.
#
So you've got to be clear, what is the strategy you're following?
#
If the lesson you learn is that the rest of the world is shrinking, therefore we should
#
shrink, then you go in one direction.
#
If the lesson you learn is the rest of the world is shrinking and is doing it in a manner
#
which creates opportunities for us, we should not be doing that, but we should be seeing
#
how we can integrate with whichever part of the world it's easier to integrate with.
#
I would certainly say that that should be our approach, but this is a strategic choice.
#
In 1991, that choice was very clear because the Soviet Union had collapsed, all the inward
#
looking stuff wasn't working and there was only one way to go.
#
I personally think we should still remain open, but I think we have to build an adequate
#
understanding because there are people who say this is just the old stuff you're parroting
#
and it's no longer valid.
#
So the second of those three questions kind of comes from what you just said that in terms
#
of that now it's still a live debate, it's no longer so obvious which direction should
#
we go and though I completely agree with you, I am all for openness and free trade and all
#
of that, but the question here is that earlier you spoke about how politicians should be
#
clear that they will be judged on their performance in certain areas, but I would argue that if
#
you look at the modern, if you look at the current times, that that link between governance
#
and accountability has broken down in the sense that politicians seem to have realized
#
and perhaps this was true all along to some extent or the other, that governance and electability
#
are two completely different things, that the whole game today seems to be a battle
#
of narratives, that governance doesn't really matter so much, people are apathetic anyway,
#
it's a question of what narratives can you build and in what direction you can take them.
#
And when you ally this with the notion that a politician's imperative is not necessarily
#
to do a deep-seated reform that will help the country 15 years later, but to do, because
#
his election cycle is five years or in the case of parties there's always some election
#
or the other around the corner, so their incentives are really to do things which are short-term
#
and visible and may be band-aids at best and not fundamental reform.
#
The classic example being that now it's become the rigor for parties to offer farm loan waivers
#
in elections and in times of deep distress, farm loan waivers may be a necessary anesthetic,
#
but they are nowhere close to the sort of structural reforms we actually need and which
#
you've written about so much in your book as well as one of those areas which was much
#
harder to tackle than the other areas.
#
So given political incentives and from these political incentives would then come the incentives
#
of the bureaucrats and the policy people within an administration because today what seems
#
to be happening is that you have a situation where our current Prime Minister has closed
#
himself off to any criticism and therefore the people he's gathered around him are people
#
who will only tell him what he wants to hear and what he wants to hear will be extremely
#
limited because his world view itself is so limited.
#
I don't want to put you into a situation to have to comment on politics because I don't
#
want to go into that awkward space, but just in terms of structurally how it works out
#
if you look at the incentives of everyone, suddenly there seem to be no incentives to
#
actually do the kind of deep rooted reforms that are still left and to orient India in
#
these directions that you mentioned towards openness, towards continuing with globalization
#
and so on and so forth.
#
So what's your sense of this?
#
Well, of course, I don't know what the situation is like inside government now, but I agree
#
with you, by the way, that all over the world, the political battle is now being fought on
#
competing narratives, that's fine, but the competing narratives are not anchored on
#
economic performance, not just in India, but everywhere and I think we just have to live
#
But I firmly believe that in a country like India, you cannot divorce yourself from the
#
I mean, whatever narrative you spin, if the economics doesn't live up to it, I don't
#
Nor is the government actually saying that.
#
I mean, for example, they're talking about, you know, we are going to have doubling, tripling
#
the GDP reaching five trillion, 10 trillion, now sooner or later somebody is going to ask,
#
And I think if you set your mind to asking that question, somebody must be saying, look,
#
this is an important part of our narrative, so we better do something about it.
#
In many areas, for example, there is a very strong assertion that we're going to do different
#
I mean, for example, on privatization, the official position is that we are going to
#
Well, I mean, they've got delayed.
#
Are they going to be just completely forgotten?
#
We have to wait and see.
#
So I see around the big narratives, many economic, if you like, touch points, which somehow or
#
the other, I think the political system will have to refer to saying, look, we said we'll
#
do this and we've done it.
#
And I think if you do that, then sooner or later, they'll have to work out how to get
#
I did an episode a few months ago with Shivam Shankar Singh, who worked in the BJP for a
#
while and then left and wrote a book about campaign politics and all that.
#
And he told me, and he also worked with Prashant Kishore in the election of Amrinder Singh.
#
So he's worked across parties.
#
But he told me about when he decided to leave the BJP and he said it was the day sometimes
#
well before the 2019 election.
#
So I'm guessing it must be 2018 or 2017, where he realized that the plank of the party was
#
going to be about divisiveness, about social issues rather than economics.
#
And when he asked why, he was told that, listen, we made a bunch of promises in 2014.
#
We did that on economics.
#
If we now continue with economics, they will ask us what happened to all those promises.
#
So we are going to turn away from that.
#
And we are going to instead turn away and talk about Mandir, for example, and talk about
#
those kinds of social issues, not literally Mandir Mandir, but you know, I'm using it
#
as a metaphor and turn away towards that and use that instead.
#
And my sense is that it's not that hard to do that.
#
Like after demonetization happened, which I think was the largest assault on property
#
rights in human history, when you see the number of people who got affected.
#
And I thought they will get hammered in UP, but they won comprehensively.
#
And part of it, of course, could be from the schadenfreude that people felt that, you know,
#
others better off the ladder.
#
Their perception was that they have also suffered, though that was not so much the case.
#
But I'm a little sort of skeptical about how much economics is really a part of people's
#
consciousness in this aspect.
#
I mean, you pointed out in your book about how when you were in the US working for the
#
IMF around 2003, 2004, when that election came about, from a distance, it seemed to
#
you that the India Shining campaign would work.
#
And the Vajpayee government, like you pointed out, there was a solid continuity.
#
On economics, they did good things.
#
You know, it was a reformist government.
#
We were moving forward.
#
So it didn't help them in the election.
#
Well, I mean, you know, obviously, as an economist, I like to think that some of the other politics
#
will ultimately come around to recognizing that whatever narrative you want to spin,
#
you can spin that narrative better if it's on the strength of good economic performance
#
rather than bad economic performance.
#
And you know, for a country of our scale and size, I remain of the view that the narrative
#
And therefore, moving ahead, people will look at that.
#
Look, the biggest thing right now, I guess, inflation is a huge problem currently.
#
And I'm sure that people are not thinking that inflation doesn't matter, we'll just
#
I think longer term employment is a big problem.
#
We're not getting nearly the kind of employment growth that we would like to have.
#
Most people would say that if we can achieve the kind of growth rate which the government
#
is currently talking about for the current year and maybe the year after, it will reflect
#
itself in the employment situation.
#
And if that happens, they'll be able to spin that as a narrative.
#
Now, this makes it important to get that kind of growth.
#
I mean, if we don't get that kind of growth, there's no way that the employment situation
#
can be spun out at all.
#
It's possible that economic deterioration doesn't occupy the center stage of political
#
debate because if economics is not going well, you can always debate something else.
#
But as the underpinning of what determines the way politics moves, being an economist,
#
I like to think that economics matters.
#
And I would therefore think that any government, whatever narrative they want to spin, would
#
be aware that it's a lot easier to spin that narrative if you've got a solid economic story
#
And they are telling that story, so it's not as if economic stories are being forgotten.
#
It's just that we have to wait and see what they look like a year from now or maybe two
#
I guess, you know, where you sit, you can see the longer span of history.
#
Sometimes it's easy to kind of get into the current moment and feel disheartened or depressed
#
But I guess if you just take a few steps back and you see the longer arc, then perhaps there's
#
Let's take a quick commercial break and at the other end of the break, we'll continue
#
chatting and I want to go back to your fascinating life story and to the teenage Montek Singhali
#
Long before I was a podcaster, I was a writer.
#
In fact, chances are that many of you first heard of me because of my blog India Uncut,
#
which was active between 2003 and 2009 and became somewhat popular at the time.
#
I love the freedom the form gave me and I feel I was shaped by it in many ways.
#
I exercise my writing muscle every day and was forced to think about many different things
#
because I wrote about many different things.
#
Well, that phase in my life ended for various reasons and now it is time to revive it.
#
Only now I'm doing it through a newsletter.
#
I have started the India Uncut newsletter at indiancut.substack.com where I will write
#
regularly about whatever catches my fancy.
#
I'll write about some of the themes I cover in this podcast and about much else.
#
So please do head on over to indiancut.substack.com and subscribe.
#
Once you sign up, each new installment that I write will land up in your email inbox.
#
You don't need to go anywhere.
#
So subscribe now for free.
#
The India Uncut newsletter at indiancut.substack.com.
#
Welcome back to The Scene in the Unseen.
#
I'm chatting with Montek Singh Aluwalia and we're going back now to the 1960s and to your
#
time in Stevens, which was very interesting because, you know, one has a public image
#
of you as someone who's a serious, stern economist and so on and so forth.
#
And at Stevens, you are just doing so much.
#
Like on the one hand, you've pointed out about how, you know, right from the time you, you
#
know, you were in DPS, you were doing really well in studies and how that kind of came
#
from your dad, the importance and you must have, you know, imbibed by osmosis.
#
But you're also very active in extracurricular activities.
#
You're debating in Delhi quite actively.
#
You later, you know, continued in Oxford and became part of the debating club there.
#
And you describe the two magazines in Stevens and one is a Stefanian, which you describe
#
as quote ponderous and somewhat pretentious, stop quote.
#
But the one that you enjoyed, you edited both, but the one that you enjoyed working with
#
was one called Cooler Talk and the Cooler with a K and remember this is the 1960s.
#
So it's such a cool name, especially back then where you write quote, Cooler Talk had
#
a snappy style and carried short pieces on current student life and events with irreverent
#
comments on prominent students.
#
We were careful to steer clear of criticizing the college authorities, but disparaging remarks
#
about the food were tolerated, stop quote and so on and so forth.
#
So paint me a picture of, you know, who the young Montaigne is at that time that on the
#
one hand, it seems that he's a party person and he's like doing all of these things.
#
He's debating, he's running magazine, he's taking the Mickey out of people.
#
And at the same time, doing exceptionally well in studies to the point that you eventually
#
just get the Rhodes Scholarship.
#
And I mean, your academic life, if one looks at it, is just absolutely stellar.
#
So tell me a little bit about that.
#
What kind of person are you?
#
What's having fun for you in those days?
#
Like today, a modern kid, you'll have your own idea of fun.
#
But what do you actually do?
#
What is the texture of a typical day when you're in college in St. Stephen's?
#
What's happening all day?
#
Well, you know, one important thing is that the things I was interested in, both debating
#
and cooler talk, didn't take up that much time.
#
I mean, if you were interested in theater, it would take up a lot of your time.
#
If you were interested in sports, it would take up a lot of your time.
#
But if you're doing the school magazine and debating, I mean, if you know how to speak,
#
et cetera, it doesn't take much time to do that stuff.
#
So I don't think these were conflicting things, but I did actually genuinely enjoy both cooler
#
talk and debating because, you know, I was a residential scholar.
#
So really, once the college teaching periods are over, you've got the whole day to spend
#
and a small group of people that you're constantly with.
#
It helps to be involved with them in extracurricular activity.
#
You know, those who did theater would just spend hours rehearsing.
#
In our case, we just met at the college cooler, chatted a bit and said, why don't you write
#
on this and I'll write on that.
#
And you went off and did something.
#
So it was actually quite, it was cool to use the correct word.
#
You make it sound so easy.
#
And what was, and you've also kind of spoken about how there was, there was discourse happening
#
I remember at one point how you called Meenu Masani and Meenu Masani came and gave a talk.
#
Because so much of his talk was so against the conventional leftist wisdom of the time
#
that people started protesting and he said, don't worry, I'm going to come back.
#
I'm going to debate with you.
#
And then when he does come back, the person debating him is Mr. Arun Shuri, who is then,
#
you know, a man of the left as it were.
#
And that's such a fascinating picture, a young Arun Shuri from the left debating Meenu Masani
#
and you're getting to hear that kind of mind speak.
#
Tell me a little bit about then how your view of the world begins to form in terms of worldviews
#
in the sense that initially, I guess it is so restricted because you don't have the internet.
#
All the knowledge of the world is not available to you.
#
What you have is in your syllabus and the available conventional wisdom around you.
#
You know, people like Hayek and Friedman are active, but you are not reading their works
#
at that point in time in the 50s and 60s.
#
So how does your worldview begin to form at that stage?
#
And how does it then evolve when you move on to Oxford?
#
Well, I think these speakers that we used to get, they would come after dinner.
#
And again, this was only the residential scholars who benefited from it, but it was a nice window
#
to the outside world where people would say things that are a little unconventional.
#
And in a way that reflects the fact that our courses were really quite boring.
#
I mean, I think I mentioned at some point that, you know, we were aware or rather our
#
teachers were aware that the issue that planning is always good was not uncontroversial.
#
I mean, there were people who had different views, but we were never taught that at all.
#
It would have been so much more exciting if they had said, well, you know, even if they
#
could have said, look, the consensus view is that this is the way to go.
#
But you know, it has this problem and you guys think about it and make up your own mind.
#
I mean, planning was good, raising investment was good.
#
Public sector was good.
#
It was just a undifferentiated mass of information thrown at you.
#
And these after dinner speakers, therefore, were a breath of fresh air.
#
And the students had organized that it wasn't organized by the college and they would invite
#
well-known people to some extent, I guess, since Stevens had a kind of a reputation as
#
So these guys would also come.
#
And I thought it was terrific.
#
And I'm totally convinced that people at that young age should be subjected to different
#
I mean, they should be told that, look, this is a conventional view, but there is another
#
You can, if you like, indicate to them that some of these other views are a little weird,
#
but let them explore it.
#
And I would say from that point of view, one of the marked differences between going to
#
Oxford and being in St. Stevens was that in St. Stevens, the formal teaching did not encourage
#
you to explore these alternatives.
#
It was almost as if the old joke used to be the guys who took the IAS exam in history,
#
that there were seven causes for the decline of the Mughal Empire and you had to say them
#
in the right sequence, where there was no effort to say, well, you know, there are different
#
views you can take on this and God knows which one is right.
#
And I wish we had had more of that in our formal education.
#
So how was Oxford there and you, of course, did the PPE, which is, you know, people say
#
that all the politicians of England are basically from that small set of elites who do the PPE
#
at Oxford and Cambridge and so on.
#
Because obviously the environment there is completely different.
#
You're not mugging up seven causes of the fall of the Roman Empire.
#
You're actually encouraged to think about stuff.
#
And I will just, you know, you've named a few people who gave lectures to you at the
#
time like Hook Trevor Roper and one of my heroes, Isaiah Berlin, you know, it just would
#
have been so mind boggling for me to actually be physically present at a lecture by him.
#
Because it seems to me that A, it must have been really mind expanding and how are you,
#
how do you then begin to get shaped into, you know, looking at the world in the way
#
No, I think that was extremely mind expanding.
#
I mean, one simple thing was that, you know, you didn't have to go to any particular lecture.
#
I mean, there were a whole bunch of lectures and there was a course and you had tutorials.
#
You could technically do your exam based on your tutorial work and go to a completely
#
different set of lectures.
#
It wasn't the case that you're doing PPE, how come you're listening to a historian?
#
And I think that was a terrific degree of flexibility.
#
It's not that one used it all the time, but you know, the very fact that you could choose
#
whose lecture you wanted to, even in economics, I mean, for example, John Hicks was one of
#
the people who lectured, possibly the worst lecturer in the world.
#
You know, I mean, he was stutter, stumble, but you just wanted to hear the great man
#
Of course, you read his book separately and I think I enjoyed the academic side of Oxford
#
In fact, my only regret in a way is that I didn't do enough, didn't take philosophy
#
I mean, I sort of slightly resented the fact that I had to do P, P and E. I didn't mind
#
the politics because that was interesting, but I think when I think back on it, if I
#
paid more attention to philosophy, I might have had a better analytical understanding
#
of how one thinks than I do today.
#
But I was very much into, you know, let's get the useful stuff like economics and philosophy
#
is neither here nor there.
#
And who are the people who had the most influence on you in terms of the kind of thinkers ever
#
and perhaps in terms of shaping the way that you think?
#
Or even during that period.
#
I mean, I imagine whenever, you know, you feel you're being formed in a sense.
#
Well, mostly it was in the areas of development economics.
#
I think one of the influential people in Oxford at the time was Ian Little because he'd done
#
a lot of this project analysis and how do you actually decide that a particular project
#
And I thought that he raised some extremely interesting things which we should have been
#
taught about much more than we were earlier.
#
And you know, it led you to question the value of a lot of what you're doing.
#
For example, one of the simplest things he said was that when you value a project, you
#
should value everything at world prices.
#
So if you're a steelmaking company and you're taking iron ore and producing steel, the value
#
you're adding is the international value of the iron ore subtracted from the international
#
And actually when you did it that way, you found that a lot of the Indian steelmaking
#
companies were extremely inefficient.
#
They were just good iron ore manufacturing companies.
#
The value they added at international prices was actually very low.
#
And had they paid themselves, paid for the iron ore, what the iron ore would have commanded
#
in world markets, they'd all be making losses.
#
So it's an interesting way of thinking about, you know, what is a productive enterprise
#
as opposed to an unproductive enterprise.
#
And Ian was one, there was a lot of work going on at the time in Latin America.
#
You know, why is Latin America, Latin America was that time a head of Asia in terms of development
#
and many of the ideas that later on were seen as traditional development ideas came out
#
of Latin America, Raoul Prebish and people like that, that, you know, basically the terms
#
of trade are rigged against you and you shouldn't be therefore trying to export primary commodities.
#
You should always be adding value.
#
And that led naturally to protecting manufacturing, which is in a way what the United States had
#
So historically, I mean, countries have tried that and done well, and the Latinos were saying
#
this is what we should be doing also, a very influential set of ideas in economics.
#
And you know, I think the whole notion of development consisting of people moving from
#
low productivity occupations to high productivity, sort of the Arthur Lewis type moving from
#
agriculture to industry, so how do you create an environment which facilitates that move?
#
That was, I think, one of the interesting things.
#
And you know, around that time, there was a lot of very negative thinking about Indian
#
Lots of people saying that, you know, India will never be able to feed herself, club of
#
Rome type of people, which proved to be comprehensively wrong.
#
So it's nice when you go back, it's not everything that's fashionable at the time, that in retrospect
#
So I think those are some of the big, big things that I can recall offhand.
#
And do you recall any light bulb moments where something happens or you read something or
#
you listen to a lecture and the way that you look at a particular thing changes completely?
#
Like a light bulb moment for many people that I come across is often that first moment where
#
they realize a positive someness of things and you immediately realize why markets are
#
great and why trade is great and all of that.
#
Or for me personally, a light bulb moment is understanding spontaneous order, you know,
#
how languages and societies and economies and so on can function that you don't need
#
a top down benevolent dictator, so to say, but the price system can work and coordinate
#
all of that within the economy.
#
So do you remember any light bulb moments like that where suddenly you just see the
#
My guess is that for the period I was in Oxford, I think some of the ideas that Ian Little
#
was working on that which are closely related to the importance of keeping an economy open
#
and not just valuing things according to artificially high values resulting from excessive protection
#
I thought that was a bit of a light bulb moment because it was a way of thinking that had
#
not been I had not been exposed to at all.
#
You know, at that time, the conventional view used to be that look, foreign exchange is
#
So you should have a shadow price on foreign exchange.
#
This is a different way of saying the same thing.
#
The issue is not that foreign exchange, but world prices are very important.
#
And you should see what value you're adding measured at world prices.
#
And I think that stayed with me and I saw its importance in many, many other areas also.
#
Linked to that was, and this was probably a little after I had left Oxford, a kind of
#
a realization that Southeast Asia was actually doing incredibly well.
#
You know, that wasn't the case in the early 60s, but for a while it was mainly the gang
#
But then during the 70s, it was very clear that our performance was deteriorating and
#
I had left Oxford by then.
#
Our performance was deteriorating, whereas the Southeast Asian, East Asian and Southeast
#
Asian countries were actually improving.
#
And that was something that had, to me, a very important signal of something wrong in
#
And later on, therefore, I was very inclined to believe that the excessive protection and
#
so on that we were locked into was actually the source of the problem.
#
And the interesting thing is that, you know, Jagdish Bhagwati and Padma Desai in their
#
book documented this very extensively.
#
And it's interesting that, I mean, the book was written after they left India, but, you
#
know, somehow it did not have the impact in India that it should have had.
#
I mean, it's only in 1991 that some of those ideas got reflected in policy.
#
I discovered an interesting phrase a couple of years back, which, you know, explains a
#
lot of things which are wrong with how we often think about the world and the phrase
#
I did an episode on this with Alex Tabarrok and Shruti Rajgopalan, which was in the particular
#
context of policymakers will take a policy that is working somewhere else in the world,
#
transplanted to India, and it obviously won't work because local conditions are completely
#
And conceptually, if I take a step back and apply it to other things, I think it can be
#
true of so many things.
#
So during the time that you were first studying at Oxford, then, you know, working at the
#
World Bank and so on during that entire period of time, were there times where you encountered
#
something in theory and you said that, wait a minute, the Indian reality is a little complex.
#
It may not quite fit there.
#
You know, in terms of, I think, people who study the world and then actually get down
#
to it to interact with it and do things in it often find that there is that gap they
#
have to bridge between the theory and the practice and the theory, the rarefied level
#
of ideas, you know, is one thing.
#
But when you get down and dirty, there's just so much else that you have to do.
#
Like one of the really interesting aspects of your book, which I was taking notes on
#
are the many points you made about how the imperatives of policy in India, which are
#
so unique and local and you have to take so much into account, which you will not find
#
mentioned in the textbooks as well.
#
Like were there areas where something that you've learned?
#
When does it begin to clash with the real world?
#
Is it when you're working at the World Bank after Oxford or, you know, do you read something
#
from a book and think about, okay, let me place that in the Indian context and try to
#
So you know, tell me a little bit about that sort of.
#
I think it's actually very important.
#
You know, I don't like to think of distinguishing between theory and as rarefied and reality
#
because rarefied theory only sort of spells out what are the constraints under which the
#
If you're going to apply that somewhere, you ought to think about whether those conditions
#
hold and if they don't hold, it's not going to work.
#
But you know, my feeling is that you really only perceive that when you're actually working
#
in your own country on policymaking.
#
Even in the World Bank, after all, you're observing from outside, you're visiting very
#
briefly and your interaction with governments is not necessarily one in which they're telling
#
you exactly what they think.
#
So I think the point is very important.
#
Everybody should think when they're trying to apply something that in theory this works
#
because if you do A, then somebody else will do B and that will lead to reaction C. And
#
is that going to happen in this particular situation?
#
I think that I began to see those kinds of things only when I was in government.
#
I don't think the World Bank, I mean, in the World Bank, you read about these things, but
#
you don't actually see it.
#
I mean, I'll give you a simple example.
#
You know, in those days, you had this completely ridiculous system where if you wanted to produce
#
something and you needed some import, you had to get the import cleared from what was
#
called the indigenous angle and also the essentiality angle.
#
So essentiality angle meant, do you really need it?
#
And the indigenous angle meant, why can't you just get it domestically?
#
I remember in a licensing committee meeting, there was some guy who wanted to produce electric
#
I can't remember whether I mentioned it in the book.
#
And you know, what he said was that, look, I want to make an electric iron and I need
#
to import steel of a certain thickness and the Indian steel is not that thin.
#
It just has to be one grade thicker and that's not suitable for an electric iron.
#
And around the committee, the guys from the steel ministry said, this is all nonsense.
#
You know, I mean, perfectly okay, iron will be a little heavy.
#
It struck me that, you know, this is why we never got producers who could actually produce
#
up to the quality they themselves wanted.
#
Because here was a guy who actually said, look, this is what I want to do and I want
#
to produce an electric iron that looked competitive and I need thin steel sheets of this thickness.
#
And the government fellow said, no, what does it matter if it's thicker?
#
End result, he's produced an iron, but he'll never be able to sell it because if that's
#
the kind of iron he's producing, somebody wants to look around who's a good manufacturer.
#
They would just say, look, this is all clunky stuff.
#
I mean, he was producing the ambassador of irons in a way and since we were doing that
#
to cars, it's not surprising that we were doing to irons too.
#
You know, I mentioned this in the paper that when Maruti came along and Maruti sort of
#
had agreed that they would indigenize at a certain pace.
#
So at one point they were importing the engines and then they had to sort of machine the engine
#
block domestically for which they needed machine tools.
#
So sure enough, they said, look, this is the kind of fineness we want and they'll have
#
to be imported from Japan.
#
The local DGTD, as it used to be called, Directorate General of Technical Development, they said,
#
no, we don't need to import this because HMT produces machine tools and HMT was asked and
#
said, of course we can produce it and they were asked, have you produced anything of
#
I said, no, but we are doing it for the Bajaj scooters and the Maruti chaps pointed out
#
that the engine of a scooter is very different from the engine of a car.
#
And to make the point, Bhargav, who was then the MD there, he actually got the two engines
#
brought into the minister's office to show him that, look, this is the engine these guys
#
This is the engine we need.
#
They can machine this one, but they can't machine this one at all.
#
Now, I would have thought that this shouldn't have been necessary.
#
And you realize then that, you know, while it's very easy to say we will only allow the
#
import of what is really essential, in the end, it's a highly arbitrary decision and
#
And Maruti were just very keen.
#
Krishnamurti, who was then the head of Maruti, was very particular that there should be no
#
decline in quality because we started producing the engine block domestically.
#
And he said that, look, I'm trying to be responsible for the quality of the Maruti.
#
Don't kind of get me stuck with a machine tool which doesn't make sense to me, whereas
#
in the system, the tendency would have been to do that.
#
And I think this is an example of why you need to be open, why producers must be given
#
the choice, because, you know, producers are not given the choice.
#
They're not responsible for the end result.
#
The moment you force the guy to buy a different machine tool from what he wanted, he can blame
#
non-performance to the fact that you didn't let me get what I wanted.
#
So it creates a culture that just is not consistent with producing good quality.
#
And several meetings that I attended of the licensing committee convinced me that never
#
under any circumstances should we have import licensing.
#
I mean, if you want to do some protection, do it through duties.
#
And the reason that makes sense is that when you do it through duties, sooner or later,
#
people will start asking the question, how come you want such a high duty protection?
#
And if the user on the other hand feels that it's worth it to import even at a higher duty,
#
you won't be easily able to persuade the ministry to jack up duties to unreasonable levels.
#
Whereas through this licensing system, I mean, it's completely non-transparent.
#
You've got another great example of this in your book.
#
Both these stories are in your book, of course, the Steele story and the Maruti story.
#
And you also relate an anecdote which Narayan Murthy told you in 1983.
#
And you're right in that quote, Infosys wanted to import a data general MV8000 computer with
#
three removable disk drives with a capacity of 200 MB each.
#
They had to make several trips to New Delhi to get the import license.
#
By the time they got the license, a new disk drive with a capacity of 300 MB had become
#
Naturally, they wanted to import the latest model.
#
However, the original license specified the model number and several additional visits
#
to Delhi had to be made to modify the license, stop quote.
#
And the kind of absurdity which was just so incredibly sort of commonplace at the time.
#
So before we come to your time in government, I think still a decade and a half to kind
#
After Oxford, you go to the World Bank.
#
And at this point, when you're at the World Bank, how do you see the rest of your life
#
Like, are you thinking that, okay, you know, I'm in the World Bank and things are going
#
And, you know, I'll be an economist here and this is sort of my circle, I found my groove.
#
Or at the back of your mind, somewhere, is there a thought about going back at some point?
#
Because in your book, of course, you write that the two sort of the two seminal moments
#
in your life were meeting Ishar and then coming back to India.
#
And the two are, of course, related because you decided that you'd rather have your kids
#
grow up here and all of that.
#
But before that's happening, when you're a young economist at the World Bank, you know,
#
Well, when I was a young economist, before I met Ishar, my idea was I'll be there for
#
three or four years, pick up some experience, move back.
#
We were kind of courting together for a year or so, decided to get married.
#
That of course altered the timing of coming back, but she was also working and she needed
#
So that stretched it out by a few years.
#
I must say that we enjoyed those few.
#
It's not as if I was yearning to get back, happily traveling around the world, very comfortable
#
life, good salary and so on.
#
But I was quite aware that as soon as she got her PhD, which she actually did in 76,
#
I think, that's when we would start thinking of moving back.
#
And that's what we did.
#
I got a job offer from the Ministry of Finance.
#
I think something in 1977 or early 78, Ishar was our oldest son had just been born in 77.
#
So we wanted a little more time and they agreed that I could come one year later.
#
And so I went and joined the finance ministry in 79.
#
As soon as kids arrived, I mean, Ishar was quite clear that, you know, she wanted to
#
So I mean, that, you know, when you have two people, both have a job, et cetera, you can
#
sometimes have a situation where the two don't have the same view on when to move.
#
As it happened in this particular case, the two were in the same direction and I had no
#
problem heading back, having spent more time at the bank than I originally thought I would.
#
So my next question actually comes from something that I read in Ishar's book, which is also
#
a beautiful book and a quick read.
#
And one of the things that she says is that when she joined presidency there, there were
#
24 boys and four girls in the class.
#
And if a boy would happen to reach the class first, the girls would wait outside till the
#
And if a girl happened to enter the class first, the boys would wait outside till the
#
And later she points out that when you, the first time you're dated, you took her to lunch
#
The thing she points out that impressed her was that you treated her as an intellectual equal
#
and thereby implying that most people did not, that most people had a sort of a different
#
And when, so my question to you is really about how you have seen notions of gender
#
evolve over those decades in two contexts.
#
One is a context that back then there simply would not have been so many female economists.
#
It would have been a male dominated workplace everywhere.
#
And I guess a natural attitude, even today, the natural attitude honestly is to talk down
#
to women and to interrupt them all the time and all of that.
#
And back then, I guess this must have been even worse.
#
So one, it's, you know, is this something that you consciously thought about?
#
Because it would have been reflexive for most people to actually behave in those ways without
#
thinking that it's odd in any way.
#
You know, like one metric that I forget which guest of mine, so I apologize to her, but
#
I've spoken about is I think Shreya Bhattacharya mentioned it and I've also read pieces on
#
this is Shreya mentioned and she works with the World Bank and she said that whenever
#
I would go to, whenever I go to meetings, if there's a man with me, they're always talking
#
They're never talking to me.
#
And somewhere else, somebody pointed out a metric that just take a man with you.
#
If they're talking to the man, they're not the kind of person you deal with, where you're
#
just uncomfortable talking to a woman.
#
So one, at this aspect of it, how much has the field changed in all this time?
#
Because women obviously bring different perspectives and that diversity helps in just sharpening
#
And the other perspective is that we often tend to, you know, a point that sort of Pranjal
#
Pandey and Amitabh Bhandare have made at different points in time while on the show is that for
#
every problem that there is in India, there is an aspect of it, which is an even deeper
#
And that's the role of gender.
#
So if you look at agriculture, what women farmers go through is there's a whole separate
#
layer of suffering that is involved in education, a whole different layer of scarcity that girls
#
go through as opposed to boys and so on and so forth.
#
And as an economist, it would seem that at one moment in time, you're obsessed with problems
#
that are fundamentally men's problems.
#
When you're counting GDP, you're looking at what men are producing and not perhaps unpaid
#
labor in the household and so on.
#
So these are really two separate questions, so I apologize for inflicting them on you
#
But one, what was your personal view towards the way gender was evolving and how much has
#
And two, that component of gender in thinking about the world, what do you think about that?
#
Well, you know, I was of course very aware of the gender aspect simply because having
#
met Isha, she frequently made me aware that this is a problem.
#
And I could recognize it's a problem.
#
I wouldn't say that I worried about it deeply, but I sort of recognized it, yes, you're right,
#
and hopefully it'll change over time.
#
You know, the awareness of what a problem it is from a development point of view, this
#
was a bit slower in coming, and I wasn't fully aware of the extent to which these biases
#
I mean, you know, if you're a woman farmer, it's not easy to get a loan, especially for
#
example if the land is not in your name.
#
And you could multiply these examples.
#
So I would agree with the proposition that the gender aspect is another layer of problems.
#
And in order to understand the nature of problems, you got to appreciate the gender aspect much
#
And I think we were not, I mean, of course we were sensitized that we ourselves would
#
not discriminate, we do not think that women are inferior.
#
I don't remember, for example, ever talking past a woman in occasions when I had to interact
#
with her professionally.
#
But the honest truth is that there weren't too many such occasions because the number
#
of women was very, very limited.
#
But I think after coming to India, more than that actually, even maybe as recently as in
#
the planning commission, I was made much more aware that there are really deep problems
#
that we have to address.
#
I mean, for example, I early on came to the conclusion that if you're going to give cash
#
support to households, give it to the women in the household and not the men.
#
And it's interesting because a lot of people used to say that if you give it to the men,
#
they'll just drink it away.
#
And if you give it to the women, they'll just beat up the women and take away the money.
#
I mean, if you give it to the women, actually the men are sufficiently civilized that they
#
But it's true that if you give it to them, they may gamble it away or throw it away or
#
So I think the point that these women have made about gender is more important than we
#
And certainly, I mean, you know, later on things in this world of in a woke world, the
#
extent to which women experience sexual harassment, this was just not evident there.
#
I mean, maybe they weren't enough.
#
I mean, not enough women.
#
But later on, you know, as I go to talk to women, they would point out that this is true.
#
So tell me now a bit about, you know, coming to India, for example, you've pointed out
#
that, you know, you wanted to start a family career wise.
#
It was just the right time, right place.
#
Both of you have written in your books about that legendary meeting with Udham Singh Ji
#
at Khyber restaurant, where he introduced you to Manmohan Singh for the first time,
#
who was then teaching at the Delhi School of Economics.
#
And Manmohan took a liking to you guys and said, yeah, you should come.
#
So tell me a bit about that and how that process played out in your head and all of that.
#
Well, I think I won't be able to add anything.
#
Since you mentioned it, it was a very interesting occasion when Udham wanted to take us out.
#
I didn't realize that he was going to call Manmohan Singh also.
#
We got to meet at that time a distinguished academic, but I had no idea that this guy
#
was going to become ultimately a very important determinant of where I went to work.
#
And you know, it was just like a normal kind of dinner.
#
The thing I regret is I've never been to the Khyber restaurant since then.
#
I don't know if it still exists, by the way.
#
It wasn't at that time much of a restaurant, but it was the nearest thing to the university
#
that Udham could think of.
#
And it was my first exposure not to a government person, but to a senior academic in the Delhi
#
And once you sort of came back and you joined government, what was that period of adjustment
#
Because you come from a very different environment where you're dealing with ideas and I presume
#
you're reading papers, having intellectual conversations.
#
Here you're kind of on the ground in the middle of this machine and everything could simultaneously
#
seem daunting and frustrating and all of that.
#
So tell me a little bit about, you know, your early times in government and what that was
#
Well, it was, you're right, it's very different from something like the World Bank because
#
in the World Bank, you're making assessments of other countries, so you're preparing reports
#
In the Ministry of Finance, you're actually processing multiple proposals which go through
#
different ministries and you get an opportunity to comment.
#
You don't get an opportunity to write a whole essay.
#
I mean, a proposal comes up in a file and you have to make a comment on that particular
#
It takes a long time before you realize that, look, you've got to limit yourself to what
#
is relevant and how can you push it in the right direction or not.
#
You know, half the problem is that you think that most of the proposals that have been
#
put forward belong to a world which they shouldn't have existed to begin with.
#
But you can't say that I'm not going to have a view on this particular action.
#
So that takes a little bit of doing.
#
I think the other thing is that it was quite a collegial world.
#
I mean, I had my doubts how easy it would be to interact with, say, other IAS officers.
#
But you know, we would, at the Joint Secretary level, Economic Advisers and Joint Secretaries,
#
the same level, we would occasionally meet for lunch in each other's rooms, bringing
#
along our dabas where there were no nice cafeterias to go to.
#
But you spent about an hour chit chatting about what's happening, about politics, where
#
things are going and so on.
#
And that was a very important part of sort of becoming part of the team.
#
And I felt that if you invested a bit of time in it and you didn't kind of throw your weight
#
around saying, I'm the economist and you must listen to me, they were quite willing to listen
#
to you as one of the team.
#
But it is time consuming because you have to invest in becoming part of the team.
#
Now, one of the interesting things in the government, of course, is that when you come
#
in as an economist, you have some existing fellows there.
#
A year later, one third of them have moved on.
#
To the new fellows, you're part of the existing apparatus, so you're an insider.
#
I mean, it's an interesting way in which the system works.
#
I didn't find it difficult at all to get on with people.
#
And I think I made a lot of friends and colleagues and many of them moved in time with me.
#
I was younger than them.
#
So one of the consequences of this was that by the time I became secretary, most of the
#
others who became secretary retired within two or three years, but I had several years
#
So that gave me a big advantage of just being around longer than the others.
#
You know, while writing about that period of the ministry, you speak about the three
#
things you did, which is you helped MPs prepare parliamentary answers, you helped on notes
#
for inter-ministerial meetings, and you worked on the economic survey.
#
But you described the inter-ministerial meetings as the most important part, and there's this
#
lovely passage where you say, quote, Mao Tse Tung famously said that gorillas must move
#
among the people like fish and water, difficult to detect, but working from within.
#
It was surprisingly relevant advice for an economist and government in those days.
#
It did not always work if strong vested interests were involved, but it was an essential first
#
On reflection, I think my participation in inter-ministerial committees had more impact
#
on policy than anything I might have put in the economic survey, stop quote.
#
And I was struck by this because, like one, of course, I have an interest in guerrilla
#
warfare and I've read up a lot about that.
#
But in this context of moving like a fish among water sounded really fascinating to
#
me and then it strikes me that once you realize this, does a significant part of it also,
#
does a significant part of your job not just have to do with thinking about policy, but
#
thinking in a strategic way about getting the kind of outcomes that you want within
#
I mean, I think this is where the big problem, you know, I discovered very early on that
#
the economic survey was an interesting document to write in the sense that people looking
#
at what's going on would regard it as a definitive statement of the government's view.
#
But it wasn't the way to make policy because it was well understood that you could have
#
all kinds of homilies in the economic survey, but nobody ever thought that they necessarily
#
had to be reflected in policy.
#
So if you want to have an impact on policy, you want to persuade people in these interministerial
#
meetings to think a little differently.
#
And I found people were really quite willing to entertain different thoughts.
#
Very often they would say, well, that's not going to work because, and then if you could
#
argue, no, no, it's not that simple.
#
But as long as you don't have a kind of, I'm the expert, listen to me type of attitude,
#
you're just part of a team.
#
And the thing that I found missing and which led ultimately to my writing the M document
#
is that, you know, very, there's very little opportunity in government to take a holistic
#
Because every ministry works within the confines of its terms of reference and the ministry
#
of commerce, for example, is responsible for providing import licenses to exporters and
#
also to give in those days subsidies.
#
So their idea of promoting exports invariably was let's give more import licenses in an
#
easier way and let's give more export subsidy.
#
The most important thing for exporters is the exchange rate.
#
That's not the function of the commerce ministry.
#
So commerce ministry not only didn't worry about it, but very rarely said anything about
#
And occasionally if they said, they will just say, you must have a realistic exchange rate,
#
but that didn't mean anything.
#
That's where I think I found that we need periodically somebody taking a holistic look
#
and saying, look, if this is what you want, these are five things you have to change.
#
And these things are interrelated.
#
I mean, changing one is not going to do anything.
#
I make the point in the book, for example, all industrialists felt that industrial licenses
#
should be got rid of because if they want to expand, they should be allowed to expand.
#
But the point is if you didn't get rid of import licensing, everybody who wanted to
#
expand would ask for a import of capital good permission, which would be given by the commerce
#
So instead of queuing up in the front of the industry ministry, they'd all queue up in
#
If on the other hand, you got rid of import licensing and freed the exchange rate, then
#
the exchange rate would depreciate if there was too much demand for import.
#
You wouldn't have a bunch of officials saying there's too much demand.
#
The system would actually work together.
#
It would have been useless just getting rid of one of these things and not doing the other.
#
And that I think is, I drew special attention to this point in the M document.
#
And I was lucky that a year later you had the crisis and we were able to get a lot of
#
And I'm sure this problem must be recurring in different contexts all the time.
#
That each ministry, if you ask a ministry to do something, it almost never says get
#
some other ministry to stop making it difficult.
#
They look at what instruments they've got and how can they use those to promote something.
#
You've got a lovely quote in your book, which I'll read out again, where you wrote quote,
#
we had all learned to students our particular policy that made sense in a first best situation
#
where all other policies were properly deployed may not work in a second best situation where
#
other policies were suboptimal as developing countries suffered from innumerable constraints.
#
The policy making had to be of the second best variety.
#
And I was particularly keen to observe how this worked in practice, stop quote.
#
And what you sort of mentioned about departments working in silos.
#
So you are in a particular department, somebody comes to you, you're not stepping back and
#
seeing the bigger picture.
#
You're not incentivized to step back and see the bigger picture, you just do what you can
#
and therefore you are tackling just one little cog and that doesn't really change anything.
#
And I would imagine that one of the ways that you are able to see the bigger picture is
#
because you're an outsider.
#
You're not in that sense, a career bureaucrat, an insider, IS officers anyway tend to be
#
So their appreciation of the nuances of anything would necessarily be limited, not their fault,
#
but if they're generalists, that's how it is.
#
So one was being an outsider, something that helped you sort of get this bigger picture.
#
And in that case, would you recommend that more outsiders join government in specialized
#
Or was it nevertheless a little lonely because you would then have been looking at the world
#
in a way that most people around you would not have shared.
#
And you would have also then to be careful and strategic about when to express a particular
#
point of view that may clash with the way things are done.
#
That's a tough question to answer.
#
I mean, you know, I think the short answer is that you can't run complex ministries just
#
by generalists, that's certainly true.
#
When you say outsiders, I mean, you mean people with specialist expertise in something.
#
People with specialist expertise and also someone who's from outside the system.
#
You haven't worked in the government all your career.
#
You've been in the World Bank, you've done your other things, and then you've come.
#
Well, in any system, it's a good idea to bring in some outsiders.
#
I would have said that the thing that was most missing is that, you know, given that
#
many things now have to be done basically by the private sector, government needs to
#
have a much better understanding of what are the constraints of the private sector and
#
what is it that will really make them do what you want them to do.
#
It's not always easy to find out because talking to a private sector guy, I mean, he's
#
constrained by whatever is good for his firm, not necessarily going to give you what is
#
best from the market point of view of the market as a whole.
#
So I think policy has to be opened up and you've got to have interactions between different
#
stakeholders in which I think generalists can also play a role.
#
But we need far more consultation, doing and throwing and that sort of stuff in the process
#
I mean, I felt that I enjoyed it, to be honest.
#
I mean, lonely would mean not having friends.
#
Not in a social sense, but in a sense of not many people who perhaps agree with your ideas.
#
No, I mean, maybe I was lucky, but I found that many people actually agreed with those
#
ideas, but they were caught in a particular silo.
#
Being an economist, in some sense, I could assume that I can kind of think more broadly.
#
But technically, you know, there was the Planning Commission, you now have the NITI Aayog.
#
So there are institutions that are cross-ministerial and there's no reason why they shouldn't be
#
used in order to get that kind of an overview, which goes beyond the requirements of a silo.
#
You know, one distinction that you made, which is perhaps relevant to this period in time,
#
though you made it in the book with reference to the post-91 period and to Narsimha Rao
#
and Manmohan Singh, is the distinction between reform by stealth and gradualism, which you
#
point out, they are sometimes often confused for each other, but they are different.
#
And you write, quote, gradualism implies a clear indication of where we are heading,
#
but with an acceptance that the pace of change will be tailored to make it more acceptable.
#
Reform by stealth is essentially opportunistic.
#
You point in a broad direction without committing to any particular pace of change and then
#
take a step forward whenever it is politically opportunistic to do so.
#
The trouble with such an approach is that it can never create a broader constituency
#
for reforms looking ahead.
#
Dr. Singh was a genuine gradualist, he conceptualized a complex and multidimensional structure of
#
reform and consistently articulated the need for it while acknowledging that change must
#
be made slowly to be digestible, stop quote.
#
In the 80s, before everything has happened, you're in the 80s, you're in these ministries,
#
government is what it is, massive in its scope and not nearly as strong as it should be in
#
the things that it does.
#
And it's this bureaucratic machine and you're trying to be a fish moving among water.
#
How do you play the long game?
#
Did you have a sense of yourself playing the long game and saying that these are the changes
#
we want, we've got to look for opportunities, we've got to create those opportunities if
#
possible, we've constantly got to figure out the best way to get these messages out either
#
to the politicians we interact with or within our department or to the people at large wherever
#
A lot of this stuff one thinks about in hindsight and one thinks about it in a post-facto way.
#
But at the time, how were you guys thinking about it?
#
Well, I don't think I was taking a long view of how we're going to do it because during
#
the period when I was a joint secretary or even an additional secretary, I wasn't in
#
a position where I'd be able to think of orchestrating the whole thing.
#
I was just fortunate that in 1990, sorry, in 89, when the Congress government under
#
Rajiv Gandhi was going in for an election, I had a very good boss that was B.G. Deshmukh.
#
The cabinet secretary later became secretary to the prime minister and he came from Bombay,
#
his chief secretary of Maharashtra.
#
And you know, it's interesting that unlike the other senior officials, he was not actually
#
anti-private sector and he had a genuine sense that look, the private sector has a lot of
#
capabilities and we should be using them more.
#
And you know, he and I tried to get a few things done and he was always supportive.
#
I remember for example, you know, we had in the case of cement, we'd had a gradual liberalization
#
increasing the market share of cement year by year.
#
And towards the end of the Rajiv Gandhi government, one area which was controlled was aluminum.
#
I mean, there were four producers and Nalco had just come in with a big production capability.
#
And so there was talk about should we do partial decontrol, et cetera, and so on.
#
So I had a discussion with Deshmukh and I said, look, that's what we did with cement.
#
It took four or five years.
#
I think in this one, there's enough supply, we can just decontrol.
#
I mean, the private sector guys who may not like the fall in price, I mean, they've had
#
a pretty good time so far, so let's kind of do it at one go.
#
And Deshmukh supported that when we got Rajiv Gandhi to agree that we could go and discuss
#
with Fotidar whether this is feasible or not.
#
And when Fotidar saw both Deshmukh and me coming in, he sort of assumed that the PM
#
must have approved it because we persuaded him that look, this is the thing we should
#
If I'd done it, it wouldn't have counted.
#
But if I'm doing it and Deshmukh is doing it, that for him, for Endi Tiwari would have
#
counted, sorry, for Fotidar would have counted a lot.
#
And Fotidar had no sort of ideological preoccupation.
#
He felt these two guys are saying it, Rajivji must be in favor, said, of course, let's do
#
And there was no problem at all.
#
So this was a very good case where the country was ready for decontrol mainly because a new
#
producer had come in producing a whole lot of things, Nalco.
#
And the existing guys, some of them may have had some marketing difficulty, but there was
#
Nobody said prices are going sky high and all this kind of stuff.
#
I mean, you need to judge when the time is right.
#
This happened to be a case where it was a silo decision and all we needed was the silo
#
taking the right decision.
#
But when it's a broader one, it becomes more complex.
#
And that's really what one needs to, government should be constantly aware of the complexity
#
of what it is doing and therefore subjecting everything to an internal but critical look.
#
How to create a capability of internal critical assessment is very important because governments
#
typically don't like criticizing other ministries.
#
So you need to build that capability very consciously.
#
You mentioned Mr. Deshbhuk and one of my favorite quotes in the book is, after the V.P Singh
#
government came and you were kept on, both of you were kept on in the ministries where
#
Quote, Montek, Delhi aisa shahar hai jaha kap badalte hai lekin chamche nahi, which is
#
untranslatable because of the dual meaning of chamche as it were.
#
And two more quotes which speak to your point about the complexity and interrelated nature
#
And one is IG Patel telling Rajiv Gandhi around the time Rajiv takes power, IG Patel tells
#
him quote, Mr. PM, there is a lot of interest in what you are doing on the economic front.
#
If I may offer some advice, please make a bonfire of all industrial controls.
#
And the other quote which speaks exactly to this point that you made is LK Jha speaking
#
to Rajiv Gandhi and saying, quote, Prime Minister, the Indian economy is like a vehicle with
#
many brakes pressed fully on, releasing one or two brakes will not make it move.
#
You have to release many more to get results.
#
So it's not as if there wasn't realization of this.
#
You know, obviously a bunch of you knew, I mean, this is of course a quote from Jha to
#
Rajiv Gandhi knew as well, right?
#
But there was some reforms, momentum under him, which kind of died down and for a bunch
#
But what was that period like?
#
Was there a sense of excitement that, yes, there might be movement, we can get some of
#
these things done and so on.
#
I mean, I think there was a lot of excitement because first of all, you had a very young
#
I mean, he was about the same age as I was.
#
So when you're there and you suddenly see someone as prime minister your age, you know,
#
that always becomes a little special.
#
And I think he had talked about, we must bring India to the 21st century.
#
A lot of younger people thought, aha, big changes are coming.
#
You know, after his government ended, Veer Sanghvi and Avik Sarkar interviewed him in
#
a very frank interview and they asked him that, look, aren't you a bit disappointed
#
that you really didn't get done all the things you thought would be necessary?
#
And he was very frank and said, why?
#
And he was quite frank.
#
He said, you know, I think lack of experience.
#
I mean, and later on in other contexts, he had said that if he got another chance, he
#
would do it differently.
#
You know, the fact is that he started with a couple of people who were very pro the idea
#
of doing things differently.
#
And in the first two years, their partnership was really very productive.
#
But in the rest of his cabinet, I don't think it was a single person who shared his ideas.
#
And you know, if you look at what happened in China, I mean, Deng Xiaoping, I mean, first
#
of all, he had huge experience.
#
Rajiv Gandhi had almost none.
#
But even Deng Xiaoping took a long time to weed out, build a team of people supportive
#
of his ideas so that things could move forward.
#
And it was quite remarkable because he, after all, he completely reversed the entire direction
#
given by Mao Zedong without once criticizing Mao Zedong.
#
So in a way, that was part of the problem in India that since Rajiv Gandhi was succeeding
#
another Congress government, it wasn't a case where you would blame the previous government
#
But you still have been able to define an agenda of change.
#
And I think to do that, you need insiders, companions in the political sphere.
#
Now, in my book, I say that, you know, politics got the better of him.
#
Once the workforce thing exploded, the whole political situation changed, and he didn't
#
really have much time to think about all these things, nor any conviction in his cabinet.
#
So these ideas sort of had to wait for a different time and a different situation.
#
So during this period of time, there is sort of momentum building up, at least in terms
#
of ideas, towards what will eventually happen.
#
You know, Rakesh Mohan has his note of 86 internal discussions are happening.
#
And you talk about the M document, which I have heard, you know, so many people regard
#
as absolutely seminal, which you came up with in 1990 and was, of course, widely criticized
#
at the time by the left and it's amusing to read those today.
#
Tell me a little bit about the M document, how it came about and, you know, and a brief
#
sense of what its contents were.
#
Well, you know, it began when the election was going on.
#
And Deshmukh had said to me, why is it that we're not able to get our ideas translated
#
into functioning policies?
#
And I thought about it.
#
And I said, the reason is that we don't take a comprehensive look at what is needed.
#
We just tell ministries to do something which happens to be in their area.
#
But what is needed to get that done involves many other ministries and nobody's taking
#
a comprehensive look, saying, look, this is what's done.
#
So he said, why don't you write a note?
#
And if Rajiv Gandhi comes back and he's reelected, we'll give it to him.
#
So I started working on such a note.
#
Well, of course, Rajiv Gandhi didn't come back.
#
And as you record, as you report, you mentioned earlier, contrary to our expectations, both
#
Deshmukh and I were continued under V.P.
#
Singh went to Malaysia and I was part of this was some Commonwealth heads of government
#
meeting and I was part of the team.
#
And he said to me that, you know, I'm really struck at how much progress Kuala Lumpur has
#
made because I had come here in 1973.
#
I mean, this is he's going there in 1990.
#
In 1973, as deputy commerce minister and has really made huge progress.
#
And I said, you know, that's absolutely true because I used to visit here in the early
#
70s from the World Bank and it's now unrecognizable.
#
So he said, why do you think that's true?
#
I said, because they've done reforms and we don't want to do reform.
#
He said, then you write me a paper on what we should do.
#
So I'd been working on this other thing.
#
I quickly polished it up, gave it to him.
#
You know, I have a feeling he understood that this was necessary.
#
But he was, of course, running a very shaky government.
#
But he had the he had sufficient conviction to say, send it to the cabinet secretary so
#
it can be discussed in the committee of secretaries.
#
He sent it to the cabinet secretary.
#
Vinod Pandey was then the cabinet's whom I knew.
#
And we know like the paper and he said, OK, we'll have a discussion.
#
You know, it's interesting.
#
You might think that Vinod was not at all.
#
But I mean, if you posed him with a kind of a holistic picture, he sort of says quite
#
We had this discussion.
#
And of course, in the discussion, I mean, Amarnath supported it, Varma, he was then
#
Finance Ministry was not supportive, but Madhu Dandavati was not in favor of all this liberalization
#
Planning Commission was not supportive because Planning Commission felt why is the PMO doing
#
Because we are preparing the midterm approach to the next plan.
#
So you're trading on our toes, et cetera.
#
And there was all this big discussion, leftist, very negative.
#
But then when the when the thing was discussed, several thoughtful economists wrote saying
#
So it was not the case that everybody was negative.
#
I feel that there was more support for these ideas than surfaced because I don't think
#
we pose these things in a in a composite manner the way the M document did.
#
Well, I mean, the V.P. Singh government didn't last, but it exited in the middle of a first
#
And by the time Narsimha Rao's government came back, I mean, you only had about one
#
month of imports in reserves.
#
So it was a very clear situation where something had to be done, an opportunity to do something.
#
And I'm glad that they I mean, that was really it was Manmohan Singh who would have picked
#
up all this, persuaded the finance minister that we must do this.
#
I had said in the paper that, you know, we should reduce the customs duties quite a bit
#
and let that be reflected in the exchange rate in a gradualist kind of way through an
#
exam script or something, which is more or less what was done.
#
I mean, first a devaluation, then the exam script, then move to a dual exchange rate.
#
Things moved very, very quickly in that 1991 period.
#
And the number of things that were done so quickly, I don't think we've ever had that
#
We never had it before.
#
We probably need something of that kind moving ahead because the world is changing and posing
#
You know, speaking about the political imperatives of V.P. Singh, you have this lovely quote
#
by Dr. Manmohan Singh, which is, quote, politicians have to be in power long enough to act like
#
statesmen, stop quote, which goes back to what we were discussing earlier, her political
#
incentives just go in such different directions.
#
And you've given examples of, you know, V.P. Singh's preoccupation with short term objectives
#
You know, I'd encourage listeners to read the book.
#
It's just such a thrilling thing now after all these years to actually read the inside
#
My question here is this, that I feel that like one thing that I have said, and perhaps
#
this is too negative, is that politics corrodes character and let me explain my reasoning
#
The reasoning is that once you enter politics, your raison d'etre necessarily is coming
#
to power no matter what it takes, the will to power as it were.
#
So you might enter politics with a certain set of principles that I want social justice
#
or I want this or I want that.
#
But the moment you enter that game, you are playing an entirely different game.
#
You are raising money for elections, there are quid pro quos involved in that, you have
#
to appeal to certain constituencies, you have to pay a price for that.
#
And eventually over a period of time, if you stay long enough, your core beliefs don't
#
matter because you have none.
#
Everything is about the will to power.
#
And when we speak about, you know, you speak about how you worked at the finance ministry
#
where when V.P. Singh was finance minister under Rajiv Gandhi and he was so open to trying
#
new things and just all of that.
#
But when it actually came to actions when he was prime minister, these were constraints.
#
You know, nobody can do anything if they are in his shoes, they are going to perhaps do
#
But on the other hand, once in a while, you do come across politicians who are decisive
#
like Mr. Narsimha Raudet, for example, the kind of support that certainly in that initial
#
period which he gave Madhya Mohan Singh and all of you to kind of do what happened.
#
So what is your sense of this?
#
You've interacted with many, many, many politicians and I won't ask you to take any names or
#
But in general, what do you feel about this?
#
Is there a certain sympathy you feel for them given their constraints?
#
Is there something to the notion that the will to power being the key imperative that
#
you always have to work around that, that to make a policy accepted by a politician,
#
you first have to make it sellable and show them why it is good for the electorate?
#
No, I'm afraid that's probably true, not just in India, but anywhere.
#
I mean, a lot I think depends on the quality of the politics.
#
I mean, if the quality of the politics is such that in the end, while you can manipulate
#
politics, you can do a little bit of teasing out a certain outcome, as long as the political
#
system rewards good performance, a politician will have a strong incentive to show good
#
performance and a lot of that has to do also with political education of the public.
#
I mean, the public has to know that some kind of political handouts are really not good
#
for even the public at large, but it's very difficult to resolve that problem in practice.
#
I'm not giving a very good answer because what I'm really saying is it is a problem
#
and I don't know how to solve it, but I think the only answer I can give is that you should
#
hope that politics is such that a large part of electoral support will be triggered by
#
good performance in areas that are important.
#
As long as you can have that, yes, there'll be little diversion here and there, but broad
#
thrust will be in the right direction.
#
So taking off on that, when we think of the political marketplace, it's a marketplace
#
Politicians are the supply end of it and the people at large are the demand end of it.
#
And I've always sort of held that there's no point if you're a reformer or if you're
#
an activist for X policy or Y policy to just speak to the supply end because supply will
#
always respond to demand.
#
So you have to speak to the demand end.
#
If your ideas become popular, then the politician will automatically gravitate to carrying them
#
And this is what makes me feel a little despondent because number one, many of the core ideas
#
which I'm assuming you share with me and which are core truths of economics, like the positive
#
some-ness of things, that for someone to win, someone else doesn't have to lose.
#
Every trade makes both people better off or something like the notion of spontaneous order,
#
which we also mentioned earlier, are counterintuitive.
#
You know, we've evolved in prehistoric times, we lived in small tribes, our brains have
#
evolved to think of the world in zero-sum ways because of the scarcity of those times
#
We've evolved to think with an engineering top-down mindset that you've got to build
#
it, you've got to control it, that spontaneous order is just completely counterintuitive
#
So that's one aspect that many of these essential truths about the world are counterintuitive.
#
And the other aspect is that in the conventional view that is popular out there is full of
#
all kinds of fallacies, which is why if at a time of scarcity, some particular thing
#
gets too expensive, there will be a popular demand, ki price control lagaon.
#
Now we know price controls lead to scarcities, but that's going to be the popular demand.
#
And similarly, and popular demands will always be based on intentions and not outcomes, you
#
know, which is the classic thing that goes wrong.
#
So I don't know if there's a question here.
#
I seem to be underscoring what you were saying earlier.
#
But my sense is that how difficult a challenge do you think this is?
#
And therefore, do you think that, you know, people like yourself then also have a responsibility
#
to be public intellectuals and put their ideas out there in the discourse so that they're
#
being read all the time?
#
Like what I would have loved both you and Dr Singh for all the great service that you
#
perform to our country.
#
But if you were also prolific columnists, I think in some small way, the needle would
#
And this is really with hindsight, I'm saying, and no doubt you had other things to do and
#
But speaking of the current generation of people, you know, if you were young today,
#
you know, is this how difficult do you think is this task of changing the demand end of
#
because then reforms don't have to be by stealth?
#
Well, I mean, you can't just operate on the demand side.
#
Minds of the electorate.
#
I mean, this is what in a contested political situation, this is what parties do.
#
I mean, it's opposition parties that have to educate the public that look, these are
#
This is what needs to be done.
#
And if something not being done, then this is going to be the consequence.
#
But clearly you're right that the thinking crowd, the opinion makers, so to speak, they
#
have a big role to play.
#
But mind you, this is one of the things that we were discussing earlier.
#
You know, in the in the world of social media, this old idea of opinion makers has disappeared.
#
I mean, there was a time when people thought that if X or Y or Z were to write a paper,
#
write an op-ed, everybody would say, well, you know, that must be right.
#
But today opinions are being made on the basis of WhatsApp messages sent out by all kinds
#
So frankly, it's not a world that I understand too well.
#
And this is not just India.
#
People are saying this around the world.
#
So somehow, how do you communicate with the electorate?
#
How do opinion makers make opinions that itself needs to be put on the table in a much more
#
frank manner so we can work out how these things are going to move?
#
But in the end, it has to be mediated through political parties, because in a democracy,
#
if it is political parties that are seeking support, it's for the political parties to
#
put these things across.
#
And at the same time, I think that a lot of politics happens outside political parties
#
If you write a column today or tomorrow about a particular political situation, that is
#
also an act of politics, that you're getting your views out there for people to consider
#
and think about and so on.
#
So I think there is something there, but I agree with you that it's kind of a tough task.
#
I want to now ask another question that is related to the question I asked earlier about
#
the core beliefs of politicians, except here it's about the core beliefs of people and
#
the core beliefs even of, say, economists or policymakers.
#
One of the disturbing trends that I've seen over the last two years is that I have realized
#
that many people from all sides of the political divide who espoused principles were actually
#
just wedded to a tribe, and that their thinking is tribal and the principles are contingent.
#
For example, in the US, we have seen how the entire Republican Party was just defaced and
#
demeaned by Trump and shifted over suddenly to supporting Trump, where a lot of what Trump
#
preached was actually against core Republican values, for example, his opposition to free
#
trade and so on and so forth.
#
And many of the positions that he took to imagine conservatives or libertarians supporting
#
But as it turned out, many in the party didn't care about the principles, they just cared
#
about that they are part of this tribe.
#
Similarly, in India, I had a deep disquiet around the time of demonetization, where many
#
of the economists who I think would immediately and instinctively see how utterly daft it
#
is didn't say anything because they were part of the establishment in some way, whether
#
it's Arvind Panagariya and the Planning Commission or so on and so forth.
#
You know, Bebek Debrau was also there, and people within the ministries and so on and
#
so forth, even though they obviously know that this is daft.
#
And there are two ways of looking at that.
#
One way of looking at that is that they are gradualists, they are realists, they are within
#
the system, they are thinking that there's no point in my speaking out now if I can make
#
small changes on the margins which make this country better off, I'll play that game.
#
But at the same time, I feel like a lot of these people who are admired because the stated
#
principles seem to match mine, have abandoned those principles because they've chosen the
#
tribe and that's a tribe and those principles were just posturing, you know.
#
So in my mind, it's like the world is now divided into these two categories of people,
#
people who actually believe in what they say, and people who say what they say because at
#
that moment it's convenient and it's contingent and that's a tribe they're part of and so
#
It depresses me a lot because I think the former category, you know, and people like
#
you and Dr. Singh would obviously be in that former category where you have your core set
#
of principles and you always fight for that.
#
But so many other people who are also in prominent positions who are also public intellectuals
#
So what are sort of your thoughts on this?
#
Well, look, I would hope that at least public intellectuals should always be speaking whatever
#
their principles are, trying to explain them.
#
I recognize that when people are in government, they're not expected to say things critical
#
So you know, I mean, I think on you mentioned demonetization, I didn't expect that anybody
#
in government would have criticized it once it was decided that it was going to be done.
#
But I think when you talked about the Republican Party, you made a more basic point there because,
#
you know, the Republicans are not in that sense part of government.
#
They're not part of the administration.
#
So what you're seeing there is a political party is moving in a particular direction
#
because it feels that's where its base is going.
#
In the old days, maybe there was a set of principles that they supported and there was
#
some assumption that the base would kind of follow them.
#
Here they're following the base.
#
And I think in a democratic environment, you cannot avoid that if that happens.
#
You have to ask yourself, why does it happen?
#
I think this is part of, you know, it goes back to what we were discussing earlier, that
#
unlike the situation 20 years ago, where there was much greater clarity about how the world
#
is moving, this is a period when there isn't that clarity.
#
So many, many kind of things that were taken for granted very recently are now up for grabs.
#
How you handle that is another matter altogether.
#
Not an easy one to answer.
#
Is there any big issue on which you've changed your mind?
#
No, I wouldn't like to say, I mean, perceptions obviously change.
#
Perhaps I would say that I was never of the view that the right policy to follow was a
#
kind of mindless opening up of the economy.
#
Remember, we were ridiculously closed.
#
So it was a no-brainer that we had to open up.
#
But I'm willing to consider the fact that in the present circumstances, if we want to
#
develop a competitive industry, you need to do something to support that industry.
#
But for example, I would be in favor of a support that is, as it were, not connected
#
with protection, but is connected with giving, either subsidizing certain things or helping
#
them do certain things and so on.
#
For example, the PLI system, which many people have criticized, is mere protectionism.
#
It's not mere protectionism because it's giving a predetermined amount of support.
#
What would become dangerous is if you have a PLI and when the fellows don't succeed,
#
they then start lobbying for higher import duties.
#
I would say that if you're going to have a PLI scheme, it should be an understood part
#
of the whole thing, that the duties on this product will not increase and will actually
#
Given that, okay, you're giving some support.
#
But if you don't put in that as a condition, nothing stops people from collecting the money
#
under the PLI and then saying for a variety of reasons, we can't compete against somebody
#
else, so why don't you ban the import or jack up duties?
#
If we go down that route, it'll be very, very disturbing.
#
I think the other issue that I'm kind of struggling with actually is what do we do in the whole
#
area of trade negotiations?
#
Our traditional approach correctly is that multilateral trade negotiations are the best,
#
but the problem is the world has kind of turned away from them and as a result, you've got
#
groups formed which are forming plurilateral agreements.
#
Historically, we've not been in favor of plurilateral agreements and it's certainly true that if
#
you could do it multilaterally, that's better.
#
But if that's not happening, then should we ignore all plurilateral arrangements?
#
I think we should look for which is the most sensible plurilateral regime to join and join
#
it and try and work from inside.
#
That's why I was in favor of RCEP, for example.
#
Maybe RCEP was not very popular because China is a member.
#
I don't know whether this new thing, the Indo-Pacific economic framework, will actually end up being
#
a serious kind of arrangement which could presage a plurilateral trade bloc, but if
#
it is, we should be in it.
#
So these are issues that as the world changes, we need to define, if you like, a second best
#
solution, given that the best is multilateral, but that's not happening.
#
Let's go back to talking about the reforms period a little bit.
#
At one point, you write in your book that when Narsimha Rao was asked why has he taken
#
a 180 degree turn, he said, quote, I have not turned at all.
#
I am facing in the same direction.
#
It is a world that has turned 180 degrees, stop quote, which is kind of glib because
#
in a sense, he was sort of forced to turn a little bit.
#
Now, you know, that heady part where you discuss those few weeks where, you know, one after
#
the other, you have the two-step devaluation of the rupee, you have so much happening in
#
terms of trade policy, industrial policy, it's heady, it's brilliant.
#
What I found even more impressive was what happens in the next couple of decades after
#
that, where, as you point out, there is this enormous continuity, both in terms of the
#
political level, where you have, you know, initially Narsimha Rao, Manmohan Singh, Chidambaram,
#
then later, Deve Gowda and I K Gujral continue the same policies with Chidambaram as FM.
#
And then Atal Bihari Vajpayee's government, where you have Yashwant Sinha, Jaswant Singh,
#
Arun Shourie, just doing remarkable things.
#
And then, of course, UPA-1, where you guys come back.
#
At the bureaucratic level, you know, A. N. Verma, Rang Rajan, Bimal Jalan, Nitin Desai,
#
Vijay Kelkar, it's a litany of names and a litany of people who should really be better
#
And then, you know, so one question is that what made this continuity possible because
#
it is not like there was a demand for it.
#
You had in the political marketplace, you had all of these people doing stuff with because
#
they felt it was the right thing to do, even though, you know, you would have imagined
#
that the opposition comes to power, they will want to define themselves as different from
#
But no, there is this thread of continuity that goes on till the end of UPA-1.
#
And you know, so where do you think it came from?
#
Was it a happy accident?
#
Well, I mean, I like to think that successive governments, obviously, when you have an election,
#
Each political party criticizes the other.
#
When one of them wins, they then lay out their own policy.
#
They have the freedom to reverse policy.
#
And what was remarkable is that they didn't reverse it, okay, particularly when Atal Bihari
#
Vajpayee came in, because, you know, some of some of the stuff that was being done,
#
which is that, look, we are not that wedded to the public sector.
#
That was part of BJP also.
#
But opening up foreign investment, these were not things that were part of the BJP.
#
But he gave a very clear signal that that's the way he wanted to go.
#
Now, I like to think that basically, while people posture in the political space, they're
#
also aware of what are the underlying technical consensus.
#
And there's more commonality on that than people think from the outside.
#
I mean, that's the only way of explaining it.
#
And in the case of the Vajpayee government, they actually said things like continuity
#
So it was a formula that they thought was perfectly good.
#
I mean, whether we will keep having that is the real issue.
#
I think what you need is a much more continuous discussion of what is the underlying consensus
#
And if you have a consensus on that, the politics will take care of itself.
#
Now to have that consensus, you need a lot of debate.
#
I mean, you cannot have a consensus unless you have a debate which takes into account
#
different points of view.
#
And I think we need we need more debate, in my view.
#
In your book, you have this, you know, lovely anecdote about how you were sitting with Mr.
#
Vajpayee and he was asked about, you know, is there any continuity and all that?
#
And you know, the balance between continuity and change.
#
And he said, look at Montaigne, Montaigne is a continuity, I am the change, which is
#
I mean, you know, I was very flattered by the prime minister saying that.
#
I think there was a particular reason, you know, I mean, the BJP government had done
#
what they had always said they would do, which is to test the nuclear weapon.
#
And there were massive reaction to that.
#
I think he wanted to emphasize that, look, on the economic side, this is something we've
#
And even the Congress supported it.
#
So it wasn't just a but I think he rightly judged that what mattered to the rest of the
#
world was whether India's economic policy was going to be dismantled.
#
And he gave a very clear signal that it was not.
#
I mean, that was a good thing to have done.
#
So one of my guests on the show, Pooja Mehra, wrote this book called The Lost Decade.
#
And the narrative of that essentially is that look from 91 to 2011, we had this golden period,
#
everything was great, roughly till 2011.
#
And to her, you know, moment which changes everything, which I know you don't quite agree
#
with, but nevertheless, for her a moment which kind of changes everything are the terrorist
#
attacks in Mumbai, because because of that Mr. Chidambaram gets shifted from the from
#
the finance ministry to the home ministry, because it's felt that that's where you really
#
need someone to, you know, do a strong job and do an efficient job, which the previous
#
And Dr. Singh takes over the finance ministry himself, but then he has to go through this
#
So instead Pranab Mukherjee becomes finance minister, reportedly at Sonia's behest and
#
remains finance minister for a period of time.
#
And as Pooja points out, a lot of things start going wrong at that point.
#
And that's when our downfall really starts.
#
And then at a later point in time, they managed to kick him upstairs and Mr. Chidambaram does
#
But it's too late, they lose the 2014 elections.
#
And then remarkably, Arun Jaitley and his guys, you know, show some continuity for a
#
year or so, till basically political imperatives and so on, change matters and everything kind
#
of goes to hell with our economy from there.
#
But the downturn in our economy is not just a Modi thing.
#
I mean, I think this government has made it considerably worse, but sort of happened towards
#
the end of UPA 1 when that kind of shift took over.
#
And now I know you won't want to comment on personalities per se, but just in talking
#
about the difference in sort of the movement and the direction, because it seems to me
#
that that continuity kind of ended then.
#
And it seems to me that today from the outside as an outsider, when I look at what's happening
#
now, I don't see where is the constituency for reform per se, or how strong is it?
#
You would of course know better, even though you're outside government now, but you know,
#
Well, I would know better.
#
I mean, being outside, I would know the same as you do.
#
No, let me say that, you know, I think if you look at what the government says, forget
#
about demonetization, which most economists felt was disruptive, but to be fair, the demonetization
#
effect would not have lasted more than six or eight months.
#
Then you had GST, which many people, and I think there's some point in it, it could have
#
The reform itself, in my view, was long overdue, glad that the government, and it was the BJP
#
that opposed it when they were not in government, they had good sense to bring it in, probably
#
handled not too well, but is slowly kind of getting back to some sort of square one.
#
This talk that they're going to bring about the key reforms that are needed in the rate
#
I think there's some committee looking at it right now, so I don't know what they're
#
But you know, if they do that, that will be not bad at all.
#
For the rest, I think most of what is being talked about is really a continuation of what
#
was in any case thought to be the right thing to do, digitalization, more infrastructure,
#
This government has given a very clear signal also that FDI is welcome.
#
So the old fear that the government would be anti-FDI is no longer true.
#
We have to wait and see at what pace these reforms actually get implemented.
#
I mean, in a way, the last few years have been very difficult to judge because the economy
#
was clobbered by the pandemic, which was not a government event.
#
You could argue whether the pandemic could have been handled a little differently or
#
But by and large, everybody did badly.
#
After the pandemic, we have recovered.
#
So those who might have said that we're not going to recover clearly wrong, but I never
#
thought that we were not going to recover.
#
We are back to sort of pre-pandemic levels.
#
Now the real question is, are we going to get back to the kind of growth that was there
#
before the pandemic, which is sort of around 4%, 5%, or are we going to do better?
#
The current projections, which many people seem to accept, are that we might actually
#
I mean, if we get 7% in this year, that would be a good performance, in my view.
#
And if in that period, some of what is being talked about on the reforms front actually
#
gets done, that would also be good.
#
The thing that I feel most worried about is the lack of clarity on openness as far as
#
import duties are concerned.
#
And are we going to sort of, I mean, on the one hand, the government talks about integrating
#
with global supply chains.
#
This to my mind is the right thing to do.
#
But you know, we shouldn't think that integrating with global supply chains means that the entire
#
chain is going to be built in India, and then we're just going to export.
#
It really means that we ought to create an environment in which, as people lock into
#
different types of global supply chains, they think of India as being one of the portions
#
of this multi-country kind of chain.
#
Now these multi-country chains are not expanding as much, and the Chinese one is actually contracting.
#
But that gives us an opportunity.
#
People are going to look for somebody that would take the place that China earlier had.
#
I don't mean replace it.
#
I mean, we are very far behind China, but it gives us a space to do better.
#
And in my view, if we want to give that signal, we should definitely not be going down the
#
route of raising import duties, etc.
#
That is going to be a real test.
#
If the government actually were to address the question, how do we become part of global
#
value chains, get advice from reliable people, experts in the private sector, and then take
#
action on that basis, I think you might well see a recovery of growth momentum.
#
If it doesn't, and we go back to say 4-5% growth, you know, that'll still be better
#
than the rest of the world because the rest of the world is very clobbered as a result
#
But it will not be enough for generating the kind of employment and meeting the kind of
#
aspirations that have been raised.
#
And I think the employment thing is really quite critical.
#
We need to get back to 7% growth for the next several years if we want to provide halfway
#
decent jobs for the youth in the country.
#
There's a sort of one great illustration of how gradual change can be is what you point
#
out in your book about how it took 31 years to get from Modvad to GST, right, over this
#
And I think the implementation of GST was so remarkably botched up that at least for
#
the short to medium term, GST was a huge negative of, you know, my sense from all the business
#
people that I speak to and what a pain it was and, you know, that's a sense I get.
#
And again, it also shows how a reform that is otherwise fundamentally good like, you
#
know, like the original conception of GST can run into problems once it makes its way
#
through the political economy and takes whatever shape it does.
#
Like another example of a great reform that has, you know, been struggling because of
#
state capacity issues and so on is something that friends of mine worked on, the IBC, right,
#
the bankruptcy code, which is a fantastic reform, everybody agrees it's needed, but
#
has not proved to be as transformative as you would think simply because state capacity
#
Well, I think in the case of the IBC, yes, there was a pushback and we should have anticipated
#
But, you know, the pandemic mucked that up quite a bit because given what happened to
#
the pandemic, pressure on the RBI is quite understandable that, look, given that the
#
economy is clobbered, don't send these guys through the IBC route.
#
But now that we are recovering from the pandemic, that should not be a concern anymore.
#
And we'll have to wait and see.
#
But yes, I agree with you.
#
The IBC is extremely important, hasn't done so well in the last year.
#
Maybe the pandemic is a reason why it didn't do so well, but again, the test is in the
#
But these institutional reforms, I mean, if they get delayed by a year, but then they
#
get back on track, it's not a bad thing.
#
GST, for example, yes, maybe it was rushed too much.
#
They didn't prepare enough.
#
Maybe the software wasn't ready, whatever it is, there were too many glitches.
#
But we are now, we are told that the GST council is coming up with some fundamental rate structure
#
If they do a good rate structure reform, that will be a very important step.
#
But we have to see what they do.
#
And the other thing that sort of worries me is that even reforms which are needed can
#
get embedded in a narrative battle because at this moment in time, you know, the opposition
#
will oppose everything the government does.
#
And there will always be pitched narrative battles about absolutely everything.
#
You know, those times are gone wherein, you know, in 91, there are stories of how Narsimha
#
Rao is speaking to members of opposing parties, telling them we are in a crisis, we have to
#
do this, and the way he's managing that and the fact that they're open to it, that someone
#
like a Vajpayee is open to it from the outside, the opposition is open to it.
#
And that it's way more polarized than that today.
#
I mean, a classic example being the farm laws, where a lot of the reforms are, most experts
#
would agree, pretty much in the right direction.
#
The Congress has proposed them in the past themselves, you know, much needed.
#
And the BJP, of course, botched the politics of it completely and made a complete mess
#
And I had a great episode with Ajay Shah on this.
#
So the whole thing was just a tragedy out and out.
#
But the point is, whatever reforms you try to do are going to run into opposition regardless
#
of the merits of the case.
#
But I don't think, you know, if the government has a strong enough majority, what the opposition
#
needs is to be listened to.
#
But I don't think it necessarily prevents the reforms.
#
I mean, you know, you have mechanisms like a parliamentary committee.
#
So you send it to the parliamentary committee, have a discussion, have some Sunvai, maybe
#
even make a concession here and there.
#
That's why I'm saying that, you know, to create a broader base, a discussion, a broader discussion,
#
including with the opposition, is a good thing.
#
The opposition may not be persuaded.
#
I mean, in the opposition, their job is to oppose.
#
But the public will at least perceive that, look, there was a discussion.
#
They had a chance to say what they had to say.
#
So I mean, I don't think that necessarily holds up.
#
So that might be a fundamental mistake, you're saying that this government made it not consulting
#
widely enough and going through the processes.
#
But there's no reason why a future government can't go through those processes and make
#
Yeah, the same government, they can do it.
#
I mean, I don't see that that's a problem.
#
So, you know, you've been very kind and giving me so much of your time today.
#
And I'm really grateful.
#
Like I said, you know, the show is called The Scene and the Unseen.
#
And you and your fellow band of travellers changed the lives of so many Indians in so
#
So I don't know how one even expresses that gratitude.
#
But you know, in these last few minutes of this episode, rather than talk about reforms
#
and policy and the narrative of what went down, for all of which I'll recommend that
#
everyone reads backstage, because it's such a wonderful book.
#
Tell me a little bit about what you do these days, like in the break, you had mentioned
#
that you wanted to spend time with your grandchildren.
#
So you were reading up on the Mahabharata and that led you down Mahabharata based rabbit
#
You know, earlier, you know, in Ishar's wonderful autobiography, she spoke about how you guys
#
together you'd watch movies of Bergman, the Sikh, Fellini, all of these people.
#
What is your life like apart from the world of economic policy?
#
Oh, well, I mean, as you say, I'm living a life of gentlemen at leisure, if you like,
#
I do enjoy interacting with my grandchildren, three boys, two girls.
#
It kind of brings you to many of the things that you know, you did as a kid and you do
#
it in a very personal kind of way.
#
I write the odd article, the odd op-ed.
#
So I'm doing a little bit of that.
#
I'm associated with the Center for Social and Economic Progress, where I'm a distinguished
#
And right now I'm kind of focusing on problems of managing climate change in India, a very
#
interesting set of issues on policy, which bring out the whole importance of the holistic
#
whole of the economy approach.
#
So I'm just bringing out a working paper for the center on that, which I hope those of
#
your listeners are interested in, will get from the website in another three or four
#
And I do, as I said, I do some op-eds on current issues of policy.
#
I quite enjoy lecturing to younger people, and primarily right now what I'm trying to
#
do is to organize my thoughts so that I can produce a book sometime in the next couple
#
of years, which will be addressed to a person of the age of 23 who won't at all be interested
#
in what happened in 91, wouldn't even have been born in 91, but who would be interested
#
in what's happening in the world ahead for me in India.
#
And so, I mean, many people have done similar things, and my big challenge is, can I make
#
it sufficiently both different and interesting?
#
It doesn't have to be different.
#
If somebody said the right things, then one should say the same things.
#
But you know, saying it to a bunch of people who are familiar with the debate is one thing.
#
Saying it to a bunch of people who are 23 years old and are not interested in the past
#
is different, and that's what I want to do.
#
Thought speed, and I can't wait to read that book.
#
It's a massive challenge, like you said, to just speak from a layman's perspective to
#
a 23-year-old and sort of convince them.
#
And you know, after these decades of sort of working what would essentially be a sequence
#
of one day job after another, do you feel that this change in pace is helping you think
#
about things you would otherwise not have thought about?
#
And if you had a chance, you know, if you got a call from the government saying, write
#
another M document, come back and join us, would you be open to doing that, or have you
#
decided that, you know, this is cool, I like this pace, I like this rhythm, I'm going to
#
Yeah, I mean, I'm 78 years old, so if the government wanted such a document, I would
#
strongly advise them to get a hold of some younger people and tell the younger people
#
You know, I think we underestimate the quality that already exists even inside the government,
#
but actually there's a lot more outside the government now than there was then.
#
I mean, you have to remember that when I was in government, most important things were
#
There was hardly any expertise outside the government today.
#
I mean, the greatest expertise on fintech is not inside the government, it's outside
#
Similarly on everything, so one of the big problems is getting policy papers done by
#
knowledgeable people who know the market, the domestic market and the international
#
I don't think it's a job for civil servants because it's impossible for someone who's
#
just, I mean, you may find civil servants who pick up this stuff because they read widely,
#
but you want to talk to the people who are working on it and who know the
#
So something of that sort is really needed for the end document of the future.
#
So my penultimate question and my final one will be really brief.
#
So this is like sort of the last serious question, as it were.
#
When you think of India, if you take, say, a view of 15 years from now, you know, what
#
gives you hope and what gives you despair about the trajectory we are on or, you know,
#
what might happen, what might not happen?
#
Well, I'm basically a very optimistic person.
#
I mean, you know, I know that's a mental state, you're an optimistic person filters out the
#
negative signals, builds up the positive.
#
One of the things I'm very positive about is that, you know, if you look at what's happening
#
in India right now, you know, you shouldn't try to make the judgment based on macro indicators.
#
You should look, as it were, at new things that are happening.
#
It's a bit like being back in the Jurassic age, which is dominated by the Tyrannosaurus
#
Rex and various other giant lizards.
#
But the future is all these little rodents that are running about in the undergrowth
#
So actually, I would say that one needs to tell the story of India in terms of interesting,
#
unusual breakaway things that are happening.
#
And if you look at it that way, there's a surprisingly large number.
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I mean, going back even to the question we raised earlier about the status of women,
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I mean, you know, what you see now, Indian women's hockey team, cricket team, this young
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Muslim woman who's won a gold medal in some boxing competition or something like that,
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all these startups, all kinds of people experimenting in new ways of farming.
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I mean, it doesn't yet add up into the macro.
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I mean, the macro is full of the usual stuff.
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The question is, is this somehow going to create a series of changes which will build
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I mean, if one would be foolish to think that is necessarily going to happen.
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But you know, I do think that if you're looking for positive signals from a multiplicity of
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efforts, the only way it won't happen is if somebody goes off and tries to chop off all
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That's not going to happen.
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So I think there's a lot of action occurring, which I hope just reaches the top in some
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way in terms of visible presence in the economy, et cetera, et cetera.
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And you mentioned Jurassic Park.
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A little bit of trivia for you and for all my listeners, the Velociraptor, which is that
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giant marauding creature in the film, the actual Velociraptor was as tall as a turkey.
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So it was all WhatsApp history created by Steven Spielberg, as it were.
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So my final question to you therefore is, and I ask this of all my guests who come on
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the show, that for my listeners and me, recommend books, music, films that you absolutely love,
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that have been a big part of your life and you want to just tell everyone, go out and
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read this or watch this or listen to this.
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Ah, that's a very tough one.
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I mean, you know, I've loved all the great movies when I was young.
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I've loved all the James Bond's, although over time those have become somewhat dated
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and not really politically correct also.
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I don't know, I mean, I can't, I wouldn't pick any one out of them.
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But I do think that films, I need to get back to watching more films, particularly more
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Bollywood films, because, you know, the interesting thing is that Bollywood films reflect what's
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going on in the country.
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And I should go and spend about two or three weeks looking at each of the more recent Bollywood
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films to know which one I want to recommend to you.
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So I don't have a straight away, anything on history, actually, if you ask me, I would,
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I think we should just pick up a lot of the more, I mean, I spent a lot of time, for example,
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reading books on the second world war.
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And it's very interesting how the macro narrative of the war is so hugely oversimplified.
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And yet when you get into detailed history of what actually went on, who goofed, who
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did something wrong, et cetera, I mean, it's unbelievably rich.
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So I think we need a better understanding of the past.
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And that's what historians should be doing, giving us that.
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We don't have enough of that kind of stuff, really.
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Montaic, thank you so much for giving me so much of your time and so many great insights.
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And thank you for all the nice things you said about backstage.
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I hope it persuades some of your listeners to pick up the book and go through it.
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Did you enjoy this episode of The Scene and the Unseen?
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If so, would you like to support the production of the show?
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You can go over to sceneunseen.in slash support and contribute any amount you like to keep
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this podcast alive and kicking.
