- 1 week ago
The Indian government's announcement of a 7.8% GDP growth rate for the first quarter has triggered political debate and economic analysis.
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00:00Over the last few days, ever since the Modi government has released the GDP numbers claiming that India's 7.8
00:07% growth rate has beaten all expectations,
00:10there has been a heated debate over those numbers. These are of course GDP growth numbers for the first quarter.
00:17With every passing day, we've seen a full-blown political and economic showdown,
00:22which is why we thought we'd bring three of the country's finest economic minds to tell us where they stand.
00:30Before that, let's take a look at our top story because the Congress in particular is questioning the accuracy of
00:37the GDP numbers
00:38and the methodology that was used by the Modi government.
00:41The BJP has hit back, defending the figures and saying it proves that the Modi government has handled the economy
00:49well despite global headwinds.
00:51Take a look at our top story and then a special roundtable.
01:05The quarterly growth figures released by the Narendra Modi government this week have sparked a political showdown.
01:13Prime Minister Modi first hailed the 7.8% growth, claiming the data has proven doomsayers wrong.
01:43But soon, the accuracy of the numbers came under a cloud.
01:47Former Finance Secretary Subhash Chandagar questioned the downward revision of previous financial year's first quarter GDP.
01:55The last year's first quarter, the government itself claimed and said on 30th August that the GDP was 86 lakh
02:04crores.
02:05That GDP has been reduced to 80 lakh crores.
02:09So that gives you the current increase of 10.3%.
02:14If the GDP, as mentioned by the government earlier, was 86 lakh crores, then you get the growth only 2
02:23.6%.
02:24How come 86 lakh crores became 80 lakh crores?
02:30The Congress on Thursday posed more questions to the government.
02:35It claimed that under the new 2022-23 series, India's GDP has been revised down by 43 lakh crores across
02:44four years and called it a huge correction.
02:47The Congress said the government's deflator for GDP calculation put inflation in Q1 at 2.5%, whereas retail inflation for
02:57the period was 3.9%, and wholesale inflation much higher at 9.4%.
03:03The party also questioned the figures given for growth in manufacturing and consumption.
03:21The Prime Minister is completely roaming around and enjoying that our GDP rate is increasing, increasing.
03:28GDP, Prime Minister's GDP, it is not reflecting the country's clear financial situation.
03:37Basically, he is misleading the world now.
03:42The government has already given an explanation.
03:46In a statement on Wednesday, the government defended the double deflator method used for manufacturing and agriculture.
03:52It added that any comparison of GDP figures should be done based on the same series.
03:58That is why the data under-22-23 series was used to arrive at growth numbers.
04:04A former finance secretary or a former Reserve Bank governor, both of whom could not complete their time in India
04:14or in the government,
04:17they don't even know how to compare apples with apples.
04:21They are trying to misguide the people of India, comparing a growth rate and an old series with a new
04:30series.
04:33While the government and opposition spar, even economists are divided and the jury is still out on the accuracy of
04:40GDP numbers.
04:41Beera Report, India Today.
04:45Okay, so as the GDP numbers continue to stir a major political controversy, also divide economic opinion,
04:54we thought we'd do the best thing possible, get three of the country's finest economic minds on one special show.
05:02And that's exactly what we're doing, because I'm joined by three very special guests.
05:07Dr. Montek Singh Aluwalya, someone who's been associated with India's economic liberalization way back since 1991.
05:14He's also been former deputy chairman of the Planning Commission.
05:17I'm joined by Surjit Bhalla, former executive director at the IMF for India and someone who's always had a very
05:24strong opinion and tracked the economy over decades.
05:27And I'm also joined by Neelkan Mishra, who is at the moment serving as India's executive director at the World
05:34Bank for India, Bangladesh, Sri Lanka, South Asia.
05:37He's also worked with private banks and at the Prime Minister's Economic Advisory Council.
05:42Appreciate all three of you taking the time off to join me.
05:45I'm going to put first that big question that has created all the controversy.
05:49Are the GDP numbers put out by the Modi government accurate or not?
05:54And Neelkan Mishra, why don't you start?
05:56Because you've come out with a very strong tweet saying, those who are criticizing these numbers are ill-educated.
06:03You don't speak in such harsh language normally.
06:06So you've been very tough on that.
06:08Tell us where you stand.
06:09Are the GDP numbers accurate or not?
06:12Okay, my English was very careful.
06:15The assertion that growth was 2.8% was ill-educated.
06:20The person quoting it, that was not.
06:22That was not my allegation.
06:23So that was Subhash Ghar saying 2.6% growth rate.
06:26You're saying that was ill-educated, but it was not against him.
06:29It was just the assertion.
06:31The comment itself.
06:33Because you are then comparing two different time series.
06:36And I think for the benefit of your viewers, it's important to understand that economies that grow fast and have
06:41a very large informal component,
06:44every five years, you have to go and reset that.
06:47We hadn't reset it for 10 years.
06:49So now we have reset it.
06:51When you do that, you find new information.
06:54And therefore, overall GDP numbers get revised up or down.
06:59So you may find aggregate numbers.
07:02And actually, they went down by 4%.
07:04This was released on 28th of February this year.
07:08For sectoral input, so manufacturing would have gone up, services went down, because maybe the estimation of informal services in
07:16the previous series,
07:17because it was very old, was wrong.
07:20And so you cannot compare old series data with new series data, because not only is the methodology very different,
07:29the input data itself is different.
07:31You are surveying a very different set of industries.
07:34And so that was the comment.
07:36So it has to be like-to-like.
07:37Otherwise, it doesn't make sense.
07:39Okay.
07:39He was also saying, just to reiterate, that the revisions were being made to inflate numbers.
07:46You're saying that's a bogus argument.
07:51So, look, I have only worked in the private sector mostly, and I've seen the statistics department from outside.
07:59But I can tell you that they don't take instructions on how the data has to be revised up or
08:05down.
08:05Because, you know, think about what happened on 28th of February when the new series came out.
08:09The nominal GDP data was revised down by 4% in the new series.
08:14That created problems for the government, because they have taken on a debt-to-GDP target.
08:19It made it harder.
08:22The fact that your fiscal deficit is always a ratio, it made it harder.
08:26So why would the government go about doing that?
08:29The statistics department does these things based on certain data and frameworks.
08:34They are audited.
08:35They are exposed to, you know, global organizations like IMF, World Bank, taking an opinion on it.
08:43So these are all things that, I mean, are very hard to manipulate, meaning that – and there are regular
08:49revisions.
08:49And this happens across the world.
08:51You will find in most quarters the first estimate of U.S. GDP could be 1%.
08:55The second estimate could be 2.5% and the third one could be 0.5%.
08:59These things are routine, normal, and I don't think this is very good for political discussions.
09:06Okay.
09:06Montek Singh Aluwalyar, do you concur that, therefore, the debate over methodology and whether the GDP numbers are accurate or
09:13manipulated?
09:14Should we set that aside?
09:17Well, look, I think the debate that you referred to, somebody saying that on certain assumptions the growth rate would
09:26be 2.8%, that I think is not a valid statement.
09:31And actually, the person who made it also kind of put it forward as a kind of, if you do
09:38this, then you'll get some result.
09:40I don't think it really meant that the growth rate is 2.8%.
09:43I think all quarterly numbers have to be taken with a pinch of salt.
09:49They're based on preliminary information.
09:51You cannot decide, based on the first quarter, what the growth rate for the year as a whole will be
09:58like.
09:59The RBI had originally projected 7.
10:02It could become much closer to 7.
10:04We shouldn't be surprised.
10:05But I don't think that we're anywhere near the very low number that was talked about.
10:11However, I mean, the debate has also been about why has it, have the new numbers been revised downward?
10:19And actually, there's no one better than Sujit Balla to comment on that, because he's done some work, which I've
10:26seen somewhere,
10:26which shows that other countries, when they revise their databases, invariably end up with higher GDP, whereas we seem to
10:37be ending up with lower.
10:39We ended up with lower GDP this time, and we also did the same thing the last time around.
10:44So that's an interesting question.
10:47Why is it that when we change the basis, of course, when we change the basis, the numbers will change.
10:54But whether they should have gone up or gone down, or gone down as much as they have, that is
11:00a relevant question,
11:01which I'm sure that when the statistics people put out the full details, economists and others interested in this issue,
11:12we'll look at it carefully, and we'll have a better idea of exactly what is a technical reason why that's
11:18happened.
11:18But it is, I think, a question that we should address, especially because, if Sujit is right,
11:24we seem to be the only country consistently ending up with lower GDP, whereas others seem to be ending up
11:31with higher GDP.
11:32And I think that's an interesting thing to inform them to.
11:36Let me ask, Dr. Balla, that, because I don't want to get into the politics in this debate.
11:41You all are fine economic minds, but we've seen even today the Congress doubting GDP data by saying,
11:46look, quarter one GDP was revised four times, from 86 lakh crores to 80 lakh crores.
11:52There was a downward revision, which has enabled the government now to claim that in these numbers, we are growing
11:57at 7.8%.
11:58Do you believe that's an argument now that we should set aside,
12:01or is there some questions that should be raised in that context?
12:06Look, I think, you know, as I also tweeted under the hashtag, only in India,
12:13only in India would you have the debate that the base year has changed,
12:21highly revised data, because the structure of the economy has been changing in a very dynamic fashion,
12:29and then to argue, as somebody has argued who should know better, you know,
12:36so I don't even think it's worth, but I can attempt, if you ask me questions,
12:41as to what might be going on.
12:43Let me just say the following.
12:44So first, I've looked at exactly this question, because behind it, I mean, it's a legitimate.
12:51We have a democracy, and we question government.
12:54So, absolutely legitimate point that people are raising, are the data accurate?
13:01Now, I've made a solid attempt, which is in the Indian Express tomorrow.
13:07You have the copy of that, and one take has, and others have,
13:12that I've tried to look at that as to are we boosting up our growth rate?
13:20Are we playing politics with the GDP numbers?
13:25And I come out squarely that there is no evidence to date that we have played politics,
13:34and I'll answer one take's question in a minute, we have played politics with the numbers.
13:40Because...
13:41You're saying there are no politics in the numbers.
13:43Let me get that clear.
13:45So, Geek Balla is saying there's absolutely no politics in the downward revision.
13:49Yeah, absolutely no politics.
13:51And, you know, the Indian national accounts series, or the people who put out the national
13:59accounts in India, who constructed, are some of the most conservative economists and statisticians
14:07that I've met.
14:08But that's not the evidence.
14:10Let us say, and that's what I try squarely to answer, let us say we were trying to boost
14:18up the GDP.
14:19That's basically what it comes to.
14:20Yes.
14:21That we have, the administration or the government has artificially boosted up the GDP.
14:29Now, if we wanted to boost up the GDP, why would anybody, any government, not boost up consumption?
14:39It's very hard to get at what consumption is doing.
14:45And we have got consumption at a lower rate than what was there in the old data.
14:53So that's number one.
14:54Number two, there's a lot of corresponding data on why investment has gone up.
15:03This is private sector data, that is to say, agencies, et cetera, who have gone out of the
15:10way to document that there has been a large increase in investment, and investment adds
15:17to GDP.
15:18One, a couple more points.
15:20Third, look at what's happened to imports and import prices.
15:27Now, imports are a drag on GDP, OK?
15:32So you have import, and the other flip side of that is that if import prices go up, then
15:40the implied GDP, let's say in manufacturing, where a lot of imports come in, are boosted
15:47up, because import prices have gone up, real GDP has gone up.
15:51So, you know, partly this discussion is for adults only, not for a family audience, but
15:58I'm happy to do that.
15:59But there's, let me just say, no evidence that this is, there are questions that we can
16:05ask, as Montague has asked, but there is no evidence that the data was in any way or
16:13exaggerated.
16:13I take your point.
16:14Let's now come to the meat of the debate.
16:18So we've come to some kind of a consensus that most of the three of you are seemingly
16:24suggesting that it is tough to believe that the data is politically manipulated at this
16:28stage.
16:28By and large, that's the belief.
16:30I'm not using the word ill-educated that Neil Kahn chose to use.
16:34As he clarifies, it's not against an individual, it's against the assumptions.
16:38But my big question, second big question, has the Modi government proven doomsdayers wrong
16:43in the face of global headwinds?
16:45And before I come to the question, I want to play out what Dr. Bhalla told me just a
16:49few months ago.
16:50In that, he had written an article saying the BJP was on the political rise, was winning
16:55politically, but was losing the economy.
16:57I want to play that point out and then get him to respond.
17:01Take a look at Dr. Bhalla possibly being a doomsdayer at the time.
17:08What has bothered me for quite some time is what's happening to investment.
17:16And in particular, foreign direct investment.
17:20We've got strange rules, which no other country has, in terms of FDI.
17:26So, the investment climate in India has really gone negative.
17:32On the other side, you've got the political climate.
17:35So, I think what is happening is that the government is in a great comfort zone because it's winning
17:42all the elections.
17:43So, it doesn't see any urgency or need to do reforms.
17:49Okay, so, Dr. Bhalla, in that interview, you seem to suggest things were going horribly
17:55wrong.
17:56India was losing or the Modi government was losing it economically.
17:59Now, with 7.8% growth rate numbers coming in the face of global headwinds, are you willing
18:04to revise your opinion?
18:06Absolutely not completely consistent.
18:09Look, what did I just say a few minutes back?
18:12What has the investment to GDP ratio, which I had thoroughly criticised, and on the basis
18:20of the bits and everything else, all the evidence, we had state in this quarter, the investment
18:28to GDP ratio has gone up by something like 3 percentage points.
18:33It's now at 34%.
18:35No, so, did you get it wrong there or has something changed in the last three months?
18:39Did you get it wrong three months ago or has something changed now?
18:42That's precisely the point.
18:44There are two points here.
18:45I did not get it wrong three months ago.
18:48At that time, the investment rate was not going up, was staying stagnant at between 28% to 30%,
18:57depending on which quarter you had taken.
19:00Now, we've seen a jump.
19:01That's happened in this quarter.
19:03That's happened after I made that statement.
19:05I didn't have that data.
19:06So, that's number one.
19:08Number two is that the whole, you know, what you haven't noted, my big argument against
19:18losing the economy was we had a vixit-bhadat target, that we will be a developed economy,
19:27equivalent per capita income, by 2047.
19:31On that, I'm still completely, and every article I've written, is that we should give up.
19:38It's impossible.
19:39And this quarter data that you are saying that I've changed my opinion further adds to the
19:48possibility that we will not reach vixit-bhadat.
19:51Because in dollar terms, which is how vixit is measured, which is how developed economy status
19:57is measured, we have grown zero in this quarter.
20:01No, no, one minute, one minute.
20:03So, you're saying your vixit-bhadat argument that we will be not vixit-bhadat by 2047,
20:08presumably for which we need double-digit economic growth on a sustained basis over the next 20 years,
20:13is not happening.
20:14Very quickly, yes or no?
20:15It's not happening.
20:16Not happening, okay.
20:17Double-digit dollar growth.
20:19Okay.
20:20Let me get Neelkan, Mishra.
20:21Neelkan, you know, Surjit is saying that he was looking at the situation three months ago.
20:27Things have changed now.
20:29Investment is looking, climate looking much better now.
20:32He's saying, but vixit-bhadat won't happen.
20:35Your view, have the doomsdayers been proven wrong?
20:38Those who said three months ago that because of what had happened in West Asia,
20:42what was happening with supply-side shocks, India was in for a very rough ride.
20:49I think the world is in for a very rough ride.
20:51In fact, I'm very worried about the global cost of capital going up,
20:55the 10-year bond deals have risen.
20:59There is, you know, continuous trade conflict.
21:03So it's going to be a turbulent ride.
21:07But frankly, I've been expecting 7.5% growth for FY27.
21:14I was a bit worried when the oil price shock happened.
21:17I'm still worried that oil prices are up a lot.
21:20But I think things are playing out.
21:23I mean, I think on your show as well earlier, I highlighted that in FY25, we had fiscal and monetary
21:30headwinds.
21:31So as you know, if, say, an aircraft is flying at, the thrust is 900 kilometers an hour,
21:36but there are 200 kilometers per hour headwinds, the speed versus ground is 700.
21:41But the moment the headwinds disappear, the aircraft starts flying faster.
21:44So that was my simple assertion for this year, that unlike most of the large economies,
21:52which are still running at either COVID levels like China or the significantly elevated levels of fiscal deficit like the
22:01U.S.,
22:02India's general government deficit is now effectively back to pre-COVID levels,
22:06which is a significant amount of fiscal consolidation, I think a very healthy amount of fiscal consolidation,
22:11but it's a big headwind to growth.
22:13Now the hard part is done.
22:15We also had issues with the liquidity management, and therefore credit growth was slowing down.
22:21We have somehow managed to change that, and that also means that now credit growth is accelerating.
22:27So having a 7.5% growth for me is not surprising.
22:30It was entirely expected.
22:33To sustain this, I think, you know, what we do in 20 years is a long time.
22:39All I can say is that we have to continue working very hard.
22:42I'll just take one minute to address Mr. Alwalia's question or point on the downward revision of GDP.
22:47If you break it down, and we did that in the report and in this part of the tweet,
22:52that the biggest, it was a 12% reduction in the services GDP.
22:58Old series was a new series.
23:00And a large part of that actually came from services which are very highly informal in nature,
23:06so like trade, hotels.
23:08Now what happens when you, you know, you can reset the base every five years,
23:14but as you are doing annual GDP calculations, you don't have data.
23:17So what you do is you kind of assume that they're growing at the same pace as the formal sector.
23:22Now, if it so happens that in that period the informal sector was losing share
23:27or was growing slower than the formal sector, the overestimate, the GDP tends to start to get overestimated.
23:36So I think both in the previous series, 2012, as well as I think the 23rd revision,
23:41this was, I think, the primary reason for the downward revision in GDP.
23:45But it was 4%.
23:46I mean, it was not compounded.
23:48It was maybe 0.3, 0.4% a year.
23:50Let's come back to that second question, doomsdayers.
23:53I don't know whether, Dr. Aluwalya, you categorize yourself as a doomsdayer.
23:58But there were lots of people who were predicting just three months ago that India was going to go through
24:02a very difficult, turbulent time.
24:04Would you concede that these numbers show that the Indian economy is far more resilient?
24:09And the good news is that there are signs of private investment picking up, signs even of private consumption.
24:15When I look at private consumption numbers of a marginal increase there as well, from 6.8% to 7
24:22.1% is what the numbers show.
24:24Do you believe that there are positive signs and the economy is proving far more resilient than the doomsdayers suggested?
24:32I think you could say that the economy is more resilient than the doomsayers were suggesting.
24:39You know, all said and done, even if the growth rate at the end of the year turns out to
24:45be closer to 7% than to 7.8%, that would be much faster than the major developing economy.
24:51So from that point of view, I think we can say that the economy has performed reasonably well.
24:57But I mean, the reason why you have this uncertainty and perhaps why you're having these questions is that you
25:05need to look at different dimensions, sort of the usual strengths, weaknesses, opportunities and threats.
25:13Now, you can, if you want to present a positive view, you can exaggerate the strengths, reduce the weaknesses, increase
25:22the opportunities and minimize the threats.
25:25Ultimately, it's a balance of all these things and it's looking forward.
25:29So the data are not relevant.
25:31Yes, the first quarter data are quite good.
25:34At least the data are not bad.
25:36You can't get up with these data and say, I told you so.
25:39But on the other hand, as everybody has said, not just India, the whole world is facing tremendous uncertainties in
25:48the years ahead.
25:49And therefore, if you ask yourself the question, are we on a track to achieve our long-term objective of
25:57Viksit Bharat, then the short answer is not yet.
26:01Because we need a much higher growth rate in order to do that.
26:05I won't go into numbers, but it's got to be a lot higher.
26:08Okay.
26:08Second, second, let me just finish.
26:11Please go ahead.
26:12I'm quite willing to stop.
26:14No, no, please go ahead.
26:15Please go ahead.
26:15I don't want to come back.
26:17Let me just finish.
26:18The second question really is that whether we will be able to weather the storms ahead depends on how these
26:28storms themselves shape up.
26:29I mean, for example, are we through the Middle East crisis and is the kind of political uncertainty in the
26:37world moving lower or is it still quite high?
26:41My guess is it's still quite high.
26:43Second, what is going to be the impact of things like AI and technology change on the situation regarding employment
26:52in the next two or three years?
26:54Third, while we are having a reasonably good, I think, average growth rate, this doesn't confirm the fact that the
27:05K-shaped phenomenon isn't relevant.
27:07And what a lot of people are saying is that maybe some parts of Bharat are becoming vixen, but large
27:15parts are not benefiting from it.
27:17And the last point, which is, I think, what probably provoked the Gen Z protest, is that if you look
27:25at jobs for young people, the prospects do not seem to be good.
27:30Now, they don't seem to be good anywhere else in the world either.
27:33I mean, the United States has the same problem.
27:36We have that problem.
27:37But, you know, in the end, we don't have to manage the United States' problem.
27:40We have to manage our problem.
27:42And the fact of the matter is that the news that we are getting on the growth of formal sector
27:49employment is not good.
27:51It's not surprising because there seems to be a push into more capital-intensive type of industry.
27:58I mean, if, for example, we're going to build the backward linkages involved in AI and set up data centers
28:06and all the rest of it, it's going to be an extremely capital-intensive process.
28:11That will only reduce the resources available for other areas.
28:16Now, whether we are forced to do this because of security reasons is an open question.
28:22But the net result is that it will require a lot of doing in order to get both growth up
28:29and employment.
28:31Now, I think the government has recognized this because the formula being used is we need more reforms.
28:37Nobody is saying we don't need reform.
28:39So I think what we need is a discussion.
28:42What are the reforms that we are likely to get in the next one or two years?
28:47Are there differences of opinion on that?
28:50And if there aren't differences of opinion, could we accelerate the pace of results?
28:56And I feel that if we want to give that signal, it's not difficult to give, but we should give
29:02that signal and find, you know, that things might be better.
29:06One positive thing, by the way, in the results is that exports seem to have done well.
29:13Now, maybe that's because the depreciation of the rupee took place.
29:17Maybe it's because we're giving signals to industry that we are going to enter into FTAs, whatever it is.
29:23I think we should not underestimate the capacity of the economy to react if reforms are actually implemented.
29:32But I think we need to move from general calling for reforms to a listing of actual reforms.
29:39And I do think, by the way, that in the short run, for particularly the middle-scale business, accelerating and
29:48improving the ease of doing business should have a highest priority.
29:53Now, people are talking about it, but I don't think we've done as much as we need to do.
29:58And what is more, the vast majority of people who actually want it are not sure what it actually means
30:06in reality.
30:07And my suspicion, by the way, is that one part of it is the central government.
30:12I mean, they've done a good thing by setting up a committee to look at what kind of reforms are
30:19needed and recommendations that have been made to get rid of quality control orders.
30:25I think if those recommendations are accepted, it will be a very major change.
30:29I think we should also lower the duties that we charge in many...
30:32Look, with the 12% to 15% depreciation in the currency, it's not clear to me why we need
30:40high duties for these large capital-intensive industries.
30:44If you can cut the duties on steel and viscose fiber and polyester fiber and all the rest of it,
30:51it would be a huge boost to middle industry.
30:53And the other thing is that the complexity of our system is a burden, especially on the middle guys.
31:01I mean, we talk about, you know, encouraging startups, which is very good.
31:05And I do believe that there is a lot of creativity in the country.
31:09A lot of young people are getting into startups.
31:11But the fact is that the system is one in which a person doing a startup is very easily convinced
31:20that it's much easier to do it outside the country than inside,
31:23simply because the systems are so much more complex and time-consuming.
31:27And frankly, we need to get down to it in the next three months and put out a whole slew
31:34of changes so that people could say,
31:37yes, we really have seen a change there.
31:39I think that would make a huge difference.
31:41You know, I've listened to you five minutes patiently, uninterrupted, which is rare,
31:45because that was wonderful exposition from you.
31:47Because you also, in a way, answered the next big question that I was going to put.
31:52What is the biggest challenge facing the Indian economy?
31:55You've touched upon a few, including jobs.
31:58And employment remains, many believe, a structural challenge that economies across the world will face.
32:03Do you agree with that?
32:04Dr. Bhala, you listened very patiently as well to Dr. Aduwalia as he gave us the big picture, the need
32:10for faster reforms, targeted reforms,
32:13not just slogans like ease of doing business, converting it into reality, the startup economy needing very specific benefits.
32:20Do you believe, therefore, the real challenges come now?
32:23There's a tendency to be euphoric every time a headline number is thrown 7.8%.
32:28But the reality, the lived experience on the ground requires greater attention to detail, particularly in critical areas.
32:35How do you provide quality employment to the millions of people entering the job market every month, every year?
32:43In those questions, there are several questions embedded in there.
32:47But give me three minutes and I'll answer all of them.
32:51No, no, I'm listening to you all very calmly today.
32:53I'm enjoying it.
32:54Yeah, OK.
32:55So, number one, I have never, ever been a doomsdayer.
33:01The much-quoted article, which I loved writing and which I still stand by fully, was a problem,
33:09was that our potential growth rate, our capabilities were much higher than what we were producing, number one.
33:19Number two, I was never subscribed that the world is going to hell in a handbasket because of war, etc.
33:27And in my article tomorrow, I point out even the IMF projects growth rate for 26 to be higher than
33:36the growth rate for 25.
33:38So, I am not in that camp at all.
33:42We have, first of all, the world is not, you know, the world figures out a way to handle whatever
33:50it's doing.
33:50And that's the global.
33:52On jobs, I'm glad, you know, I see the stuff coming out on your, this display.
34:02And, you know, there's so much wrong there.
34:05Rajdeep, I don't know where to start.
34:07First of all, there was this thing about poverty, that benefits and the poverty reduction is actually much less than
34:17what the data suggests.
34:18You know, I've wasted so much time of my life trying to say just the opposite, and I have said
34:26it.
34:26So, that's completely wrong.
34:28The other that I have spent too much time on, and I will spend more time on, is this completely
34:37misplaced belief that there are no jobs, no even good jobs.
34:45Salaried workers, you would consider that salaried workers is the best job we have.
34:53That has grown at the fastest rate ever in India since 2011, at the rate of 4% a year.
35:02This doesn't include your family workers.
35:05This doesn't include self-employment.
35:07Jobs is not a problem.
35:10You're saying jobs is not a problem, but, you know, in their August 18th report, the Niti Aayog reimagining skilling
35:16for Viksit Bharat 2047 says,
35:19unemployment among India's graduates is four times that among the general public, and only 1 in 12 or 8.25
35:25% of graduates gets job aligned to their qualifications.
35:28We can't say jobs are not a problem.
35:29You're reading out stuff that I have documented is completely wrong.
35:35So, let me give my side of the story.
35:37You have your side of the story.
35:39No, no, it's not my side.
35:40I've given numbers.
35:40I'll come to then Neil Kand in a moment.
35:42So, just listen, salarated jobs are the best jobs available, and they have grown at the fastest rate possible.
35:53I gave you 4% a year since 2011.
35:56What we have a problem in the world is that because of globalization, because every mother and every father and
36:08every kid in every part of the world said,
36:11go forth and educate and get a college education.
36:16So, we all went and got a college education around the world.
36:20So, therefore, the supply of college graduates, which are the best jobs, has gone up exponentially, and the demand in
36:30the world hasn't gone up at even half that pace.
36:34This is a global problem.
36:37Global.
36:38Real wages in dollar terms have hardly gone up, and if you allow me to come, I will present it
36:45on any channel.
36:47Jobs is not the problem.
36:48And last point, but this is another topic.
36:51What is a problem in India, related to other countries, is reservations.
36:57But I don't want to open that can of words.
36:59Okay.
37:00You know, interestingly, the way you put it, Neil Kand Mishra hopefully will rejoin us because I want to ask
37:07him that question as well.
37:09What are the big challenges that lie ahead?
37:12Remember, Neil Kand is at the moment in Washington, so he has a series of meetings also to attend, presumably.
37:19But we'll try and get him on that question of challenges.
37:21But I just want to put a final googly question to both of you because both of you have tracked
37:26the Indian economy from 1992 to today.
37:30And that question is quite simply this.
37:32Who has handled the economy better?
37:36NDA or UPA?
37:37We've seen 10 years when Manmohan Singh was in power.
37:40We've seen 12 years with Narendra Modi in power.
37:43Montek Singh Aluwalia, you are intimately connected with the Modi government.
37:47Surjit Bhalla, you've closely worked with the Modi government.
37:50I want to ask both of you that question.
37:52And maybe you can give me that question as objectively as possible.
37:56Montek Singh Aluwalia, why don't you go first?
38:00You know, I think this is a typical sort of politically exciting question to ask.
38:06But I mean, from an economist's point of view, it's extremely difficult to provide unambiguous answers.
38:13I would certainly say that during the UPA period, I'm biased because I was part of the government at the
38:19time.
38:19I think the economy was handled extremely well.
38:23International perceptions of the economy improved very substantially.
38:27And it's true that it ran into problems in the last three years.
38:31In any 10-year period, you can occasionally get governments run into problems.
38:36We were seen as part of the Fragile Five.
38:39That point is hammered home time and again, at least politically.
38:43That in those last few years, we were seen as part of the Fragile Five.
38:48No, that is a wonderful phrase which I think one of the TV channels popularized.
38:54See, the interesting thing about the Fragile Five is that we got out of it within one year.
39:00As a matter of fact, personally, I would say that the economic management of the economy in 2013,
39:08when you had a huge capital outflow from all developing countries, the rupee came under pressure.
39:15We were able to bring it back without getting any external assistance, etc.
39:21And I think that showed that the economy had a great potential to deploy multiple instruments.
39:28We also allowed the rupee to depreciate, which was the right thing to do.
39:31And I think to some extent, that's what we've done now.
39:35I mean, given the rupee had overappreciated in real terms, it's good that in the last year or so, it
39:43has corrected itself.
39:44So, I mean, I think that the real difficulty is that if we are judging our challenge today
39:52in terms of what the challenge is lying ahead of us, I think we have really very large challenges
40:01which require different responses, not conventional ones.
40:05For example, if you've got a global situation where you're not sure what is an assured supply chain
40:13or a supply link that you can rely on, so what do you do?
40:18I mean, how much do you rely on diversification?
40:21How much do you rely on producing things yourself?
40:24You've got climate change, which is becoming a major problem.
40:27And it's being under-emphasized in the West because they're taking their eye off it.
40:32But we'll be the ones who will be most affected.
40:34You can see what's happened in Nepal, which is all the result of Tibetan ice kind of melting
40:40and causing disasters in Nepal.
40:43And the Nepalese are saying that those who have caused the climate warming should somehow compensate us.
40:49I mean, you know, I think you cannot make these simplistic calculations without taking into account all these things.
40:59Yeah, the external environment does matter.
41:01There were tough times between 2008 onwards in particular.
41:05There have been tough times since COVID also in 2020.
41:09So, Surjit Balla, you want to dive into that question?
41:14You're never short of making controversial comments.
41:16If I asked you a direct question, who's handled the economy better, India or UPA?
41:20Yeah, I've never shied away from politically loaded questions, number one.
41:28Number two, I've worked with every government since 91, since 96, more precisely.
41:37So, that's...
41:38Okay.
41:38So, what's your answer?
41:39So, the answer is as follows.
41:42And you have to...
41:43Look, if you look at the data, living standards have improved at a substantially faster pace
41:55under the Modi government than before, number one.
42:00Poverty reduction has proceeded at a faster pace under the Modi government than before.
42:07The growth rate has proceeded at a slower pace than 2004 to 11.
42:16Now, coming to the determinants, where are the fault lines?
42:22The Manmohan Singh government was under its tenure.
42:29Import tariffs were brought down.
42:32We became a more open economy under them.
42:37And that is to the positive.
42:39I mean, that's really, really good.
42:41We have become a more closed economy in the Modi administration.
42:48I attribute...
42:49So, our potential growth rate, because of the increase in education in the economy, has gone up.
42:58And our growth rate has broadly stayed the same.
43:01That is a big black mark against the Modi government.
43:07We have not lived up to our potential.
43:10Last but not least, I think the influence of the deep state, which was much less in the Manmohan Singh
43:20government,
43:21is now dominant in the Modi government.
43:25That's a huge negative.
43:27That is why we are not getting the right policies.
43:31What you're saying when you say that, let me get that clear.
43:34You're saying when you're saying the influence of the deep state is much greater,
43:37you're saying there is greater fear.
43:41Businessmen face...
43:42Presumably, right?
43:43What do you mean when you say the influence of the deep state is greater?
43:46There's an atmosphere, a climate of fear?
43:48No, no.
43:49I want it clear.
43:50What do you mean when the deep state...
43:51The deep state is the people who influence politicians, and they basically think of the short answer about the deep
44:04state,
44:05which I've tried to do in several articles, is that it is not the politicians.
44:11It is people who decide policies, and this is major industrialists, so they have gained ascendancy in India under the
44:22Modi government than before.
44:25So the big business, the cronyism, let's use a simpler word, you're saying cronyism.
44:29Call it cronyism.
44:31That's a loaded term, but yes.
44:33Our protection rates have gone up.
44:36QCOs have been invented.
44:37We don't allow foreign investment.
44:40There's a whole slew.
44:42Why is that happening?
44:43And why are tariffs on inputs like polyester 25%?
44:50I mean, why?
44:51You guys don't ask these questions.
44:54Those are the questions we should ask this government, rather than saying, oh, you're fudging the data or something like
45:01that.
45:02Why?
45:02Why have we become a more closed economy?
45:06That's the question to answer.
45:07And who's responsible for it?
45:09Who is dictating the policies?
45:11I also happen to think, along with the deep state, that basically we need to change the administration system.
45:19The IAS, the ICS of old, IFS, I mean, they are not fully capable of coping with the modern world.
45:31And they have gained ascendancy under the Modi government.
45:37Can I therefore ask you, Montek Singh, if there was one thing, therefore, that you'd like to see change?
45:43And this is irrespective of governments.
45:45Every government has had their achievements.
45:47They've had their failings.
45:48And we need an objective analysis.
45:50Since 1991, every government, in a sense, has taken our economic growth part in some way or the other forward.
45:56But if there was one piece of advice that you would give the Modi government, what would it be?
46:01A quick answer, sir.
46:03No, no.
46:04That's the kind of quickie question that I don't feel confident to ask.
46:08I mean, I've said a lot, I agree with what Sujit has said, that any signal that would signal to
46:19both our own industry and to the world that we are going to be a more open economy and have
46:25confidence in our own ability to compete, this would be very positive.
46:29Now, I mean, who's holding it up?
46:32Is it bureaucrats, politicians?
46:34I don't want to speculate on that.
46:35But I think this is something that needs to be much more thoroughly discussed.
46:40Because believe me, there are people who don't agree with this view.
46:45Then I think we should face that.
46:46There are people who would say that this open stuff is old-fashioned, this is not the way to go,
46:52et cetera, et cetera.
46:52So I think we are faced with a situation where if a politician wants to invoke an alternative expertise, it's
46:59very easy to do that.
47:01That's where you need a debate.
47:02You want to be clear.
47:04What is it that you want?
47:05I'm very clear.
47:06I agree with Sujit.
47:07We ought to be more open than we are.
47:09By the way, give credit.
47:11The biggest credit, I think, you could give the government is the signature of the FTAs with both UK and
47:18EU.
47:18Those are the main ones.
47:19I think we should carry that further and apply to join the CPTPP, which is the Asian group.
47:27It doesn't have China in it.
47:28So our industry is very reluctant to join a group which includes China.
47:33Okay.
47:34But is there any reason not to join the CPTPP?
47:37Okay.
47:38It's surprising that this is not an issue which is debated.
47:42People are not asked, why aren't we doing that?
47:45That's what you need to do.
47:46You know, President Trump described India as a tariff king.
47:51And quite honestly, he was not wrong.
47:54Because as Sujit says, we were continuing to be tariff kings wrongly.
47:59But all said and done, when we've signed an FTA with the EU, signed one with the UK,
48:05and if we would also join CPTPP, nobody could say that we are tariff kings.
48:12So let's give that signal.
48:13Okay.
48:14I think, you know, what I've learned from this is that we started off by questioning methodology.
48:18And all my guests, Neil Kunt was also with us, say, forget that.
48:22That's not the question at the moment, top of the mind.
48:25The question lies in sustaining growth momentum, in the challenges that lie ahead,
48:30and the question of a Vixit Bharat that will require, I think, as most economists say,
48:3410% plus sustained growth over the next 20 years.
48:38You need to think bigger, you need to think larger, you need to open your minds and explore
48:42different areas when it comes to the challenges and opportunities that lie ahead.
48:48Montek Singh, Aluwalia, Dr. Surjit Bhalla, and Dr. Neelkand Mishra for joining me here on
48:53this very special show.
48:55Thank you all so much.
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