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    We stand our ground when it deals with India's interest and people have begun to respect that: Sanjeev Sanyal

    Synopsis

    “While I always take forecasts with a pinch of salt, at least for this year and the next, the IMF clearly forecasts us to be growing at much higher rates than even China and I think that is sustainable. We are on a good wicket here and we should pursue our rational policies as far as we can, maintain flexibility, continue to pursue international export markets, upgrade our technology and not be apologetic.”

    Two-volume format of Survey was unwieldy: Sanjeev Sanyal

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    “If we want to be on a global scale, we need to be able to have Chinese scale factories. We are now thinking like a country that can be an alternative to all this. While we always restrict ourselves in various ways, in the last few years we have begun to think on the correct scale – in terms of infrastructure, policies and ambition – and those are beginning to pay off,” says Sanjeev Sanyal, Member, Economic Advisory Council to the PM (EAC-PM).

    In the short term, there are some headwinds in terms of global inflationary pressures, the war in Ukraine and its impact on commodity prices and obviously the disruption which is still continuing in the global supply chain in some form or the other. How concerned are you about the global growth situation in the Indian context?
    There is no doubt that globally inflation is a major issue and here in India also, we are seeing some part of that flow through to prices. We are an energy importing country and we cannot be insulated from global oil prices.

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    Other commodities are also high and in that sense, we and the government are watching these price rises with some concern on the energy front. Domestically driven inflation is not really the issue in the case of India, supply side is responding wherever possible, Wherever there are these imported disruptions, whether it is for oil or for things like chips, where the disruptions are filtering through to sectors like automobiles, we need to be cognisant of the fact that these are pressures that we need to take into account.

    What can we do? Well, one is to keep our supply side at least internally so that the feed through is as minimal as possible. Very importantly, maintain macroeconomic control and this is very critical for the medium term, whether it is in terms of money supply or domestic interest rates. We have already seen that the Reserve Bank has preemptively begun to increase interest rates and the money supply in India, even through the cycle of the pandemic, where many other countries may have gone overboard with their monetary easing.

    We maintain money supply growth at a reasonably controlled level. All of that means that from a macroeconomic stability perspective, things are in control but we are part of the rest of the world and we have to be cognisant that there will be some feed through to us.

    In the long-term scenario, one thing which has emerged very clearly post pandemic and even now continues to evolve is the world’s attention on China plus one policy. If we keep all these factors together, then there is a good case for the Indian economy to remain in a high growth trajectory for a couple of years to come as a country. How do we capitalise on that?
    You are absolutely right. Globally, supply chains are indeed diversifying and India is an obvious country to take advantage of that. People are beginning to appreciate a much more stable democratic political system. They are also appreciating the large number of supply chain improvements we have done, not only in terms of external but even internally inside the country in terms of building up the roads, highways, air networks and so on Also, very importantly being able to implement the GST system.

    Till very recently, we were not an internally integrated market. We are not a common market. We could go around the world and say India is a large market but in fact, we were not a common market. So, with the implementation of GST, we are able to leverage our internal market. All of this means that we are in a position to create scale which is something that historically we were not very good at doing, particularly in the manufacturing sector.

    So, infrastructure on one side, building up a common market on the other side and then using schemes like the PLI Scheme in order to create scale again. An important issue that we historically had is that in the name of protecting the MSME sector, we introduced all kinds of restrictions which actually restricted them. So for the first time, we have created a PLI Scheme which is like a ladder for allowing medium sized players to scale up very rapidly and even for larger players to scale up to be even larger.

    If we want to be on a global scale, we need to be able to have Chinese scale factories to have those economies of scale. It is important to understand that we are now thinking like a country that can be an alternative to all this. While we always restrict ourselves in various ways, what is good in the last few years we have begun to think on the correct scale – in terms of infrastructure, policies and ambition – and those are beginning to pay off.

    I understand that people are looking at India as an alternate manufacturing destination or a supply chain port of sorts. But how are we placed otherwise in this global geopolitical cum economic scenario?
    The important thing to deal with an uncertain, evolving world is that we need to engage with it keeping in mind our national interests and also being unapologetic about following those national interests.

    Whether the way we dealt with the RCEP issue, we felt that RCEP did not fit into our national interest. There was a lot of pressure to go in and sign up for it. We did not, but that does not mean we are booming into a sort of inward looking import substitution kind of worldview that is not at all true. We have pursued free trade agreements with other countries. We recently signed one with Australia, we have done with UAE, we are aggressively pursuing other ones for example with the UK. So, it is not that we do not recognise the evolving situation, we take a pragmatic view of what the options are at each point in time and evolve with it.

    The same thing has happened even with the issue of our response to sanctions with Russia. We stood our ground as far as importing Russian oil is concerned and ironically many of the critics of that policy are themselves importing gas and oil from Russia on a much greater scale than we are. But in the past, we would have quite easily caved in. What has changed is that we stand our ground when it deals with our interest and people have begun to respect that.

    Since you mentioned energy and this is a slightly short term issue, but coming to energy prices, crude is hovering way above our comfort level and even above our budgetary estimates. Maybe from a medium to long term view, it will settle down or it will adjust itself in the current fiscal situation where we have a couple of issues to tackle..
    We are an importer of oil, High oil prices hurt us; there’s no question about it. Certainly oil prices in the range of $110 per barrel is something we in India are not happy about but we have to deal with it in various ways, particularly in terms of the feed through to the general population.

    We have limited scope for manoeuvering and one of the things we did back in November was to cut some of the taxes. Some of the states also cut taxes. Maybe some of the states that did not cut taxes can now perhaps follow through but at some level we have to realise that whatever the feed through we allow, if we do not want that feed through to happen there is a fiscal price. Somewhere we have to make adjustments – whether it is in terms of cutting taxes or some other way and each one of those measures have some price to be paid.

    At the margin, maybe we can buy some oil from Russia or some such thing but frankly in the end, we have to figure out a way of becoming much more independent in this imported oil problem. As it happens, we may not have a lot of hydrocarbons in India but we are in doubt with a lot of sunshine. So, renewable energy is an area that is of interest to us. We also need to maintain a bouquet of other sources as well.

    I am a votary that we should pursue nuclear power seriously and of course some amount of coal based electricity production also needs to be maintained in this country and even into the future. Whether it is driven by domestic mining or by imports from Australia, we need to maintain a certain mix of energy so that if any particular source of energy suddenly becomes expensive or difficult for whatever reason, we have other sources to make up for it. But of course, not merely for climatic reasons but simply because of the nature of our natural resources, pursuing renewable, particularly solar, is something we need to do and sustain.

    When we are looking at the next 25 or even 50 years and the kind of potential that India holds, how concerned are you about the Federal structure because in many cases, we have seen that states drag their feet on the policies and projects announced and rolled by the central government. From a foreign investor point of view or purely from a confidence point of view, it sometimes becomes a dampener. How do we address that?
    The various roles of different levels of government are laid out. There are things that the central government needs to do and hopefully we are doing a decent job of it. Incidentally, the specific case of the legal system being upgraded to a larger section, depends on the judiciary and not even on the central government.

    But yes, things like municipal services in particular or local support for industry and business has to come at the state level or even at the municipal level. It is true that there is a fairly wide range of outcomes depending on the states. My view is that while there is a certain amount of top down incentivisation that the central government can do for specific things, I am a believer that ultimately one has to allow democracy to work.

    This is not about the Planning Commission or the Prime Minister’s Economic Council or Niti Aayog who are headmasters who must be telling what the states should do, that is not at all the case. Ultimately, the people of these individual states have to demand services and that is the only way it will work in a democracy. There is no easy way. Until people demand services and quality, one cannot resolve this issue and it goes back to the core of that.

    The good news is that people now have much better sources of information. Very often you will have relatives in different parts of the country and social media. All of this means that people are getting much better information access than they probably ever had and presumably, if one or two states do a lot better than the others, then news gets around.

    That ultimately is an important part of this and I do not think it is about people sitting in the Centre wielding a headmaster stick that is the ultimate way. I am much more in favour of a decentralised bottom up approach of competitiveness that ultimately allows local governments to perform better.

    The two major challenges that the entire southeast Asia faces is climate crisis or the climate emergency as we call it and the second in case of India is creating the right kind of jobs for the right kind of people. We need many more jobs than what we create in the formal sector. What is your view on these two very critical issues?
    As far as climate change is concerned, it certainly is an important issue and climate change is something that happens all the time throughout history. Our first urban civilisation, the Harappan Civilisation, ultimately got destroyed by climate change and the drying up of critical river. We know that climate change is a very serious thing and does have major ramifications. We need to not just think about mitigation, but a lot more about adaptation.

    Whether we like it or not, the climate will now change and we are probably already well past the tipping point. We should be prepared for major change and it requires us to be a lot more flexible on all kinds of things. For example, in agricultural policy, we need to pay a lot more attention in terms of much more resilience of crops rather than just growing more and more calories which is how we have currently set up agricultural policy.

    So, crops like millets, which are more resilient to variation in climate, are things that we need to take more seriously. As far as jobs are concerned, creating more and more jobs is an important part because we need to deploy more people in new and emerging sectors. This is critical because we are also going through the demographic cycles for the next 20-25 odd years. A disproportionate part of our population will be of working age and we will need to be able to absorb them. So, it is very important that we create jobs.

    However, you had a statement in there. The right kind of jobs for the right people. I do want to make it very clear that I am uncomfortable with the idea that you know this is done in a planned sort of way. Most of the jobs of the future are still not known and they will emerge out of areas that we have not imagined. So I am a little uncomfortable with this idea about having top down policies to try and guess where these jobs will pop up from. Policy makers and bureaucrats are notoriously poor at being able to guess that.

    So what really matters is to maintain open policies, allow for creative destruction, allow for flexibility, make sure that the frameworks in which entrepreneurs, start-ups companies and individuals take decisions remains as easy as possible so that there is ease of living and ease of doing business.

    As things evolve and new sectors rise and so on, our job market is able to evolve with it. I think that it is very important to create the conditions for this evolution rather than try and guess where those jobs will be. I am very sceptical of the ability of policymakers to be able to guess where they will be.

    How do we capitalise on the democratic dividend apart from the demographic dividend?
    I think we Indians are way too apologetic about the noisiness of democracy. It is noisy, there are lots of opinions that bounce about and sadly we tend to think that is somehow a disadvantage. My own view is that since the entire basis of my argument is to allow for a churn of creative destruction of all kinds of flexibility, in that context, democracy is also true in the political sphere as far as democracy is concerned.

    There are lots of different people coming up with new ideas. Let that churn, some of them will get tried out in different states the better ones will presumably survive and so on. In that way, we will make our way forward. This allows for a certain degree of flexibility that other systems may not have but it does require one thing that we as Indians have faith in this messy process and at the beginning, we are way too apologetic about this, especially when we are dealing with foreign media critics for example we tend to get all very defensive

    There is no reason for us to be defensive whether it is in terms of the way our system is messy as it may be or in terms of our pursuit of national interests in international forums. There is absolutely no reason for us to be apologetic. We are now the world’s fastest growing economy, democracy or otherwise. While I always take forecasts with a pinch of salt, at least for this year and the next, the IMF clearly forecasts us to be growing at much higher rates than even China and I think that is sustainable. We are on a good wicket here and we should pursue our rational policies as far as we can, maintain flexibility, continue to pursue international export markets, upgrade our technology and not be apologetic.



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    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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