BR Shenoy Memorial Lecture 2026 | Professor Arvind Subramanian

BR Shenoy Memorial Lecture 2026 || Professor Arvind Subramanian

Source: https://www.youtube.com/watch?v=O4ah1ur4X8w Duration: 6096.3s

Speaker 1 (00:00): Is neoliberalism relevant for India today? My answer is going to be yes, yes, and mostly yes. The best way to acquire power is consistent 10% growth. So there’s no one AI-specific intervention that I think we can do. It has to be across the board. Three chairs for Professor B.R. Shenoy.

Speaker 2 (00:23): Welcome to the 2026 B.R. Shenoy Memorial Lecture, organized by the Center for Civil Society in New Delhi and the Economics Research Center, Mangalore.

Speaker 3 (00:31): My name is Kumar Anand and I will be your host this evening. Our distinguished speaker today will be Dr. Erwin Subramanian, Senior Fellow at the Washington, D.C.-based Peterson Institute for International Economics. And the title of his talk will be, Is Neoliberalism Relevant for India Today? The talk by Professor Subramanian will be for about 45 minutes,

Speaker 2 (00:53): after which we will have about 30 to 35 minutes for a question and answer session with the audience who are joining us live you can please type your question in the Q&A box in the zoom here and we’ll take up and we come to it before introducing our speaker let me first say something about professor Bia Chinoa or BRS Bellicote Raghunath Senoy was born as one of the 11 children of a poor farmer in a small village of Bellicote near Kangana in Kassargo district of Kerala in 1905 when Lord Kersen was the Viceroy and he passed away in Defense Colony New Delhi in 1978 31 years after India’s independence inspired by inspired by Gandhiji’s BR Gandhiji BRS ran away from home while still in school arrested in a Bombay procession carrying the flag he was put in Nagpur Central Jail one of his much older prison mates who was also the founder of Banaras in the University offered him a scholarship if he successfully completed his schooling after release from prison. Later, moving from Bellicote to Banaras, BRS completed a BA and an ME in economics, and then as a topper, received scholarship to study at the London School of Economics. He took courses from Professor F.A. Hyatt and submitted his first paper, one of the first by any Indian and still available online, in the 1934 volume of the Quarterly Journal of Economics. Returning to India, he worked on monetary economics at the RBI, advised on setting up the central bank of Ceylon and served between 1951 and 53 as the executive director of India at the IMF in Washington. He later resigned from government service to be able to write freely and join Gujarat University as head of the School of Social Sciences and later set up his own economic

Speaker 3 (02:42): research center in defense colony, New Delhi. The story of Professor Biashinoi’s note of descent to the draft of the second five-year

Speaker 2 (02:51): plan is well known. Twenty distinguished economies said yes to the draft plan and one said no. An emissary of Pandit Jawaharlal Nehru then at the height of his power and prestige was given

Speaker 3 (03:01): a courteous but unilting reply. Please tell Panditji I will not withdraw. Over the next 20 plus years, BRS kept writing and lecturing largely unheeded, making the case for a free market economy in India. His argument slowly helped turn the intellectual tide by 1991 a full-blown economic crisis one that forced the government to pledge its gold reserves to foreign banks push the country onto a new path of reform he passed away in 1978 and did not see it happen but professor Bia Chenoy was proved prophetic in many ways he called the complex and rigid constraints on businesses a permit license large and predicted that removing the system would lead to prosperity he said a flexible adjustable exchange rate reflecting reality would remove the unceasing balance of payment crisis and foreign exchange shortages even saying the Indian rupee could one day become a hard currency he said we could follow Gandhiji’s talisman of seeing the faces of the poor when considering policy economic growth was not a statistics but a better life for every Indian one day

Speaker 2 (04:14): someday there would be a development was super kubito I gave the search for the a bright mix of policies for which for such a dream of fixed by the constant to continue in this search. Our speaker for the twenty twenty six memory lecture brings impressive experience and a

Speaker 3 (04:30): distinguished background. Professor Arjun Subramaniam is a senior fellow at the Peterson Institute for International Economics. Previously, he has taught at Brown, Shoka and Harvard universities. He served as the chief economic advisor to the government of India between twenty to 14 and 18. He currently also advises the state governments in India on macroeconomic, fiscal and sectoral issues. Foreign policy magazine named him one of world’s top global thinkers

Speaker 2 (04:58): in 2011. His latest book co-authored with Devesh Kapoor, A Sixth of Humanity, Independent

Speaker 3 (05:04): India’s Development Odyssey was a Financial Times book of the year. A chief economic advisor, His annual economic survey of India became a widely read document of on Indian economic policy and development. The twenty eighteen survey had twenty million views from over one ninety countries in his first year of publication. He was closely involved in the design of the nationwide goods and services tax and several other policy initiatives.

Speaker 2 (05:31): His reflections on his tenure were published in the book of Council, the challenges of the Jaitley Modi economy. This critically acclaimed book, Eclipse, living in the shadow of India’s economic dominance

Speaker 3 (05:47): in the shadow of China’s economic dominance sold over 130,000 copies and was translated

Speaker 2 (05:52): into four languages. On behalf of the economic of the economic business center, Mangalore and Center for Civil Society in New Delhi, it gives me great pleasure to welcome our speaker, Professor Arvind Subramanian to deliver the Biashanai Memory Lecture 2026. Professor Subramanian, welcome please.

Speaker 1 (06:08): Over to you. First of all, good evening. Thanks, Kumar. I’m really honored to have been invited to deliver this Biash Shannoy annual memorial lecture. I want to thank Professor Subodh Shannoy for initially reaching out to me, and of course, to the trustees of both Center for Civil Society, Shri Giridhar Prabhu, Dr. Pat Shah, Dr. Amit Chandra, thank you so much for inviting me. Knowing what we all know about Dr. Shino, it’s really an honor to be here. The title for my talk is, is neoliberalism relevant for India today? And a lot of what I’m going to say is going to drop on my recent book on India with Devesh Kapoor, A Sixth of Humanity.

Speaker 4 (07:06): And so let me just begin by saying that to the question, is neoliberalism relevant for India today?

Speaker 1 (07:15): My answer is going to be yes, yes, and mostly yes. And why those three yeses, you will see, you know, I want to keep the suspense hanging over the next 15, 20 minutes. I’ll get to that. But yes, the answer to that is short answers are yes, yes, and mostly yes.

Speaker 4 (07:38): Now, we’ve just heard a wonderful description of Professor Biashanoy’s life.

Speaker 1 (07:44): Let me just, you know, I’m not, you know, an expert on his life, don’t know that in that much detail. But I did read up a little bit about him, of course, in the course of the research for the book. But more recently, there have been some excellent, you know, writings on him by Aditya Balasubramanian in his excellent book. I also consulted Niranjan Rashad Yaksha for some of his writings as well. It seems to me that three qualities are quite amazing about Professor Chenoy. One, obviously, which is going to be the subject of the talk, that he was a remarkably prescient economist in his advocacy for markets and openness and freedoms. Second, I mean, if you read his writings, you do come across a man who possessed a deeply democratic sensibility. And, you know, I kind of highlight that even in his dissent note, I’m going to highlight that. And of course, maybe for me, what has been most appealing is that he embodied the, you know, the independence of a contrarian, the willingness, as you just said, Kumar, that he said, replied to Panditji saying, you know, I’m going to stick to my guns. That echoed to me personally, because I was not so long ago on a government committee. I wrote the sole dissenting note to that committee. I was asked by even Mr. Arun Jaitley said, Arun, please reconsider. And of course, you know, in the spirit of Biashnoi, I did not reconsider and I stuck to my guns. And of course, even more closer to home and a bit more controversially, I have, as you know, questioned the government’s GDP statistics, the COVID numbers. So, you know, kind of questioning authority, not taking this for granted, I think is one attribute of Dr. Shunai that I really, really admire. And, you know, it’s kind of truly inspirational for all kind of independent, disinterested analysts. I think especially in this era where this is becoming a much more scarce commodity. I think that’s a trait that’s truly inspiring.

Speaker 3 (10:08): Now. So, you know, one has to define what neoliberalism is.

Speaker 1 (10:15): And, you know, we can, you know, be here till, you know, till the end of Kali Yuga and not agree about what neoliberalism is. And, you know, it can be you can overdefine it, you can underdefine it. But let me just give you some simple tenets, which I think most people, especially Professor Chenoid, would agree on. One, a large role for the private sector and markets in economic activity. Second, I think nobody would disagree that, you know, markets need governments to create them, you know, by having rule of law, protecting property rights. Very importantly, providing public goods such as infrastructure, health and education. The government also has to correct markets often, you know, the negative externalities through regulation, monopolies, for example. governments have to stabilize markets you know I think this comes through in the writings of Professor Shanoi I mean you know preserving low inflation avoiding crises via appropriate macroeconomic policies and financial sector regulation and of course the state has to legitimize markets as well if markets produce outcomes that are completely beyond what is socially acceptable like you know preventing very very extreme inequality protecting the vulnerable So the state, so this whole opposition of states versus markets is a bit overblown. And I would submit it’s a bit of a Western, you know, imposition. We in India, you know, we’ve always been aware because we came from a position of, you know, the state doing everything to having wanting the state do less. But we were never under any illusion that the state should walk away from economic activity.

Speaker 4 (12:05): And it had some important roles to perform. So the false opposition, I would say we should get away from.

Speaker 1 (12:12): And of course, the third thing, you know, a degree of political agency and freedom for all citizens, I think, would be part of the neoliberalism playbook, as it were. And I think these three things are fairly unobjectionable. And that’s what I will mean by, you know, neoliberalism in this talk. Now, I’m going to now do an aside on the history of economic thought, in which I’m going to mildly criticize Professor Chenoy. And I think but it’s just useful for me in writing this book, you know, and thinking about development more broadly. I think to me, if you go back to the 1950s and that era, the most damaging idea, in my view, on development economics was somehow the notion that development was constrained by savings.

Speaker 4 (13:10): By, you know, the whole objective is how do you raise savings to finance a given level of investment?

Speaker 1 (13:19): I think Professor Chinoy, I think, shared this with all the economists of the era. It was not that he believed that savings was not important. What was important to him was and where he differed from everyone else on the on the second five year plan. He said, don’t increase saving by reducing consumption undemocratically or via inflation. I mean, that was, I think, the main thrust of his dissent note that, yes, we require savings, but don’t achieve that through undemocratic means. He had that famous line about the KMT. And also, he was really averse to inflation as a way of reducing real consumption because he felt that really affected the poor. So in some ways, he said, don’t do what Mao and Stalin did, because, as you know, they basically reduced consumption by killing tens of millions of people. And I think Professor Shinoy was totally against that.

Speaker 4 (14:24): But I think what all economists of that generation missed, including, you know, all the growth and development, very lustrous names. And this is something I would one notable exception was I.G. Patel.

Speaker 1 (14:37): and what the East Asian experience demonstrated, that savings are not a constraint on development, that if you grow, follow the right policies, savings will come automatically.

Speaker 4 (14:51): And this is a chart I have,

Speaker 1 (14:53): which I’ve written in a recent piece. It compares per capita consumption growth in China, Japan, Korea, and Taiwan,

Speaker 4 (15:01): indexed at their takeoff point to 100.

Speaker 1 (15:05): And what you find, and this is very important in the current debates on Chinese mercantilism, is that China is a country that is arguably the highest saver in the history of humanity. Right. But its high savings came about through high growth. And therefore, what this chart shows is that if you can deliver the growth, you can also have very high consumption growth. So the whole notion that they had that there’s some sacrifice between current consumption and future consumption, I think that was the big ideological mistake of that point. And that happened because the planners of that point, you know, the famous Lewis Feldman Marlonobis model thought that savings were fixed. And the damage came from looking to the Russian experience, the Chinese experience, or sorry, the Soviet experience, instead of looking at the East Asian experience, where they basically said, if you improve agricultural growth and agricultural productivity, indeed China after 1978, you’ll have savings coming out of your years and savings will not be an impediment to development. So I think this is just an aside on the history of economic thought, where I think Professor Chenoy also, I think, shared this idea, although he had his own differences with others.

Speaker 3 (16:30): Now, in India, this is just a chronology.

Speaker 1 (16:36): Broadly, what we say in the book, that India has had four periods of economic growth and economic policy. 1950 to 80 is the era of planning. Danny Roderick and I wrote about how the 1980s is the first era of import substitution. And of course, the neoliberalism era was somewhere between, I would say, the late 80s even, and then after the 91 reform, going up until 2010. And then we have had a period thereafter, which I will talk about later. So roughly the mid 80s and especially 91 to about 2010, 2012 is kind of the peak era of neoliberalism in India.

Speaker 3 (17:19): So the question is, what did neoliberalism ever give us? And I want to say the place is famous. I hope I hope you can. It’s coming on. It’s a Monty Python sketch. They bled us white bastards. They take everything we had. and not just from us from our fathers and from our father’s fathers and from our father’s father’s fathers yeah and from our father’s father’s father’s father’s you’re right don’t labor the point and what have they ever given us in return the aqueduct what the aqueduct oh yeah yeah they did give us that that’s true yeah and the sanitation oh yeah the sanitation reg remember what the city used to be like yeah all right i’ll grant you the aqueduct and sanitation are two

Speaker 5 (18:06): things the romans have done and the roads well yeah obviously not roads i mean the roads go without saying don’t they but apart from the sanitation the aqueduct and the road irrigation

Speaker 3 (18:16): medicine education yeah yeah all right fair enough and the wine

Speaker 5 (18:23): yeah yeah that’s something we’ve really missed reg if the romans left public baths and it’s safe to walk in the streets at night now reg yeah they certainly like to keep order let’s face it the

Speaker 3 (18:32): the only ones who could in a place like this.

Speaker 5 (18:36): All right, but apart from the sanitation, the medicine, education, wine, public order, irrigation, roads, the fresh water system and public health, what have the Romans ever

Speaker 3 (18:46): done for us? Brought peace. Oh, peace. Shut up.

Speaker 1 (18:52): So what did neoliberalism ever give us? This Monty Python sketch is basically the famous one about what did the complaining, what did the Romans ever give us? And they say they gave us aqueduct, sanitation, freedom, rule of law, peace.

Speaker 3 (19:05): And so in that sense, if you think about that era, everything improved in India’s neoliberal era.

Speaker 1 (19:15): I mean, it was not just the era of the most rapid economic growth. And we show this in our book. It was faster space of poverty reduction. India’s poverty came down from about a 55-60% headcount ratio to the low teens, about 11% by 2011. Even in terms of all the things we care about in terms of distribution and society, you see the biggest changes happened in the neoliberal era. You know, people forget that the neoliberal state, the Indian state, became the caring state after the 1990s. You know, investment in public infrastructure, in education changed. And of course, a lot of this was because of a rapid economic growth itself. And I think in some ways, you know, infrastructure improved, educational attainment improved, you know, state capacity improved. You know, before this, Rajiv Gandhi used to say that of every rupee or only 10, 15 paisa reached the per. And of course, over the last 20, 25 years, we’ve seen that improve considerably. And we’ll come on to that later. And I think much more importantly, it transformed India in a very cognitive sense. India, you know, to use the, you know, the Naipaul trilogy as the metaphor. India went from, you know, civilizational grievance, darkness to an India where, you know, it became an India of mutinous aspiration because, you know, people said anything could happen. The future is going to be better. And that was the fundamental cognitive transformation that happened in India’s neoliberal era. Now, but of course, there were things that I think were also things that happened that were, I think, somewhat problematic. I mean, we got rapid growth. What we say in the book is that we got East Asian styles of levels of growth, but we never managed the structural transformation of the economy. And even today, if you see the chart on the right hand side, organized employment or factory employment, however you want to measure it, is still very small. So India never managed to create the kind of jobs, a formal sector, reasonably well-paying jobs for a vast majority of its population. And that’s a kind of endemic Indian blot, as it were, on the Indian economic landscape, which didn’t happen. Of course, on the left hand side, you see the critiques of neoliberalism would say that it created extreme inequality. And to some extent, that’s true. I think the number of billionaires, this is a chart that shows the number of billionaires in different countries, you know, at different points in their development trajectory. And you do find that India, you know, has many more billionaires and has much more extreme inequality in that sense compared to other countries at a comparable stage in development. And I’m going to talk about that later in terms of what neoliberalism did not deliver. And the other thing, I think, although, as I said, vast improvements in all the social indicators, health education, I think it’s fair to say that these were improvements more in the quality quantity rather than in the quality. And in the book, this is a chart that shows, you know, how India on the left hand side did very well in improving infant mortality, but on child stunting made less progress. Similarly, enrollment improved, but learning outcomes haven’t improved. You know, life expectancy on the whole has come down, but nutrition reflected in heights has not made similar progress. And so these are challenges that remain. But things are still much better in the neoliberal era than otherwise. Of course, the one last thing which we can talk about later on, the other legacy of the neoliberal era, was that we had very rapid growth, but very uneven growth across the states. And this is a chart that shows, you know, this is a chart that shows per capita GDP of the different states. In 1960, you can see all expressed as a share of the national average. In 1960, they were all bunched up, all close to each other. The richest was, you know, two to three times richer than the poorest state. But then beginning the 1980s, but especially today, that divergence has just exploded. And, you know, per capita GDP in the richest states is five to six times. So this was a consequence of rapid growth. Rapid growth was uneven growth. And this has created the problems of fiscal federalism that we can talk about in the Q&A. But just wanted to note that liberalism delivered a lot, but also, you know, it had these outcomes as well, which I think we cannot gloss over or ignore. Now, just to step back, the neoliberal era in India was also the neoliberal era globally. And so I’ve done some research with my colleagues from Harvard and the Center for Global Development, that it was not only a period of growth for India, it was a remarkable piece of, you know, change and development for developing countries as a whole. And what this chart is from research that we’ve done, it shows the share of countries that were growing faster than the G7 from about 1960. And what you find is that from about the mid 80s onwards, globally, more and more countries started growing faster than advanced countries. We call this the period of rapid catch up convergence, as it were. And, you know, and so this was not really good for India. It was, you know, great for countries in the world because prior to that for 200 years, poorer countries were poor because they consistently grew slower than rich countries. It was a period which Land Pritchett called divergence big time. But the global neoliberal era was also a thing when that dynamic globally changed and developing countries as a whole started catching up.

Speaker 4 (25:59): So so so the Indian neoliberal thing coincided with the global neoliberal era. But then something happened. And this is important to note as intellectuals is around 2010, the West abandoned neoliberalism and globalization.

Speaker 1 (26:19): They abandoned it because they thought that it led to China becoming too powerful, China de-industrializing the West. It happened because the global financial crisis happened. So the whole global model of finance based capitalism in the US came into disrepute. Other things happened on the Iraq wars. So essentially, neoliberalism got discredited. And of course, inequality rose very rapidly in the West. So all the ills of the West were placed on neoliberalism, as it were, and globalization. So the West turned inward. Now, I think it’s one of those tragic things that India also turned away from neoliberalism. It’s a bit of a tragedy because I would say in some sense we were, you know, intellectually enthralled to the West. We kind of did some intellectual mimicry or, you know, intellectual imitation of the West. And we, too, turned against neoliberalism when, in fact, this neoliberal era served India, China, many other developing countries like no other period in modern economic history. So it’s a pity that we took our cue from Western intellectuals, especially Western progressive intellectuals who turned against neoliberalism for ailments in their own countries, which may or may not have to neoliberalism. But we turned against it, despite it having delivered for us, you know, as I showed you, what did neoliberalism give? It gave us, you know, the aqueduct, sanitation, rule of law, freedom, peace, and good wine. That’s a piece that you missed and good wine as well. And that was I think this is one of the major intellectual tragedies of the South that we we imitate the West, even when it goes against us.

Speaker 4 (28:23): And this was particularly two of the Indian progressive left. It imitated the international progressives. So what did we do after 2010? In the book, you know, it’s not easy to characterize what happened after 2010.

Speaker 1 (28:37): How would you describe it? You know, the planning era, something clear, import substitution era, the neoliberal era. But after 2010, it’s kind of a mishmash of all kinds of things happening. But let me say the four strands are discernible in policy and economic policy and development. One was, so we call this the post 2010 era in India, the era of welfarism. And remember, welfarism, it began under the UPA, you know, Mandraga, all the rights-based assessment, the Food Security Act, that began. It began as a way of sharing the prosperity of the neoliberal era. And of course, under the Modi government, the NDA, it is kind of, well, the Modi government has kind of backed, you know, gone into the Food Security Act with a vengeance, if anything, you know, expanding it further and further, because now food is available free to almost everyone in India. It’s kind of initially it was, you know, it’s kind of paid fast and loose with Mandraga, but then it evolved its own welfare, which which I call new new welfarism, which is the public provision of essentially private goods and services. You know, chula, cooking, toilets, bank accounts, power, drinking water, culminating in, I think, the most extreme form of welfarism, which is cash transfers. So one could argue that India today, I mean, one could make the case that basically India is a mega welfare state and 80 percent of the population welfare is kind of the opiate of the masses today. And so we have basically since 2010 kind of gone away from neoliberalism to much more serious welfarism. I’m not saying it’s all good or bad. I think there are elements of both. But as a kind of analytical proposition, I think that’s what we went into. Then we got the public investment push in infrastructure under the Modi government, partly because, you know, under the previous government, much of the push was in the private sector.

Speaker 3 (30:55): But after the financial crises and the twin balance sheet challenges, we got more of a public investment push. But then there were two distinct things about the Modi government, especially after 2018.

Speaker 4 (31:07): is one, you know, for all those now in the West who are dying for industrial policy,

Speaker 1 (31:16): you know, abandoned neoliberalism, let’s do Chinese style industrial policy. Well, the good or bad news for all those who are pining for this is the Modi government has delivered on a kind of industrial policy, which is basically promoting national champions. You know, under the planning era, we promoted public sector champions, you know, in the last 10, 15 years. We’re promoting a few national champions, which I will talk about later. That seems to be fairly distinctive turn in Indian development strategy. And then, of course, we really did abandon neoliberalism. Beginning 2018, we raised tariffs, you know, a 25 year consensus that we should have slow and steady opening of the economy via trade policy.

Speaker 4 (32:05): We kind of reversed, went back on that. And to be fair, we’ve gone back and forth on that.

Speaker 1 (32:12): I think we’ve gone forward in negotiating all these free trade agreements with different countries, which I think is kind of would be part of the neoliberal agenda. But then we’ve done something which is just completely egregious and atrocious on trade policies. We’ve brought back the worst of the license permit quota Raj in terms of these quality control orders. These are basically non-tariff barriers. And this is research done by my colleagues Abhishek Anand and Naveen Thomas. This is a chart that shows how many quality control orders there are on the left-hand side and how many sectors they cover on the right-hand side. Basically, after 2019, it has exploded. And this is, believe me, the worst form of crony capitalism, the worst form of arbitrary policy, And absolutely detrimental to India’s trade based, low skill exports based strategy, because many of these QCOs are on sectors to promote capital and energy sectors in India, which provide inputs into labor intensive sectors. sectors so by issuing these quality control orders we’ve made inputs into labor intensive sectors prohibitively expensive and and this implicates two or three major business groups in India they’ve got this so in some ways I think Professor Chinoy would be most unhappy with this development because we in some ways we’ve gone back to the worst instincts of the license quota, Raj, in the form of these non-tariff barriers, arbitrary cronyism, detrimental to exports. And I think this is something that’s going to continue to haunt us for some considerable period of time. Now, the amazing thing, as I said about the neoliberal, the turn away from this, is that usually we say you make an orphan of failure. Here we’ve made an orphan of success. The chart on the left hand side shows, you know, that the neoliberalism era, you don’t have to know what you just have to know that all those bars are very good, which means everything was doing well. And in the post neoliberal era, everything collapses, except, of course, officially measured GDP growth, which we will come to later. But basically, you know, we’ve gone from everything growing rapidly to everything collapsing. And the chart on the right hand side is especially important. This is some work we did for the economic survey that if you look at India’s successes, you find that the states that are more open and more globalized are the states that have been more prosperous. And we talk in the book about, you know, they’ve been open and global in different ways. So, for example, Gujarat and Tamil Nadu have globalized in terms of manufacturing exports.

Speaker 3 (35:33): New Delhi and actually Haryana open both in terms of manufactured goods and services. Karnataka via Bangalore globalized via services.

Speaker 1 (35:46): And what you will find here is that there is one outlier, Kerala, which neither produces manufacturing, agriculture or services, but is still very prosperous because it’s globalized in a very different way via exports of labor. So the lesson from this is that openness that served us not only at the national level, but also at the level of the states, we have turned against that. And we’ve made so, you know, I was joking with someone the other day that, you know, most countries, you know, learn from their failures or don’t learn from their failures. We don’t learn from our successes either. And this kind of turn away from openness has been one of the sadder features of the post neoliberal era. Now, I think to bring it to today, I think it’s fair to say that, you know, in the post Trump world and today, even compared to 2010 when the global financial crisis, I think there are four or five major changes in the global economy.

Speaker 4 (36:55): One, of course, is the deglobalization and the breakdown of the trading order.

Speaker 1 (37:01): The second, I think, is what I would call a technological change that substitutes for unskilled labor like robots. And this is going to have implications for any manufacturing based development strategy. But we simultaneously also have technological change, which is substituting for skilled labor. And that’s artificial intelligence. So it’s one of those unique moments in history where you have both kinds of technological change, not just unskilled labor substituting, but also skilled labor substituting. That’s why I think the fear going forward is that if AI and robots take over, the labor share of income will completely collapse because of, you know, labor saving technological change. Of course, at the same time, we have geopolitics, hegemonic rivalry, you know, over-reliance, the need for resilience and self-reliance in the wake of all these shocks, with the COVID shock, the Ukraine war, the Iran war. And I’m going to talk about some of these. And of course, on politics, we have the return of, you know, call it how you want, populism, illiberalism, authoritarianism, nativism, and often within the scaffolding of electoral democracy. It’s not that countries are becoming dictatorships or authoritarian. It’s that a lot of this is happening within the scaffolding of electoral democracy. And this is a global phenomenon. It’s not just true. You know, it’s true at home. It’s true. It’s true in Hungary. It’s true in China. It’s true in Russia. It’s true. You know, name your country, Turkey, Hungary, Poland, you know, all parts of the world, the United States, the UK, Brazil and so on.

Speaker 4 (38:47): So this is something that I think these are the big changes taking place. And therefore, it’s in that context that what does it all this mean for today, especially what does it mean for neoliberalism today?

Speaker 1 (39:01): And remember, I said I had three answers. Yes, yes. And yes. So this is my first yes, that there is a big unfinished business of neoliberalism, which is very, very relevant today in the context of what’s happening, the Ukraine war and the Russian war.

Speaker 3 (39:22): What has become clear in India that we are still very vulnerable to energy shocks. I did a calculation with my co-author Namnirad Sharma recently in a project syndicate piece.

Speaker 4 (39:39): India imports about 35% of its overall energy needs.

Speaker 1 (39:46): And this has been rising for the last 25 years from about 15 percent to now 35 percent. China’s is about 20 percent and has been declining. So the dependence on energy import dependence has been rising. So there is how do we respond to this?

Speaker 3 (40:05): Now, we have to get energy prices right.

Speaker 1 (40:12): You know, this is one example. Remember, what the Iran war has shown is that it’s not just petroleum, it’s not just natural gas, but it’s also things like urea and fertilizer.

Speaker 4 (40:23): And this is a chart that shows the global price of urea and the Indian price of urea and shows how much, you know, extra consumption takes place wasteful because it’s heavily subsidized.

Speaker 1 (40:37): Now, here’s a very, very important point that we have to realize when we talk about subsidies on all these energy products. And this is true, not just a fertilizer, but on electricity as well, is that these are subsidies that are wasteful because it leads to a lot of overconsumption. But here’s the critical thing to remember about fertilizer, MSP and power on which I’ve actually done detailed work.

Speaker 4 (41:09): 60 to 70 percent of the subsidy goes to what we would call the middle class, upper middle class and rich. You know, in writing one of the surveys, one of the surveys, Arun Jaitley called me and said,

Speaker 1 (41:24): Arvind, you always say the subsidy, middle class subsidy, you can write a chapter on the middle class. And he was so right, because so many of the subsidies in India are not, you know, if you give free fertilizer to poor farmers or to poor consumers, that would not be a macroeconomic problem. The macroeconomic and fiscal vulnerability comes because of, you know, energy subsidies to the middle class, upper middle class and the rich. And by the way, there’s nothing about democracy or socialism that says you should provide subsidies to the rich. These are very few in number and the quantities are huge. And of course, one of the downsides is that this the competitive populism that we see across the states in India very much extends to the energy sector as well. So therefore, in terms of India’s macroeconomic vulnerability to energy shocks, which is, you know, and India is really macroeconomically vulnerable because 35 percent of energy is important. I think the unfinished business of at least getting prices right without and this is the key point here.

Speaker 3 (42:45): We have so many cash transfer schemes. We do not have one cash transfer scheme in India, which says we will give these transfers for fertilizer, for energy, for poor consumers, poor farmers.

Speaker 4 (43:02): But we will make sure that the prices paid are reasonably close to what the costs and market prices are. So we have cash transfers, but we do not have one direct benefit transfer scheme in India.

Speaker 1 (43:17): So given that we’ve made so much progress on the jam, given that we have energy, such energy dependence, it seems to me that a critical unfinished business of neoliberalism would be to use the latest technology, get, you know, reduce wasteful consumption of energy, reduce subsidies for the very, very rich in order to get macro vulnerability.

Speaker 4 (43:41): And I think this is an unfinished business of neoliberalism. I think that Professor Chinoy would wholeheartedly approve of. So that’s the yes. So when you say is neoliberalism relevant today, this is the first yes.

Speaker 3 (43:56): the second unfinished business is undoing the anti-neoliberalism that we’ve done in the last

Speaker 4 (44:04): 15-20 years so if you ask what asked me what is the central growth challenge today the chart on

Speaker 1 (44:14): the right shows that it is that since the you know the peak of the global financial crisis private corporate investment has declined and declined and declined weak and declining private corporate investment is the central challenge and and you know I have argued with colleagues that even the macro crisis that we saw why is capital not coming into India which has also triggered off this crisis is in part because you know there is opportunities for investment are declining so then the question comes why because it’s a bit of a puzzle if you tell me that India is growing at eight percent for the last three years which the statistics are telling us if you tell me that you know the banking sister has a abundant money to lend if you tell me that you know, we have enacted corporate tax reform, we have macro stability, we have high growth, then the puzzle remains. Why is private investment so weak? Why is capital leaving India rather than coming into India? Indian corporates are investing abroad instead of foreign direct investment coming

Speaker 4 (45:26): in. And I think, you know, Josh Feldman and I have argued that this has to do a lot with the kind of

Speaker 3 (45:36): anti-neoliberal impulses that have crept into the Indian economy in the last 10-15 years. One, you know, the quality control orders, the reversal of openness that we have is chilling

Speaker 1 (45:52): investors very much. I think we need to square up to another fact that if you promote national champions you know and you favor them you tilt the regulatory field in the favor of a few big you are going to chill investment by other domestic and foreign investors this anti-neoliberal streak that you have you know in macroeconomics we used to have this famous debate is does public investment crowd out or crowd in private investment but here we have a case of some private investment, possibly crowding out other private investment, because, you know, I don’t have to tell you, I was once in an airport in Chennai, not so long ago, someone came up to me and said, sir, we read your articles in foreign affairs on, you know, the stigmatized capitalism of promoting a few national champions. And he said, I work for a large, I’m in fact, the CEO of a large company in India and says I will not invest in areas that you know the big people the big corporate houses operate today or potentially because the regulatory field will be tilted against us so and similarly you know I want to come back to the notion that I think professor Shinoi had

Speaker 3 (47:19): is that a neoliberalism, I think, also has a broad and pretty severe embrace of rule of law.

Speaker 1 (47:31): And if you don’t have rule of law, if you have arbitrariness in implementation, if you have arbitrariness and overzealousness in tax administration, if you tilt the regulatory playing field in favor of some.

Speaker 4 (47:45): So in some broader sense, this collapse of the rule of law has taken a toll of private investment. In fact, the sharp way to pose this is to say, to be fair to the government, it has done a lot of things to reduce the costs of doing business. but what I would argue is that but the risks of doing business in India because of this kind of

Speaker 1 (48:14): degeneration of the rule of law you know arbitrarily you know going after some groups some business houses overzealously implementing tax laws favoring some I think this collapse of the rule of law I think has affected Indian growth quite a lot and therefore the second yes is the first yes was there is an unfinished business of neoliberalism the second yes is that there’s something that we actually reverse uh the anti-neoliberalism impulses that have crept in we need to reverse the last point is of course beyond neoliberalism or what um and let me just say two things here several people have argued that we should now have Because on the left hand side, you can see global trade in goods is stalling, but global trade in services is rising. And on the right hand side, India’s share of global services exports is rising, but India’s share of labor intensive manufacturing has been declining. So some people have said, therefore, the new development strategy should be services led growth. And I would unambiguously resist this because so when people say this is what we should try, my answer to this is we have tried this already over the last 25 years. And while it has favored some, and this is a stark way of showing this on the left hand side, that policy of favoring services has led to a lot of emigration from India of high skill talent because we emphasized high skills. This is a chart based on work by my co-author Devesh Kapoor. How much do Indian immigrants earn relative to other immigrants? Fantastic. India has global influence because of its diaspora. But the flip side of this is the right hand side. This is a chart which shows on the y-axis, what is your share of global labor intensive manufacturing? On the x-axis, what is your share of working age population? China and India are outliers. China and India have the same share of the global labor force, but China has about 50 percent of global exports. India has about two, three percent of global exports. So any strategy that emphasizes just skilled services, et cetera, is doomed not to provide opportunities for a vast share of India’s labor force. And in some ways, we cannot give up on labor intensive manufacturing because this is the potential that still exists. And the China plus one opportunity, although it’s slipping away, we have to do our utmost like some states in India, like Tamil Nadu have done. So when people say beyond neoliberalism, one is the services led growth. The second thing that people say is industrial policy.

Speaker 3 (51:17): You know, China is doing industrial policy. Look, I don’t have a strong view. Maybe we should do more industrial policy that would be somewhat anti neoliberal.

Speaker 4 (51:27): But, you know, I just want to go by the experience of what we did in India under the PLI scheme.

Speaker 1 (51:34): What you found about the PLI scheme, maybe it worked in electronics. It didn’t work in the other sectors. But if you look at even the emphasis given in the PLI scheme, It was all for, you know, skilled intensive technology intensive sectors, very little on labor intensive sectors. And so I think, you know, when we do industrial policy, my two suggestions would be one. Do you have the capacity to do it? Because industrial policy, if it results in quality control orders, if it results in promoting national champions, it is just terrible industrial policy.

Speaker 3 (52:15): the last point i make and i’ll stop here is powered you know um let me be a slightly uh you know try and be uh mischievous and say the following

Speaker 4 (52:31): robert solo used to say one of his famous lines all discussions of growth and development

Speaker 3 (52:38): begin with great rigor and end in a blaze of amateur sociology now what i would say about

Speaker 1 (52:47): the current moment is all discussions of everything begin and end with in a drone of armchair geopolitics and geopoliticians uh it’s about big power superpower middling power converging power convening power you know indo-pacific indo this pacific this and

Speaker 4 (53:06): And yes, power is important. I think how to, you know, people have different ways on, you know, what should we doing by way of innovation, technology, etc. But I’m fairly simple minded person. To me, how do you deal with a world of complete uncertainty and complete really the uncertainty has gone up.

Speaker 3 (53:32): There is only one thing you control in this world is domestic strength.

Speaker 1 (53:38): So I would like to think that Professor Chenoy would agree with a real wisdom due to one of my mentors, Vijay Kelkar, who I think is very much in the Chenoy mold of liberal economists. And he famously said the best way to acquire power is consistent 10 percent growth, economic growth. And, you know, essentially, it’s a way of saying you have to have a strong economic base domestically for any having any illusions or any hopes of exercising power internationally. nationally. Domestic strength is a necessary and absolutely almost sufficient condition for exercising global power or projecting power. And without that, we cannot have that. So I want to, you know, channel Professor Chinoy via Kale Kerby saying, you know, the best foreign policy, the best way of acquiring power is 10% growth. And I want to channel Professor Chinoy via Arvind Subramanian by saying that that 10% economic growth must be real growth, not statistical growth. In the spirit of, you know, being upfront, honest and things, what we really need is that kind of strong domestic base, which would require, just to summarize, you know,

Speaker 4 (55:08): doing the unfinished business of neoliberalism, you know, reversing some of the worst

Speaker 1 (55:14): anti-neoliberal impulses that have crept into the economy. And of course, in some sense, maybe we need to go beyond neoliberalism with industrial policy and so on. But the core, even there, you need a strong domestic economic foundation for projecting power is also, I would say, a core neoliberalism tenet. So in some ways, I think we have to say three cheers for Professor B.R. Shenoy.

Speaker 3 (55:45): Thank you.

Speaker 2 (55:46): Thank you very, very much, Professor Subramanian, for the most illuminating talk. We have a bunch of questions in the Q&A session, sections of the Zoom, and a bunch of questions were sent to me ahead by looking at the speaker and hearing the topic of talk. I think it was exciting enough. But I will use my privilege of being the panelist here and quickly recall in 2018, if I’m not wrong, I was reading the Economic Survey of India. And there you have a chapter on UBI, if I’m not wrong, and where you talk about food, fertilizer, fuel, subsidy, rationalization and how that racialization could be one way of financing UBI for a certain percentage of the population. This reminds me of, I spent a little bit of time at Ministry of Finance as a consultant, and one of the bureaucrats there said, any program started by the government of India never shuts down. So I wonder if any kind of UBI of that nature one wants to attempt becomes very, very difficult for a democratic multi-party system, first-past-the-post, etc. I have a thought, and this is a question that I’ve asked multiple people in the past. Our friend Gurcharan Das keeps quoting this story

Speaker 3 (57:12): that a big percentage of a job of a politician

Speaker 2 (57:18): is not only to do reforms but also to sell the reforms. And he quotes Margaret Thatcher as an example and says a big chunk of Thatcher’s job, and I think Thatcher is on record saying in the British Parliament is that this percentage of time I spend trying to sell the reforms. And I also recall reading something by Ashok Desai in a 1995 piece. In 1995 piece, Ashok Desai said, in India, neoliberal ideas are being implemented, but they are not being sold to the public. So my first question to you, coming from me directly, is to what extent do you think that a turn of neoliberalism to some extent was never adopted and championed by people at large, never made an earnest attempt by the intellectuals and the politicians to, you know, market it to the people so that any positives of higher economic growth percolating that you see were never attributed to these reform ideas. So there was never a connect being made. So your thoughts,

Speaker 3 (58:21): please. So, shall I, can I answer the UBI question as well? Before that was the, yes, please, please. Yeah. Yeah. So, so it’s true that, you know,

Speaker 1 (58:34): when I see the proliferation of cash transfer schemes in India, I’m reminded of the quote, you know, be careful what you wish for because it will actually happen. And, and some extent, you know, the proliferation of cash transfers at one level is a kind of, you know,

Speaker 4 (58:50): a variant of universal basic income. See, but I think apart from the insight of, you know,

Speaker 1 (58:57): no program in India ever dies, they only created, which is absolutely true. We spoke about the lack of exit in India more broadly, right? But I think there were two, looking back, I have two reflections on the UBI, because remember, we always said UBI, but at the expense of other schemes like things and that was i think maybe politically naive if you think schemes guns can’t be killed why would you know the fertilizer fuel thing be killed so this was always going to come on top of as another thing but i think the other thing about the ubi which i think uh uh we i think

Speaker 3 (59:35): under uh recognized is an insight due to uh president uh thurman uh sharman um some of Singapore and he used to say that you know if you take Western

Speaker 1 (59:50): democracies they have something called this earned income tax credit scheme which is a very complicated way of providing subsidies for the poor you

Speaker 4 (01:00:01): know you you you get a rebate if you have a certain thing and what he said was

Speaker 3 (01:00:05): that that a simple scheme has the virtue that you know it’s appealing you can sell it but the simple scheme also has the virtue or the vice of being abused so you know i give you a thousand

Speaker 1 (01:00:23): rupees cash transfer uh it’s very appealing for someone to come and say oh he gives you a thousand in your bank account i’ll give you two thousand so this competitive populism that comes with cash transfers is intrinsic to you know cash transfers per se the very appeal is the very source of

Speaker 3 (01:00:42): abusing it and that’s something that I think we under recognized on the question of selling

Speaker 1 (01:00:49): reforms and so on by the way I thought you were going to say that the job of an economist is as

Speaker 3 (01:00:56): much killing bad ideas as promoting good ideas and I think there’s some truth to that but on the On the selling of reforms, I think what you’re saying is correct. Or there’s some truth to that. And this is the evidence I have for that, which is don’t listen to me or to you or someone else.

Speaker 1 (01:01:20): Look at the Congress Party manifesto. Even today or for the last many years, they have made an orphan of the very success that they created they don’t talk about you know reform openness increasing the pie the congress party that shepherded and presided over this rapid growth this neoliberal turn they themselves have repudiated it and in publicly will not own up to it so there must be something to this that if you can’t, but, but here’s, here’s where I would kind of push back on. Now, take something like a upper middle class subsidy. I think that’s something that should be eminently sellable. You know, you could say, for example, I will, you know, the rich farmer, the rich consumer, the rich industrialist, you know, why would you, you know, subsidize them? So I think there are

Speaker 4 (01:02:22): areas where I think governments can make a better case, policymakers can make a better case. But I think overall broadly, what has happened is, is if, if the state cannot sell, you know,

Speaker 1 (01:02:40): real change, it then, you know, uses the prop of these gimmicky change, easily change. And really, I think the new welfarism of Mr. Modi, the genius of that was that it became saleable, eminently saleable in two respects, right? It became saleable because one, you actually gave stuff to people, you know, tangible things, not your children will get educated five years from now. It is, you know, you get a b c d and you get it today the second thing is that it also overcomes the trust deficit with politicians you know people don’t take politicians seriously but if a politician says i will give you this and can show you in real time because of the jam technology etc so i i do think therefore that what has happened is that it’s not that politicians don’t do it it’s that some things are intrinsically easier to do than others. You know, selling growth is intrinsically more difficult. And I do feel sometimes that politicians may have to come to grips with the fact that, you know, good economics, maybe, you know, bad politics, at least for one or two terms, that you should be, you know, be willing to sacrifice power in order to this. So I think

Speaker 3 (01:04:05): it’s more difficult and complicated. I agree. And therefore the challenge of always be trying to sell good ideas and take down bad ideas and maybe a foresight for politicians that they know that they are going to be in power for the next three terms. Maybe then they can, no matter what. But then that brings with it other problems, right? I mean, it leads to, you know,

Speaker 1 (01:04:28): over-centralization, you know, abuse of power, staleness of ideas, you know. One could argue that the greatest virtue of a democracy, we say, you know, short time horizons. That’s true, what you just said. But the flip side is that you get staleness of ideas, you get status quoism, you get laziness. And so, you know, it is what it is. I’m very grateful for all the audience who

Speaker 2 (01:04:54): have joined and I’ve asked questions. And I’m also like to apologize. I forgot apologizing at beginning we started a bit late I think we have about 20 20 25 minutes or so time and also depending upon how long professor minimum can spare and then we will try to take as many questions as possible first questions comes from himanshu hurry and he said he asked hi sir in your book you mentioned the presence of the state in society through specific functions state in society so specific functions such as market creating market stabilizing market legitimizing and market complementing with the recent push towards deregulation decriminalization and digitization how do you see the role of the state evolving now

Speaker 6 (01:05:40): i mean look

Speaker 3 (01:05:48): we see world over that all these new technologies uh are are both in some ways wonderfully decentralizing, but also just awesomely, you know, capable of abuse by the state, you know, whether it’s surveillance, whether it’s, you know, identity, all of these things.

Speaker 1 (01:06:15): So in that sense, I think it’s going to be a constant battle. I think the role of the state, I think what the state has to do, I mean, maybe changes to some extent, but fundamentally, all the things it has to do doesn’t go away. But because it has acquired these new means, I think, I think the kind of shenoy, you know, if you err on the side of political freedom and agency, you would always want to be a little bit anxious about the state acquiring more coercive power, more surveillance power, especially if the countervailing force of an active civil society active institutions you

Speaker 3 (01:07:04): know the independent institutions if you don’t have that and in some sense one could argue that

Speaker 1 (01:07:12): the world take the United States for example and I think it’s true for India as well that we’re seeing the state acquiring more surveillance coercive power but at the same time you’re seeing the the you know weakening of the countervailing force of you know other institutions of society and I think that makes for a somewhat dark foreboding future and I’m more worried about that than saying oh the state has to do different things things I think the state all those functions that I’ve spelled out the state still has to do all of that but the new development is really you know, what happens, the combination of broader illiberalism taking shape and the state acquiring more coercive power. I think that combination is to me a little bit, you know, anxiety inspiring,

Speaker 2 (01:08:07): anxiety imbuing as well. That’s also my favorite part of Professor Shinoa’s note of dissent. the third part when he says socialism and pursuing socialism and democracy will lead to weakening of the democratic institutions. Second question comes from Rahul Basu. He says, from the definition of neoliberalism, it would seem that China would be called a neoliberal.

Speaker 3 (01:08:32): If China isn’t neoliberal, what can we learn from their successful growth experience? see look i i mean i think china is not neoliberal uh let’s be honest about that you know you don’t

Speaker 1 (01:08:48): have the political freedoms and agency uh the surveillance state that we spoke about is only

Speaker 4 (01:08:53): getting worse uh but china is different because it has this i would say the most efficient institution in the history of humanity, which is the Chinese state.

Speaker 1 (01:09:07): You know, the Chinese state, for a variety of reasons, has been able to do all kinds of things, including create the basis for technological innovation, create the basis for competition. I mean, if you look at what China is doing today in EVs and things, it’s this kind of a really weird combination of a Chinese state that can dictate, you know, a lot of things, but at the same time, create the space and the freedom for the private sector to kind of compete with each other. So the honest truth is that I think there are no lessons from China and the Chinese state for most other countries in the world. because if you say, oh, and it’s true, to be fair to the questioner, I think what China did do after 1978 was said that, you know, from the state doing everything, there are lots of things that we should give a role for the state in the private sector. So it’s that combination of a very strong state that then allows for a greater role for the private sector that’s created this unique combination today. And, you know, I think we can write reams and reams about, you know, how the Chinese state functions and how effectively it’s done these, you know, amazing things in the last 10 years. But it’s simply not replicable because, you know, we have nothing like the Chinese state,

Speaker 3 (01:10:39): both in its good and bad manifestations. Next question I’ll take from the email.

Speaker 2 (01:10:45): Mohit Satyanand asks, do you still believe that official figures overestimate GDP growth by 2 to 2.5%?

Speaker 7 (01:10:53): And what has prevented India from gaining market share in government trade?

Speaker 1 (01:10:59): Yeah, you know, Abhishek Khan and Josh, we have recently had a paper, a very detailed paper. But I want everyone to realize that there were two findings in that paper. We said that GDP growth was overstated by 2% to 2.5% after 2011, but it was also understated or rather revised downwards by about 1.5% before 2011. So both things happened as part of the changes to the statistics. And both, in our view, were off that that both official actual growth was more in the period before 2011 than official statistics say. And they are less afterwards. So so both are true. And I continue to believe that, you know, let me let me tell you a way of answering that question.

Speaker 3 (01:11:58): so if you look at india today you say puzzle growth is high but private investment is weak growth is high but wages are weak growth is high employment is weak growth is high foreign capital is running away how do you explain all these things growth is high there’s

Speaker 1 (01:12:21): been structural detransformation and for each of these you could have a really contorted complicated explanation for us applying occam’s razor the simplest answer is there’s no puzzle because you know growth is not as high as as it’s claimed so it’s a simple occam’s razor answer to uh all these

Speaker 4 (01:12:39): you know many many puzzles that are now creeping up see the second part is um why have we not uh

Speaker 1 (01:12:48): you know chapter five of our book if you you know wanted to read is about exactly that question of Why were we never see because the puzzle is in the neoliberal era. We not really grew very rapidly. Our trade grew very rapidly and not even trade in services, trade in manufacturing grew very rapidly. It’s just that it happened to be high skill, capital intensive manufacturing, not labor intensive. And I think there’s no one answer. But I do think there are a series of answers. A lot of it, some of it has to do with, you know, overbearing government regulation that prevents firms from becoming big in India.

Speaker 3 (01:13:27): I think, you know, the government as a employer also plays a very distortionary role in favoring labor intensive manufacturing.

Speaker 1 (01:13:38): We’ve also shown that, you know, when we talk about the power sector in India today, what I didn’t say was and we’ve written about this.

Speaker 4 (01:13:45): We subsidize the rich. We impose about a 50 to 100 percent tax on electricity going into manufacturing.

Speaker 1 (01:13:54): So, you know, that’s another tax we impose on manufacturing sector via this.

Speaker 4 (01:14:01): And I think the really subtle point I would say is that I do believe that there’s been a kind of Dutch disease.

Speaker 1 (01:14:08): You know, when you have a services, a skilled services sector that does very well, it does hold back the low skill manufacturing sector via all kinds of things, including a more appreciated exchange rate than ought to be. So the causes are manifold, but I don’t think they are irreversible. I think we need, you know, a mission mode on saying that, look, there’s a China plus one opportunity. Parts of Tamil Nadu, parts of Karnataka, parts of Haryana have been able to do labor intensive manufacturing. I think we should do it. But our mindset is such that the PLI scheme, as I said, we want to subsidize, you know, chips. We want to subsidize, you know, batteries. I mean, maybe that’s a good thing to do. But why don’t we ever think of, you know, how do we, you know, muster the resources of the state and the states as well, you know, state governments to kind of create the ecosphere to attract labor intensive manufacturing. I think it’s doable, but it requires that, you know, mission mode frenzy, what we devote to other things.

Speaker 2 (01:15:25): Next question comes from Razia Khan and she asks if neoliberalism claims to reduce state intervention and maximize individual freedom. Why do many contemporary right wing governments simultaneously advocate free markets while expanding state control over culture, identity, surveillance and civil liberties? Is this a contradiction or does it reveal that neoliberalism selectively limits the state only in the economic sphere while strengthening it in the political and social sphere?

Speaker 3 (01:15:55): That’s a great question. I think that it is absolutely fair to say, I mean, the cop-out answer for me would be to say that’s not neoliberalism because it says you must have political freedoms and so on.

Speaker 4 (01:16:11): But it is true that over the last 15, 20 years, I think for whatever cultural reasons, nationalism and nationalism around identity has become a very powerful galvanizing force. force and which has been used by you know it’s it’s just that you know uh uh right-wing governments

Speaker 1 (01:16:40): unfortunately tend also to be nationalistic governments right they harp on this whole uh history the past identity and so on uh and uh you know that’s all that’s almost held as an accusation against true neoliberals that they don’t address questions of nationalism and identity enough. But yes, it is true. And my answer is that I would not call them neoliberals.

Speaker 4 (01:17:06): I would just say that there is something about political, this kind of nationalism and identity based politics that seems to attract, you know, right wing free marketeers as well. And, you know, I just don’t have a very good explanation. Although I would add, can I just say one thing that

Speaker 3 (01:17:29): if you look at India, for example, I would say that a political nationalism and economic nationalism have gone together. Not, you know, that I think especially the anti-neoliberal turn,

Speaker 4 (01:17:46): the kind of other anti-neoliberal impulses that I’ve spoke about are, I think, go with political

Speaker 1 (01:17:52): nationalism. I don’t think so. So at least it’s not always the case that only right-wing government sees this identity thing that I think certainly I would say in India and even, you know, places like Turkey, for example, or China, I think definitely you see political and economic nationalism going hand in hand. I just think maybe, therefore, it’s just that, you know, identity has become such a powerful galvanizing force that, you know, it’s amenable to easy abuse, it seems to me.

Speaker 2 (01:18:32): Next question comes from Arjun Krishnan and he asks, is it possible to achieve rapid structural transformation and growth without significant reform to agriculture land markets? Even if manufacturing constraints are eased and services exports continue to grow without making it easier for people to leave farming, a large share of the workforce will remain trapped in low productivity agriculture.

Speaker 3 (01:18:57): I mean, that’s absolutely true. But, you know, in doing the book, I realized or kind of learned the following. And when I spoke about the history of economic thought, you see, the Indian planning models and all these models said that the way to get people

Speaker 4 (01:19:27): out of agriculture is the pull factor. You make manufacturing grow, they will come up.

Speaker 3 (01:19:35): But if you look at the East Asian experience and the Chinese experience after 1978, and this is where I think the early planners got it wrong completely, is that you get exit from agriculture, both because of the pull factor and because of rising agricultural productivity. In China, after 1978, what happened was that when you had the household responsibility system

Speaker 4 (01:20:06): introduced and we had rapid productivity growth in agriculture, what it did was that it boosted

Speaker 1 (01:20:15): incomes, boosted savings, and boosted demand for these, you know, low-skill manufacturing products. So markets were created for low-skill manufacturing, which then, so the first phase of Chinese industrialization after 78 was in fact based on these township and village enterprises making goods, manufactured goods, sewing machines, bicycles, you know, lathe, cutters, etc. for a local market that had become rich via rising agricultural productivity. So you need so in that extreme version, you get industrialization because, you know, of a nice push based on rising agricultural productivity. See, in India, we’ve had neither. We neither had the rising agricultural productivity, nor did we have rising, you know, low scale manufacturing as pull. So we’ve had neither push nor pull. And that’s been, I think, the failure of structural transformation. And we know that if you do services, I mean, it has absolutely no kind of trickle down impact because it’s concentrated, you know, 1% of the labor first works in, you know, high skill services. So to get really inclusive growth structural transformation, you both need rising agricultural productivity and you need rising manufacturing and, you know, low skill manufacturing as well. And getting so to support the questioner’s point, I do think even today, you know, if people leave agriculture out of distress, then they will go from one form of informality to another form of informality. What you do need is much more investment in agriculture and something that Professor Gulati has emphasized. We have just in our obsession with subsidies and MSP and so on, the fundamental thing of how do we get rising productivity across crops in India. In fact, I have a co-author, Shomitra Chatterjee, who’s going to present something at the India Policy Forum. that we’ve missed the boat on agro processing because of the same problems of, you know, not investing enough in, you know, all kinds of things to boost agricultural productivity, not just of cereals, but also of non cereals like, you know, fruits, vegetables, ground nuts, sugar, etc. So I think you need both. And I think that agenda has gone a little bit missing, and we need to restore that agenda.

Speaker 3 (01:22:59): Next question I’ll take from over email.

Speaker 2 (01:23:01): It comes from Shubhan Sharma. And he asked, you have previously critiqued the so-called national champions model, whereby concentration of economic power occurs among a few large corporations. Even the late Professor Shinoy had said the state can never pick winners. Do you think with the ongoing supply chain disruptions and economic uncertainty that a country like India can build up its resilience and infrastructure without these massive conglomerates or does this model undermine the very aim of achieving economic growth and adaptability?

Speaker 3 (01:23:36): Look, I think this building national,

Speaker 4 (01:23:40): okay, let me be a little bit careful, something that, thanks for asking the question.

Speaker 3 (01:23:46): You see, Korea and Japan did build national champions, right?

Speaker 4 (01:23:53): but there were two differences with the Indian national champions or I was even three differences difference number most important difference is that these national champions for all the benefits

Speaker 3 (01:24:12): that they got they had to prove themselves through export competition so the famously

Speaker 4 (01:24:21): the chai bowls and things they had to export to show they were internationally competitive India’s national champions mostly operate in regulated non-tradable sectors so you know you’re

Speaker 1 (01:24:33): always going to wonder whether they are truly competitive or whether they are you know I’m not saying there have been no successes you know some of these champions have produced but on an ongoing

Speaker 4 (01:24:43): basis. Point number two is that the Korean Japanese champions and even the Chinese champions,

Speaker 3 (01:24:51): for example, they were never, their tentacles were never as widespread in the economy as India’s

Speaker 1 (01:25:00): national champions. You know, if you take the two largest groups in India or even the three largest groups, they are everywhere, every sector. That’s why concentration ratios have risen across the board. So and that’s a recipe for acquiring, you know, too much power to the extent of, as I would argue, chilling other entrants, other private investment into the system. And the third difference is that remember the thing about industrial policy, successful industrial policy, as they say, is not just picking winners, but letting losers go. I mean, letting losers go is an important part. Do we think that the Indian state, especially enthralled to these big groups, would be ever be capable? I mean, we’ve never been able to do exit, for God’s sake, even on these simple subsidies and policies and so on. I mean, to think that we can allow, you know, exit or allow losers to leave in a situation where these groups are strong, state capacity is weak. I would think that that’s also so that’s why I think that, you know, we have to be very careful about promoting national champions. It’s taking a macroeconomic toll already. And, you know, we have to find other ways of I mean, the objective of building resilience. Absolutely. Right. But whether that should be done through national champions, I’m more skeptical of that.

Speaker 2 (01:26:30): next one comes from arindam goswami and he has as per some research in in indian manufacturing productivity gains have caused have accrued to capital not labor so productivity is not automatically a waste wage policy faster productivity growth goes with a falling labor share almost entirely in manufacturing this explains the weak wages behind india’s

Speaker 3 (01:26:55): consumption slowdown the policy choices therefore also have to account for this what is your take on how to tackle this see firstly I have not seen the Indian data on because I don’t think

Speaker 1 (01:27:08): there’s a lot of productivity increase in Indian manufacturing that’s why we’re not globally competitive you know so so but but I want to you know leave you with this thought you know there’s a big debate on China and how China it it invests too much and consumes too

Speaker 3 (01:27:27): little and you know you will this is the kind of constant theme in the discussion of China but and you know China represses wages you know because it’s a communist system whatever etc but the chart that I showed you is very important that even if productivity growth

Speaker 1 (01:27:47): lags behind real wage growth, as has happened in China. The point is that the pie expands so rapidly that everyone benefits as a result. So just to give you that example of China, which is over investing, but because it’s growing so rapidly, consumption growth, real per capita consumption growth has been six, seven percent annually. So before we get into the concern that oh my god productivity growth will not lead to real wage growth let’s get the real productivity growth because the chinese example shows that even if real wage growth lags behind the real wage growth and real consumption growth will grow so rapidly that you know the the living standards of everyone will improve very rapidly uh but art so or to

Speaker 3 (01:28:43): it differently our problem now is getting productivity growth in manufacturing to be internationally competitive. Professor Subramanian, in terms of time we are close but I wonder if you have a little bit more time to spare and I would love to take a few more questions. Next one is from Subodh Shinoi and he asks I’m a physicist and my question is about data. You started the economic survey and that was frankly one of your greatest legacies.

Speaker 2 (01:29:12): falsifying data for political reasons is a stupid effort and to put dirt on the windshield of a car because you don’t like the road you are seeing. How do you prevent this? How do you lock in integrity?

Speaker 3 (01:29:26): How do you sorry? How do you lock in integrity integrity in data? I mean, the answer is you can’t you can’t lock in integrity in data. As we find out, see, the first point I would say is that.

Speaker 1 (01:29:42): So this deteriorating or impairment and integrity of data is again a global phenomenon. Just as identity politics seems to be a feature of illiberal politics, I think a feature of this global trend towards illiberalism is that data has become a casualty. I mean, even in the United States, there have been periods in the last year where there have been, you know, serious doubts about, you know, whether data are going to be, you know, fair, you know, accurate, of high integrity and impeccability. If you look around the world, you know, Greece, for example, famously had this problem.

Speaker 4 (01:30:29): China has basically stopped producing data for a long time.

Speaker 1 (01:30:33): And I do think illiberalism in politics will, especially in the absence of strong countervailing institutions of society, media, press, etc., is always going to. So that’s why you can’t lock in the integrity, because the integrity, apart from isolated individuals like Professor Shinoy, you know, or their counterparts, integrity is going to be a function of the broader political climate. How, you know, how effective even rulers are in being able to, you know, get away with these things, right? I mean, so the, you know, there is no locking in mechanism because that is determined by people in power and the countervailing institutions. If all those suffer, I think data is also going to suffer. And I wish we could kind of, you know, because we say let’s create independent statistical commissions. But, you know, finally, they are run by governments. They’ll be influenced by governments.

Speaker 4 (01:31:46): and you know you know I’m sad to say that think about institutions in India that have the most kind of independent power as it were you know where they they can be relatively

Speaker 1 (01:32:03): unscathed from the coercive power of the state like the judiciary for example You know, if even the judiciary cannot be strong and independent and set a shining example, I mean, other other institutions of society will not be able to exert that countervailing influence either.

Speaker 3 (01:32:26): So, yeah, so there is no locking in mechanism.

Speaker 2 (01:32:30): Reminded me of Sir Humphrey and the BBC series. Yes, Minister. He says the government never sets up a committee without knowing the result in advance. So I have a couple of questions which are very similar. So I’ll take them together. Wasabi asked, hello, sir. Thank you for this giving this lecture. Just had a question. I was just kind of trying to connect the dots. You might have come in the presentation. I just wanted to understand if we were to work beyond liberalism and push for labor intensive exports, but in the age of rising AI and robotics, as you pointed as well, how this might be possible and workable for the growth of the country. and another similar kind of question comes from Abhinav Bhatia who says for those interested in innovation and higher education skilling what would be strategy for preparing job ready population

Speaker 3 (01:33:15): on the first questions are great both are very good questions see on the first question it’s a simple arithmetic here China occupies about 45 to 50 percent of global labor intensive exports

Speaker 1 (01:33:32): we occupy three to four percent if we go we don’t we can never go to 20 percent 25 percent but we can try and go from three to 11 12 13 percent if we do that and even allowing for the

Speaker 4 (01:33:50): fact that the employment potential from that will not be as good as in the past precisely because of robotics, it’s still, you know, a recipe for creating a lot of jobs. So that’s the reason why

Speaker 1 (01:34:05): we cannot give up on that. That yes, you know, robots are going to mean fewer jobs. That’s what I spoke about the unskilled labor technological change. But just a simple arithmetic, we are so underperforming that even if we become a normal performer, and even allowing for the reduced

Speaker 3 (01:34:25): employment potential, it’s still a lot of jobs. See, on the AI, I’m not an expert on AI,

Speaker 1 (01:34:33): but it seems to me that in the era of AI, what is really important is a kind of proficiency across the board in India, you know, better education, better skill, both in the private

Speaker 4 (01:34:53): sector and in government. So a kind of, I mean, the AI is just a wake up call for, I mean, you may

Speaker 1 (01:35:02): have to do something specific, you know, but it’s a broader call to improve education skilling across the board. And this has been our major. So there’s no one AI specific intervention that I think we can do. It has to be across the board. And we’ve been very weak on that traditionally. But this should be a wake-up call for that because at the end of the day if you follow all the debates finally the benefits of AI is going to be not to who produces the AI but to who all can benefit from the AI and I think that’s the diffusion side is what I think is going to be very important.

Speaker 2 (01:35:47): I’ll just take two last questions. Asimismamul Haq asks does the Indian experience suggest that neoliberalism should be just not merely by the extent of deregulation, but by the initial institutional conditions under which markets are introduced. Freight equalization seems to imply

Speaker 3 (01:36:03): that the starting line itself was unequal, as you have discussed in your book. See, look, 100% agree that the institutional thing, but I just, you know, want to be a little

Speaker 1 (01:36:19): bit careful about, you know, how far in the past we want to go to, you know, to explain today’s

Speaker 4 (01:36:28): outcomes, right? And let me just say one thing that in India, the fact that we’ve not had labor intensive manufacturing, and what we say in the book is that it’s a puzzle in the post-91 era. You know, if in 1985 you had asked me why there’s no labor intensive manufacturing, I would have said there are 100 reasons for that, including freight equalization, for example.

Speaker 1 (01:36:55): But 25, 30 years after we’ve opened up the economy, you know, and, you know, kind of have, you know, reasonably good institutions, you know, you know, a reasonable role for the private sector and markets. We haven’t been able to achieve that. So so 25 years on, we have to look at what we’re doing currently wrong rather than, you know, whatever may have happened in the past. Yes, freight equalization had an impact, but today we’ve moved, you know, way beyond all of that. And we have to look at why what we’re doing now or done recently, that’s not working and that’s not helping.

Speaker 2 (01:37:33): Thank you. I’ll take the last question, which I’m clubbing to, which sounds very similar to me. Akamsha asked how does liberalism benefits poor India privatizes public sector and service sector has been India privatizes public sector and service sector has been has seen rapid growth but its consequences stayed say railways and health sector specifically has failed to be inclusive for poor and hasn’t expanded as it should have been also education in government schools may be glorified on paper but reality reality is far far different and Amit Chandra asks what are the barriers towards building alignment between political and economic priorities?

Speaker 3 (01:38:13): Yeah I mean what was the first question that is how does how does

Speaker 4 (01:38:21): neo-liberalism benefits poor? Oh yeah so you see I think as I tried to say

Speaker 1 (01:38:28): Perhaps, you know, if you look at the Indian historical record, 1985 to 2010 was when we had the neoliberal era and the fastest growth in everything, you know, not just poverty reduction, wages, employment, educational attainment, everything. So I would say that that is the strongest evidence that, you know, it was it may not have been as inclusive as some counterfactual, but certainly relative to India’s historical record, there’s nothing been as inclusive as the neoliberal era. So I think that’s what we need to keep in mind. I think things like education and things, there’s nothing about neoliberalism, as I want to say, that says, you know, the state should not deliver better on health, education, etc., etc. You know, so the two are not incompatible.

Speaker 4 (01:39:26): There are serious deficiencies in that. But I think we need to address them.

Speaker 1 (01:39:31): But I think the last point I would say on this is that, you know, there has been a kind of rule of law deterioration over time, which I think is the most anxiety inducing for me.

Speaker 3 (01:39:49): So in that sense, it’s a kind of the same manifestation in politics and in economics that we see.

Speaker 1 (01:40:01): And to that extent, I think we need to think about how we can, you know, maybe address one or both.

Speaker 3 (01:40:08): Maybe we can’t address one without the other. I don’t know. I think that was the last question. What are the barriers towards building alignment between political and economic priorities? So maybe the answer to that is maybe we shouldn’t have too much alignment.

Speaker 2 (01:40:24): But it was many, many thanks, Professor Subramaniam for sparing your time so generously and giving this fantastic talk and engaging with the questions of the audience. with this will come to a close. But before that, I would just like to thank my colleagues Kunal, Ginny, and Harsh who helped put this together. And thank you very much, of course, to the audience who stayed back and asked such interesting questions. Once again, thank you very much, Professor Subramanian.

Speaker 3 (01:40:55): Thanks, thanks, Kuban. Thanks very much.

Speaker (01:41:06): Thank you.