Global Upheaval, National Ambition: India’s Policy Shifts in a Time of Flux
Insights on how India needs to go about developing a new policy framework to successfully address the multiple simultaneous global challenges
In this episode, author and journalist Puja Mehra speaks to economist Dr. Rajiv Kumar about his new book “Everything All At Once: India and the Six Simultaneous Global Transitions” co-authored with Ishan Joshi. The book argues that at a time the world is in a geoeconomic and technological flux, India’s development goals cannot be met through “business as usual.” Drawing on decades of experience, Dr. Kumar explains that India is perhaps the only country in world history that must develop while reducing its carbon footprint at the same time. This too at a time the US is abandoning its universalist approach, China is rising, and there is a widespread sense of unease in major capitals at the emergent fragmented world order. The sense of optimism at the end of the Cold War, despite lingering issues of power asymmetry and inequitable growth, has dissipated.
Dr. Kumar argues that Indian policymakers must ensure they are not seduced into tackling the ongoing transitions in either a piecemeal fashion or within a linear framework. The six global transitions demand a rethink of policy priorities. In the absence of such a construct, India faces the unsavoury prospect of being caught in the middle-income trap, and not achieving its aspirations of becoming a developed economy (Viksit Bharat) by 2047, he cautions.
Tune in for insights on how India needs to go about developing a new policy framework to successfully address the multiple simultaneous global challenges.
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TRANSCRIPT
Puja Mehra: Dr. Rajiv Kumar, thank you so much for coming on the show to discuss your new book. My congratulations to you for it. This is Everything All at Once, India and the Six Simultaneous Global Transitions.
Dr. Rajiv Kumar: Yes, thank you so much Puja. A great pleasure to be here and thanks for talking about the book.
Puja Mehra: It's very, very timely. We are all struggling in understanding the implications of this huge global upheaval that is going on, which has many strands to it. And your book is immensely helpful in understanding some of these issues.
I do want to start by requesting you to explain to listeners, if we have a sense yet, I know things are developing, but if we have a sense yet of how the task of developing for countries has changed, is it tougher to date than it was even just a few decades ago?
Dr. Rajiv Kumar: So Puja, first thing I have to say in this regard is that the role and the contribution of emerging economies has actually gone up a notch, a significant notch over the last decades, in the sense that these emerging economies today contribute significantly more to global growth than the OECD countries or the rich countries. So that's the first thing we should keep in mind. But the second thing is that because of the six transitions going on simultaneously at this time, and especially the one in the climate change where the window is closing very fast or the technology, technological change, the task for development to achieve growth and reduce your carbon footprint at the same time has become enormously difficult.
Nobody has done that in the past before. All the developed countries, all the rich countries, they didn't care at all about the environment or the ecology or the carbon footprint. They went full pace focussing on development.
As a result of that, we have today what we have. And now it's very clear. And several agencies, including the UNFCCC, have told us that we have a 20-year window after which there could be a catastrophe.
So emerging economies have to take the climate change seriously. And they can't ignore it. And we have seen the situation where I think it was the government of Maldives which held once a meeting below water because a six-inch rise in the sea level is going to become an existential threat.
Especially, let me focus on India, which is that we in India, we will be the first large economy in the world to try and achieve this. And we have to take this seriously because if there is an environment catastrophe of the rise of sea levels or the melting of the glaciers which is happening, then there will be a massive number of, if you like, ecological refugees who will rush into this country and we will have a real catastrophe on our hands. So which is why we suggest in our book that the policymakers and the business sector and academia should take the climate change, you know, the threat very seriously and weave it into the policies so that we get growth and at the same time safeguard our ecology and environment.
And that's the challenge that the developing countries as a whole are facing today.
Puja Mehra: Dr. Kumar, also we hear, and you've discussed that in your book, we hear a lot from economists about what is called the breakdown of the Washington Consensus, which is the global economic order, the way trade is done, the way financial capital moves across financial markets. What do economists mean when they say breakdown of the Washington Consensus and how does it affect India?
Dr. Rajiv Kumar: The basic tenets of the Washington Consensus was, I think, summed up in some way by Thomas Friedman, who said that the world is flat, by which they meant that the movement of all factors of production, whether it's capital, labour, technology, you know, will be all free and not threatened at the borders. And then the Washington Consensus was that you have to first achieve the current account convertibility and then you have to have the capital account convertibility and then labour movement, etc. Now, unfortunately, I have to sort of say that all the previous decades, even when the Washington Consensus was at its zenith, they never ever respected the movement of labour into their economy.
That was always considered to be a social, political problem. There was a freer movement of labour. But along with that, the consensus was that all factors of production would be free to move where they like or where they found the highest income and all markets will be open to everybody.
That was it. Now, what you've seen in the last few years is actually and especially Trump 2.0 is a complete negation of this Washington Consensus, by which they're saying that, no, markets are not free. And therefore, we have to adopt a country-list view of the market, which is that each market is true for yourself and every country should try and maximise their profits, even at the expense of the other.
And then technology is restricted and capital, you can see that capital will, in a sense, be forced to move into directions which the powerful countries wanted to move. For example, Trump's settlement with Japan, where he said that $500 billion of Japanese capital will be invested in the UK and a similar one with the EU. So all of this represents the breakdown of the Washington Consensus and along with that, the breakdown of institutions like the WTO or the IMF role, etc.
Now, that makes life very difficult for the emerging economies because until now, the emerging economies, the developing economies would look towards the global market for achieving their exports, for enhancing their export, for achieving scale and competitiveness, and raising the per capita income of their people and giving them employment opportunities. Now, all of that is gone, or is going. The saving grace in all of this, Puja, is that I think a large majority of emerging economies still believe that an open economy framework is better for them and that they will stick to it.
And that there is only harm if everybody adopts a mercantilist view of economic policy. That is what led to the Great Depression of the 1930s, when you had escalating retaliation. So at the moment, I think the US, which was the source of the Washington Consensus, has actually gone back on it.
And I do hope that this will not become a trend which has taken roots, but it will be a temporary phenomenon, after which we will go back to an open economy framework for all the economies, which will surely benefit the emerging economies.
Puja Mehra: Dr. Kumar, you're hoping that the trend will revert to what it was before President Trump, with the breakdown of the Washington Consensus, that discourse has been going on from before his current term. It was being talked about even before that. And you also ask the question in your book where you say whether this new normal in the US external engagement will outlast the current administration's term.
So if it does, then how do economies like India respond?
Dr. Rajiv Kumar: That's my fear. And that's our fear in the book. And if it does last longer, then I think what India will have to do is to, I think you say it in the book also, is to try and create a coalition of willing, which is all those countries, including China, by the way, which will agree to an open economy framework.
The previous Washington Consensus, the open economy, etc. benefited China hugely after they joined the WTO and they took the greatest advantage of it. But now, if the largest economy in the world, the US, becomes protectionist for its access to its markets and also protectionist for its technology and prevent it from going to the other countries, the emerging economies will have to find new sources, both for the demand for their products as well as for the new technology that is coming along.
And I think that's, in a way, going back to the G77, if you like, or in some kind of a grouping of the developing countries. The moment it can be achieved because there is the BRICS, which have got its own institutions, which have now enlarged and become 40% of global GDP is with the BRICS. I think there are these platforms which can then expand and create a counterpoint to the protectionist tendency.
That's one. And the second thing is that I think, as India is doing, we should try and get into bilateral trade agreements and regional ones, where we have sort of reciprocal arrangements for market access, access to new technologies, movement of skills, etc. In short, emerging economies will have to try and isolate this protectionist tendency of the largest economy who would like to take a mercantilist advantage because of the size of their market and the higher technology levels that they have.
Puja Mehra: Let's now talk about trade, which is much in focus and in headlines these days, thanks to President Trump. The hectic urgency with which the US administration is announcing closure of trade negotiations with countries these days, every day we hear of a new country. Your book suggests that India should begin to look at mega trading block.
And you suggest that the future of global trade is going to be determined by mega trading blocks. At the moment, we are seeing a lot of bilaterals. But there, which trading block do you think India should be closely aligned with?
India has resisted being in the RCEP. But Asia is there, global growth, global demand, where it's likely to be. So it is a bit of a tightrope walk for India on balancing ties with, even if we were to just say China on one side and US on the other side.
How do you see that playing out?
Dr. Rajiv Kumar: So the first steps are being taken. With the signing, let's say, of the India-UK SETA, it's called. I think there's a new term that's coming along.
I hope the 18-year-old FTA discussions with EU come to fruition. And if that's sorted out and that's signed and finalised, that's a huge mega block. The EU itself together is the largest economy in the world.
So that would be very good. I think that should be done. There is an India-ASEAN FTA already.
But I don't think it's really working as efficiently as it could do. And then there's, of course, the Indo-Pacific, Asia-Pacific cooperation. That's a very big one, which is the one that we should be mining.
And subsequently, even the ASEAN. And then the other one is, of course, the rising continent, which we don't think about much, Africa. About 1.86 billion people and incomes rising. So we should be getting into whatever arrangement that we can do. So we'll do three different blocks there. But the critical point for India is that all of these trade blocks or entries of membership will come to a knot if you don't focus very sharply on improving the ease of doing business in India, on making the environment not just friendly, but promotional for private enterprise and private entrepreneurs.
They have been the mainstay for India's history from 300 BC. They were the ones. And therefore, what we suggest in our book is that the best foreign policy for India would be to improve its domestic ease of doing business.
And once we do that, and once the state becomes a friend of the private sector, then therefore we say what you mentioned, that we need a different type of private-public partnership. We don't call it public-private. We say private-public partnership and that the government's role should become promotional rather than regulatory.
I think that's key because if you don't do that, then if you join all the mega blocks or regional blocks or whatever, you will actually find that they could become counterproductive to you, which is what you don't want. And soon enough, the cries for greater protectionism will start in India. That's the key.
So two things there. One, yes, we should look at all possible regional trade blocks and you can even call it trade and technology and investment blocks if you like. But for doing so, this is so urgent today.
If you don't do that, because it's a necessary condition that you have to make your business environment as investor-friendly for the private sector and the private entrepreneur as you can and the state to become accountable for the promotion of private enterprise in this country.
Puja Mehra: And about balancing the geopolitics between, let's say, China on one side and the US on the other side.
Dr. Rajiv Kumar: You use the right word, which is balancing. We use the word strategic autonomy, which is the current coinage for all of that. But that also means that you can't say no to anybody.
Of course, I realise that the post situation, etc., etc., but sooner we resolve that. And there's very good news that we are now beginning to do that. And I've been a votary of it for a long, for a significantly long time.
This is what I've said is that let's always keep with China, let's keep the border issues separate from the economic issues and economic ties. And lo and behold, even when we had all these restrictions, this, that and the other, our trade with China, bilateral trade, continued to and our deficits continue to grow from the 100 billion. So why would you do that?
Sort of a central core message of the book is that in this situation that we are, where we need alternate sources of technology, where we need different markets, and where we need to grow much faster than we are growing today, like 6.5%, which is creditable, but you need to, we point that out in our book, that if you grow at this level, we will be inevitably caught in the middle-income trap, which is what the Latin Americans have done, and which is what the Asians have been able to breach through, Korea, Taiwan, now China.
So if you want to do that, and you must do that, then you have to use all your methods at your command, including friendly ties with China, friendly economic ties with China. Because now, in 1990, we were the same size, and our per capita income was the same, but now they are five times our size. So we have to recognise that reality.
We also point out in our book that the Australian Institute of Strategic Studies points out that out of the 53 leading technologies, the frontline technology, China today leads in 39 of them. So again, if the US is trying to make a deal with China, we should be doing the same. And that's just pragmatic.
Because if you do that, then this old world, which was Asia, will rise again. And it's now its turn to rise. After the 300-year blip, which saw the transatlantic go up, we are seeing it's now the turn again of the Asia-Pacific to go back up.
And here, the two countries, the biggest two countries, biggest two economies, if they come together, it will be a completely different ballgame than what we've seen so far.
Puja Mehra: Dr. Kumar, you've had long years of experience of working with governments and in India in government. Would you like to share a few specific recommendations maybe for how to remove some of the red tape, regulatory, etc., telestrol, and make the ease of doing business a priority on everyday basis for growth of Indian economy and industry, and also for this normalisation of economic relations with China?
Dr. Rajiv Kumar: So on the first one, Puja, we are actually doing a very ambitious project in the foundation that I now chair, which is called the Pehle India Foundation. And there what we're trying to do, and this is inspired actually by my experience with the aspirational districts, which the Honourable Prime Minister had led so amazingly, and his idea of making districts the fulcrum of development. So what we are trying to do here is that we are actually doing it in our three states, that we want to go to the districts, create a baseline of their economic situation today, and then create a blueprint or key performance indicators for the district administration to perform, to achieve.
Each of our districts is an average 30 lakh people, 3 million people, which is equivalent to many countries in the world. So it is a reasonable size to do that kind of a blueprint. Why is it that I think this, there if you get all the stakeholders together on that particular blueprint, the administration, the industry, or the business, the academia and the civil society, that is the platform.
And if you assign key performance indicators where the government can become accountable to the other stakeholders, that's the key message that I've learned. I learned this after a very long time. You can keep trying to do whatever reforms, et cetera, but the rubber hits the road at the district level, and the districts have enough resources.
If it is for skilling, for example, that you want to create the sort of skill that you need, it's at the district level that you will have to do that. So that's what we are trying to do. That is, I think, what we need to be done and to be rethought.
Because otherwise, today, it's all top-down, and we are saying that it has to be bottom-ups. Because again, you will appreciate the fact that India is more diverse than Europe, is larger than Europe. So you can't have a pan-India policy for anything at all, for primary education, for health, for exports.
I mean, how can you have a pan-India export policy? Can the Punjab have the same export as Tamil Nadu? That's a double landlocked state.
But all of this comes down to strengthening and making accountable the district administration. If you do that, and then people keep talking about 73rd and 74th amendments, the Panchayati Raj, etc. I think that will follow from there.
Also, because the district is the legacy of a colonial administration, the way it is. And that's the power. I mean, I've experienced this at first hand.
And I think that needs to change. And if that changes, and if the district magistrate is actually called the CEO, and she's left to remain in place for a few years to achieve the targets that have been set to her, I think the things will change. That's my bigger thing.
On the other side, there are several, I mean, you talked about the cholesterol, etc. The Prime Minister has talked about 67,000 regulatory and compliance burden that the private sector faces from all the states combined. That's the other one that we need to do.
But government machinery is very loath to do that. So there, for me, the process really is that we should change the public narrative and bring more and more into the public domain about how the bureaucracy today is becoming a barrier to the growth of private investment. And the third point is that we need to reduce the uncertainty that shrouds the economy and the polity and the society at the moment.
Because uncertainty is anathema to investment. The last point is predictability. We should, after all these decades, have a situation where you know that if you do A, B would follow, and then C would follow.
At the moment, nobody can say this for anything, pretty much anything in this country. And we need to do that. And I think the Prime Minister has tried very hard to do this.
But it's at the level of the state governments where we need to change this. And we are therefore working with the states at the moment. When you're talking about the district development plan, etc.
I think to work with the states and create this capacity within the state governments. And each state is so large, so huge. My state, UP, is the fifth largest country in the world, I think, or the fourth largest.
So you need to work there. If you do that, then the ease of doing business will happen in this country. And the regulatory cholesterol will change.
And the nature of governance will change, which is the important thing. About China, friendly relations, I think this will be gradual. It will be incremental.
But the effort has to be made right away, start off right away. And I'm sure I led two fairly high power delegations when I was the Vice Chairman for NITI AYOG. From what I have seen, they are open to this.
They are wanting to improve our relations between us. There is, of course, the fact that the market access in the Chinese market has become very difficult. But we should identify three, four, five areas, a specific number where we want better access, and then go after them.
If you don't get joy, then raise a public outcry. Make it clear to everybody concerned in the public domain that that's what we're not getting. And then let's see what happens.
And then the other thing, the last thing here on the India-China thing is that maybe we should the two countries should start a track two process of visualising the world in 2050. How would the two of them together, what do they see the world in 2050? When the two countries will probably be among the first or the second largest economies, what do they see?
How do they see this going on? Because I think if there is a broad understanding on the bigger, broader contours of the economy, of the global economy, then we might get some convergence on how to get there. And last, it's been said before, I believe that there has to be some trust-building measures.
Because there is a huge amount of mistrust, and for very good reasons, maybe about China and so on. And again, I mean, you must see as to how hard our Prime Minister tried to create that level of working relationship with presidency, and so on. I think we need to have, therefore, trust will appear if you have multidimensional engagement among the two countries, multidimensional at every level, and believe the fact that the two countries will be very low and will not like to have hot war.
If you have that, I think this is one of the possibilities that maybe we can persuade China. And I don't know how, but there is merit in tackling some of the global public goods together, like maybe the global environment, the water issue, the trafficking issue, the drugs. If the two of us came together, then there will be, and that be a beginning of the building up of trust.
We did this once. I think it's in the Stockholm conference of the UN, the environment conference, where we all got together and therefore forced the Americans to accept the Palestine. It is possible.
And that's those are the ways I would think about it.
Puja Mehra: Although, Dr. Kumar, some of the economic economic security concerns people express with regard to China would also be important and would require redressal. Because, for instance, I've seen an entire list of Chinese exports, where 99% of those exports come into India. So India is the bulk importer of as much as in some items, 99% of Chinese exports.
That level of economic dependency is naturally going to be a concern, not just to ideological groups, but also government as a whole, even industry.
Dr. Rajiv Kumar: I think one, I'm not sure, Puja, that any product, 99% of Chinese exports come to India.
Puja Mehra: I've seen a list by Dr. Ila Patnaik. I don't recall the items, but...
Dr. Rajiv Kumar: What is true, of course, is that there are certain areas where 99% of our imports come from China, especially for the advanced pharmaceutical ingredients and so on. I think out of this would be what the Chinese did to the Americas, which is to invite Chinese investment to produce these products within India and invite them here and get those investments going and encourage Chinese FDI. The other aspect of course is what I said earlier, which is that, for example, we have the PLI scheme, production linked incentive scheme, make sure that it succeeds, make sure that we get more and more made in India products and so on.
But I think that will also be helped if we are open to the idea of inviting Chinese investment, Chinese technology. I mean, I don't see any reason at all why this should not be the case, because once they do that, then our trade imbalance will decrease and our employment and investment and production in the economy will go up. So I think if the Chinese can do that with the Americans and the Japanese, against whom they have all sorts of things around the Second World War, I think we can also try and do that.
We can draw our red lines, but the point is that all of this will happen only if we have a multi-dimensional engagement with China.
Puja Mehra: Towards the end of our very insightful discussion, I wanted you to help us understand, this is completely unrelated to the preceding conversation, but you do discuss briefly in your book, Pandit Deed Dayal Upadhyay's Antodyay, and you also mentioned Dattopant's Tenghari. And I don't see many market economists discuss these philosophies. In general, we tend to have a lot of curiosity about what the Indian right-wing economic ideology is.
It isn't discussed much, it isn't written about much. So I was wondering if you could help us understand a bit.
Dr. Rajiv Kumar: Thank you for asking that question, because I think it's a very important question. Deed Dayal Upadhyayji's concept of Antodyay has been much better understood than Dattopant Tenghari's one. Antodyay is a fascinating concept.
He was saying, and then he had this integral humanism, he was saying that you have to measure your success with what happens to the last decile of the population, what happens to the person last in the queue, that was Antodyay above. So no more talking about averages, an average GDP, average per capita, no. And he, in this case, many, many years after he had unfortunately passed away too early, Francois Bourgogne, the chief economist of the World Bank, said the same thing.
And which is, he said that it's time to measure the rise in per capita income of the last decile of the population and compare that across industries. Because, you know, to compare averages, it hides everything. So that's the Antodyay.
And I think we should all be committed to that. And that will require, again, a completely new way of thinking. But you won't be able to achieve that by just private and individual effort and growth.
You will have to increase the quality of public goods that is available to the people. For example, primary education and basic health. And I think we have seen this in our country, in Kerala of all places, you know, which would be a totally, the Indiana Padiyaji would be very happy to see that, although the ideology is very different.
But they've achieved that to a certain extent, you know, achieving human development indicators, you know, which are almost comparable to the OECD economy. That's what we should be wanting to do. And if that requires, you know, that we should change the measure of our income growth, etc., we should do that. Dattapanthi Nidhiji, on the other hand, again, an amazing stalwart. I'm afraid much less read and, you know, understood by others. For example, he said that, you know, you don't measure the women's contribution in the economy, because they are working in the households.
They're bringing up their children, you know, and giving them good values and so on. So the non-market contribution of half the labour force is just not accounted for. And the second thing that he said was, again, is that you do take into account all the illicit activities that go on in an economy.
All the guys who are doing all the wrong things, you know, that all gets counted up because, you know, that generates employment, etc., etc. So he had said that this very blanket idea of measuring GDP growth does not make sense. So therefore, what we suggest in our book, therefore, is that maybe it's time for us now to think about something like the gross welfare product and not the gross domestic product.
And there's another big reason for that, which is that you may not be able to go up to the OECD levels of $20,000 per capita without completely spoiling your nature. So therefore, a gross welfare product would include within it how much natural capital you have used, what's the state of your human capital, to that extent, therefore, what is the state of your education and health, and then also your growth. And we give a sort of say that we need to weigh that differently.
Now, you know, some of it was tried by Professor Amartya Sen and Stiglitz when President Macron gave them the task of developing an alternate measuring index. But that's neither here nor there. In our country, for us, for ourselves, which has had a tradition of, if you like, putting the women at the highest level, we have a Shaktikal.
The goddesses are often more powerful than the gods, you know, and the gods go to them to try and protect them, you know, from all the asuras that you have. So in our situation, and given that we have also had been a very compassionate society forever, you know, taking care of the poor, we didn't need official CSR for our people to be able to tell them to take care of the poor. They did that.
So that was our tradition. Given that, I think we need to think afresh now and get out of this rat race of saying that we will do this at GDP, that, you know, that rate of GDP. No, please start calculating the level of living of your last desire and how that is changing.
And not just by their own effort, but also by the contribution of the public goods through that. And by the way, the central point of the book is the six global transitions coming together in a way business as usual will simply not do. You've got to have what we call, what we actually call a Sagar Mantra, or we call a Yajna, as it were, you know, where everybody has to get together and think differently, think for the country and bring all the stakeholders together on a platform of trust.
At the moment, that just doesn't exist. That's one of the missing ingredients. I think if we do that, there's no reason for us to not achieve, you know, the objective, the goal of Vixit, but, you know, a Sukoshit, you know, and a Sundar Bharat as you go along.
Bottom line, business as usual will not do.
Puja Mehra: Thank you. Thank you, Dr. Rajesh Kumar and my best wishes to you for your book. Hopefully, we will have more versions of it as the clouds sort of move and what lies ahead becomes clearer.
Dr. Rajiv Kumar: Thank you so much.
