Ep 248: How Ancient Wisdom can Shape Modern Bharat’s Economy | Sriram Balasubramanian (Author)

[00:00:00] The Prime Minister is probably the only Prime Minister, besides Lal Bahudra Shastri,

[00:00:05] who's lived through poverty.

[00:00:08] Meaning has been really poor, lived through poverty.

[00:00:12] No other Prime Minister has lived through poverty.

[00:00:15] Much of whatever is determined in terms of policy for a long period of time

[00:00:22] has been with a world view which is concentrated among people of Delhi

[00:00:27] and what they think of the world.

[00:00:29] In a really sort of big picture view, what it tells you is that status quo is not going to get you there.

[00:00:36] There has to be some level of destructive thinking.

[00:00:39] The transition of these people, this huge informal economy plays a very important role.

[00:00:45] But just making them formal I think is a very sort of naive view of the practical realities of how Bharat functions.

[00:01:00] My guest today is Sriram Balasubramanian, who is an economist, author and columnist

[00:01:05] for such publications as the New York Times, Wall Street Journal, Foreign Policy and Forbes.

[00:01:11] In this conversation I speak to Sriram about why studying economic history is so important,

[00:01:17] its relevance in the current times, his thoughts on India as a $5 trillion economy

[00:01:23] and by extension what the Prime Minister calls the Amrit Kal,

[00:01:27] what are those ideas, concepts and principles that will enable us to become a fully developed nation by 2047.

[00:01:34] I also get his perspectives on things like GDP growth, unemployment numbers, urbanization, so on and so forth.

[00:01:42] This was a wide ranging conversation with a lot of fascinating insights in here that you will like.

[00:01:47] So let's get started.

[00:01:49] Hey Sriram, welcome to Bharat Varta again.

[00:01:51] Thank you so much for making the time.

[00:01:53] Thanks Arush and it's a pleasure to be here.

[00:01:56] As always I enjoy having conversations with you guys on a variety of subjects.

[00:02:01] Awesome and congratulations on the fantastic response your book has gotten.

[00:02:06] It was number one on Amazon for economic history and then it's on its third or fourth reprint right now.

[00:02:12] So congratulations on all of that success.

[00:02:14] And like I was saying, it's very heartening to note that these kind of ideas and concepts

[00:02:19] have a lot of purchase in the modern times as well.

[00:02:22] Yeah, thank you.

[00:02:24] It was indeed a pleasant surprise for me as well because I did not expect the book to do this well.

[00:02:29] And interestingly enough one of the first discussions for the book was on Bharat Varta.

[00:02:33] So I think that was also an important role in sort of taking the message across.

[00:02:38] But you're right, I think there is like I mentioned in my previous sort of interactions on the book and the subject,

[00:02:46] there is an inherent interest in general on Bharatia philosophies and history.

[00:02:51] And economic history is sort of a very niche subject, probably I'm one of the few dogged guys who keep going at it.

[00:02:59] But there is an inherent interest as well as need for understanding this.

[00:03:04] And I think that is a reflection of the success of the book.

[00:03:07] So thanks a lot and yeah, it's been a pleasure.

[00:03:10] Awesome. So before we proceed with the conversation, right,

[00:03:13] and we will cover, you know, economic history, some of the context of those ideas and concepts in present times.

[00:03:19] And of course, I would love to get a commentary on some of the things that are topical right now,

[00:03:23] whether it is the GDP numbers or our vision for the Amrit Kal or unemployment numbers and so on and so forth.

[00:03:29] But you know what makes your perspectives very interesting is that you have kind of an interesting background, right?

[00:03:35] You are obviously author, columnist, economist, all of those things.

[00:03:39] But you study really old ideas and how they could be relevant in the present context, right?

[00:03:45] So for those of who may have missed the previous episode or aren't following you on Twitter already, right?

[00:03:51] Could you give a little bit of a background and kind of explain, you know, how you've arrived at some of your views at this point?

[00:04:00] Right. So yeah, for those who are uninitiated.

[00:04:03] So basically, I'm an economist and author while my sort of core interest professionally is on macro, macroeconomics, macroeconomic policy,

[00:04:12] a lot of the jargon related to the macro economy. My sort of passion, put it that way, is also understand economic history.

[00:04:20] So, you know, a lot of people have studied about Angus Madison, have heard about Angus Madison's data sets

[00:04:26] and his research using economic historian who talked about prosperity in ancient Bharat, which is zero CE onwards

[00:04:34] and how Bharat and China were some of the top two economies in the world during that time, until about 17th century CE.

[00:04:41] So this triggered off a lot of my background research.

[00:04:44] I was always intrigued by the fact that Bharat had such an illustrious history, had such a, you know, you know, pathbreaking inventions over the past,

[00:04:55] both scientifically as well as socially, as well as, you know, the engineering marvels that you see.

[00:05:00] Yet there was literally nothing on the principles of economic policy and thinking, which had to be sort of the base to sort of engage in these activities.

[00:05:11] So that was a huge vacuum.

[00:05:13] So that led me to the article, which is, you know, your viewers might know as a third century BCE text written by Chanakya and or Kautilya.

[00:05:22] And the book basically tries to create template, a general template, a prescriptive template of what a political economist would think about economic policy

[00:05:34] and what the constructs of it are, or rather the output of it was.

[00:05:39] So but much of the discussion on the Arstha Shastra was related to, you know, Chanakya Neeti, statecraft, defense policy, everything but the Arstha Shastra.

[00:05:49] So that had to be corrected.

[00:05:51] So I derive an economic framework based on based on the idea of the Dharmic capitalism, where it plays a central role besides the state and the market to facilitate economic policy.

[00:06:04] And it has various components in terms of ethics, responsibilities and harmony.

[00:06:11] And these are all mapped to rule based but non intrusive state, you know, sort of a state society which engages with the rest of the world in terms of commerce and commerce and trade and activities.

[00:06:22] And also another bucket of sustainable growth.

[00:06:25] So this is sort of the framework which I derived based on Kautilya's ideas and then apply it to today's Barrett's principles in terms of every chapter talks about trade.

[00:06:35] We talk about inequality, we talk about labor contracts, we talk about, you know, a variety of these principles are relative these themes and then correlate or bring in Kautilya's ideas as Kautilya Tantra for each of these, you know, themes, and then sort of bring together a big picture of first what this framework is and what is its relevance today.

[00:06:58] And how is it relevant to today's Barrett's challenges. So that was sort of the first, you know, book.

[00:07:05] But my subsequent effort has been to sort of produce a time series because we start about third century BCE and there's an introductory chapter which talks about how Kautilya's ideas were there prior to third century BCE.

[00:07:18] And then I moved to in my subsequent book, which is a sequel which is coming out later this year. I talk about economic models, dharmic based economic models in in common era kingdom so it could be the Cholas, the Palavas, the Pandyas, Vijayanagara Empire, the Cambodia Desa in Cambodia, Champa in Vietnam, Java in Southeast Asia.

[00:07:40] So it is a fascinating book. I'm just amazed as I'm writing it. So that's the sequel. So the idea.

[00:07:45] And then the third part of the sequel is to look at how some of these principles are applied to Amrit Kaur itself, 20-25 years down the line. How do we sort of, you know, bring some of these ideas into that mold that we're talking about.

[00:08:00] So this is an attempt to sort of first establish a credible, you know, logic based analytical framework and showcase a time series for this framework which is more than thousands of years.

[00:08:12] Obviously there are iterations here and there, you know, on how this framework is evolved in different places.

[00:08:17] And then use some of these ideas and apply it to some of the challenges that we see in modern Bharat as an extension for the modern world.

[00:08:27] So this is sort of a summary of what the inspiration and the goal of, you know, what these researches, you know, and it's a very, like I said, it's a very niche subject.

[00:08:37] Unfortunately, very little research is done on this. So I'm sort of this, you know, one or two man army going at it.

[00:08:45] But I firmly believe that it is very important that someone has to do this and takes a lot of effort, a lot of persistence.

[00:08:53] But I'm seeing more and more the value of understanding some of these things in addressing some of our modern challenges.

[00:09:00] So let me pick up on that. I mean, it may not be obvious to us with our smartphones and digital and AI and sort of a connected world and ecosystem that we're living in that some of these ideas that you talk about, which are hundreds if not thousands of years old, could be relevant in the modern context.

[00:09:17] But if you could give us a couple of examples how, you know, some of these old ideas are relevant even today in 2024.

[00:09:26] The best way to look at this is to, you know, sort of take a big picture view. Right? How do you sort of view these subjects? I mean, no one is saying that, you know, anything and everything in ancient Bharat is something that you want to do today, especially on economic policy.

[00:09:40] Right. But what the research is trying to say is that there are certain principles, certain concepts which can be of value to formulate policy.

[00:09:51] And I think it's even more important in economics, more than other professions, is that, you know, of course, even if you take other professions like engineering, still say the Bhadishara temple and engineering marvel that it is could be useful in designing say such monuments in the future.

[00:10:10] You know, those things still apply. But in economic policy it's even more relevant because at the end of the day we are still human beings whether now or 5000 years earlier or 5000 years later. Right. So, human beings make behavioral choices based on a set of circumstances.

[00:10:29] So, what I mean by behavioral choices is in layman's terms, say for example, I'm going and buying a laptop. Right. So the laptop might, you know, you might have three, four options. You might even make your choice based on a variety of decisions, you know, income, whatever it is.

[00:10:48] Right. So, you might even make an economic choice based on these X set of factors. Right. Today it might be laptop 5000 years ago it might be say buying a stock of wood for example. Right. Or it might be buying jewelry for example. Right.

[00:11:03] So, the question really is how do you make these behavioral choices.

[00:11:07] So that is where the crux of the matter is because irrespective of the generation and time.

[00:11:13] Some of these economic choices, you know modes of revenue of the economy remain more or less the same. Right. What is the biggest sort of income driver for the state today.

[00:11:23] Taxation. Right. So, taxation is pretty much a similar you know thousands of years ago taxation was still quite evident I mean that the taxation rates that the ideal taxation rates that we talk about today between 15 to 25% was something that even

[00:11:38] So, let's take the idea of minimum wages. Right. We see what minimum wages more more than advanced world. I'd say $15 an hour but also now there's a lot of talk on rural and urban minimum wages in India as well.

[00:11:55] So, cartelia proposed this idea of you know relative minimum wage a real minimum wage. The sense that $15 at say 23% inflation is very different $15 at say 78% inflation.

[00:12:09] So how do you keep evolving this metric based on macro economic factors and and have a sort of assessment of whether this minimum wage is relevant or not.

[00:12:20] So, cartelia again proposes this sort of principle to sort of keep consistently looking at this labor contracts right even today much of the informal economy which we are going to talk about later in the discussion.

[00:12:32] You know most people daily wage laborers even today in Bengaluru don't really have a contract. You go for a daily wage job you get given say per day a particular beta or some amount that they give you.

[00:12:46] And you keep doing that till you know you want to the next labor. So, in cartelia's times he proposed this idea of labor contracts even for the daily wage laborers where institutions had to sort of display a template of governance, which shows a contract between the employer and employee for whatever that work that needs to be done irrespective of whether it's daily wage labor or not.

[00:13:10] So, they were sort of entitled to showcase some of these things for the rest of the world template so that people are aware that and and and the young I mean the real poor are actually empowered.

[00:13:22] You know, to do this so lastly to avoid the idea of much senior much in as is again a concept which which which you know where the big fish eats the small fish.

[00:13:32] So you ideally want to avoid much senior.

[00:13:37] So, cartel is you know sort of thrust on on on ensuring the rule of law is implemented irrespective of who it is to the T is to ensure that much senior has avoided and the poor is empowered.

[00:13:51] So the importance of rule of law equality of rule of law was also sort of, you know, instill. So yeah, these are some of the, you know, principles that you see that were sort of conceptualized that were implemented or proposed to be implemented.

[00:14:07] But yeah, one one thing your listeners should notice the art of Shasta as a text is a sort of a template right. It doesn't necessarily mean that the modern empire forwarded to the T.

[00:14:18] You know, cartelia was shrewd enough to understand that political compulsions political limitations were there. He just had this set of ideas as a manual and people could choose whatever they wanted, which is relevant for their times.

[00:14:29] So that's how the sort of text is but anyway so these are, you know, some of the ideas. I think that could be relevant today.

[00:14:36] And also, how do you make policy more effective? Right. I think that is one of the important questions that some of these ideas and principles could help us address.

[00:14:49] Yeah, I mean it's amazing sometimes right how much ever things change I mean our fundamental motivations kind of remain the same. You know we had an economist, I mean sorry a historian on the podcast yesterday and you're kind of discussing the same thing right I mean fundamentally our hopes and fears are, you know, insecurities so on and so on.

[00:15:05] I mean kind of remain the same and what you're saying is the principles of decision making, you know, kind of have carried forth right. I mean we might be making decisions about different things in a different context but the fact that we are making decisions the fact that those will have an opportunity cost or a trade off and so on and so forth are something that you know fundamentally has carried right.

[00:15:27] Yeah and just to add further right I mean we are probably one of the few countries in the world I mean really developed countries or developing countries who still are reluctant to sort of engage on this subject in a serious way because if you look at other countries, I mean the Japanese for example as I understand they even have within their ministry of finance a subdivision that looks at economic history.

[00:15:52] Most contemporary Japanese discussions whether it's Bloomberg all mainstream discussions talk about how Japanese culture plays an important role in their policy making right. Whether it's the savings rates, whether it's their entire inflation debate or the lack of inflation and how consumers sort of decide choices whether it's on migration.

[00:16:12] Right so the Germans do it. The Germans have an understanding make an understanding of the past, you know, I mean look at the Americans themselves. I mean the entire big picture idea of capitalism was a construct of the Protestant ethic.

[00:16:27] You had a philosophical underpinning no matter how limited the Americans history is but what I'm trying to say is there is a there's an underpinning of a philosophical bend for an economic sort of paradigm set based on those philosophical constructs.

[00:16:44] Which led to you know modern day capitalism at least in the 19th 20th century. So what I'm trying to say is most countries even the Chinese I hear that they do a lot of sort of a lot of their policies sort of go back and try to learn lessons from the past.

[00:17:00] So you know so that is something which which we people I mean we need to sort of you know come to terms with is another point I want to add.

[00:17:05] One of the primary preoccupations today right when we talk about economics and just a study of the world.

[00:17:11] Is the focus on inequality right whether it is looking at the Gini coefficient or the Gini coefficient of the world.

[00:17:19] You know it is a misnomer not to do this. So you know so that is something which which we people I mean we need to sort of you know come to terms with is another point I want to add.

[00:17:29] One of the primary preoccupations today right when we talk about economics and just a study of the world is the focus on inequality right whether it is looking at the Gini coefficient or you know just the divide between the haves and the have nots.

[00:17:43] Some element of billionaire envy so to speak right and you know for somewhat good reasons also because I mean if the distance grows I mean there is instability in the society and so on.

[00:17:54] Right while people may disagree on you know what is the right way to bridge this and so on but it's an important factor that you know people tend to focus on right now.

[00:18:02] I wonder how our ancients kind of looked at this right because you mentioned you know empowering the poor and not you know sort of defaulting to Matsya Nia as such right.

[00:18:12] So how did they look at this problem.

[00:18:15] Yeah so again very important question and I think there is sufficient evidence to suggest that you know that it was an important you know part of the thinking in those times.

[00:18:25] So I had actually given a lecture at IM Bangalore which a full lecture which still have publicly available for people who want to see on a quarterly as ideas on inequality.

[00:18:35] And how we try to readdress some of the issues emanating from inequality so yeah you're right so the idea of avoiding much in itself is by principle not just a legal sort of an argument.

[00:18:46] But it's also trying to bridge the gap in terms of access to public resources equitable you know a fair public resources and that principle is there in most other places even redistribution.

[00:18:58] Yeah I think Kautilya sort of believes in a targeted form of redistribution you know which is where you empower and give people the basic necessities and then empower them to do enable them to sort of grow up in their economic ladder through hard work and you know sincerity and things like that.

[00:19:14] So one he believed in the idea of I mean Kautilya's ideas talk a lot about you know empowering the poor both in terms of say labor contracts as an example empower them in terms of legal you know remedies fair access to legal remedies empower them in terms of redistribution.

[00:19:33] You for real poor you provide the basic necessities required and then for the rest of them you sort of enable empower them and also look at you know the idea of because see it's very important understand that Kautilya was a very practical political economist.

[00:19:50] He saw economic prosperity as a means for political power right. So at any point of time people are the lower end of the spectrum in a very shrewd political sense from the large constructs of population right.

[00:20:04] So unless they were happy or contented political success is a limited story right for Kautilya. So he sort of understood that besides his general intention to empower the poor I think there's also sort of a political need the substantial and you see this across board I mean even in this subsequent book which I'm talking about there is a lot of evidence which suggests that you know temples were used as redistributive centers besides financial centers and redistribution and sort of the

[00:20:30] So that is something I would say is again you know some of these ideas can help us and just to add or complete this section on importance of economic history. I think it does three things I mean it can also help us segue into the next part of the discussion. One it gives you an understanding of the past and then you see the other part of the discussion.

[00:20:44] So that is something I would say is again you know some of these ideas can help us and just to add or complete this section on importance of economic history. I think it does three things I mean it can also help us segue into the next part of the discussion.

[00:20:58] So it gives you an understanding of the past by as an extension it gives you confidence as a society that or this amount of years or in the past we have been world beaters on a particular subject or try to you know do things in a way which is probably distinctive to our own you know which is still engaging in the world but still distinctively you know unique to us.

[00:21:22] So it gives an important confidence you know to look at the past and I mean and look at the future because if you're really looking at the next 25 years you're looking at new ideas new principles which is sort of away from the status quo.

[00:21:35] So this provides you a sort of a confidence to segue into that and then it also tries to like I mentioned try to try to help you understand some of the behavior of constructs especially of the informal economy through some of these ideas.

[00:21:49] And lastly it gives you a sense of continuity in terms of some of these principles and how and why you know some of the modern day challenges could be addressed to them.

[00:22:01] So I think these are I would say three sort of buckets or three points that you know that allude to why we need to understand a bit more on economic history.

[00:22:12] Right. Yeah what I find fascinating also is the amount of pragmatism right in terms of understanding that hey there could be political compulsions right some kind of a top down policy making where you just have a dossier or something detailing out what has to be done and you know the will is carried out the following day does not really work right.

[00:22:32] That as well I mean I think is really fascinating to note right the amount of thought that is given to that you know coming to the present context right.

[00:22:40] I mean we are headed towards becoming a five trillion dollar economy and you know the prime minister has given this vision of an Amrit Kahl right where we become a developed economy in the following 24 25 years.

[00:22:52] Right. So applying the concepts that you spoke about how could that be relevant in our march towards you know becoming a developed economy and also were there similar sort of you know visions that were provided even during the Mauryan times and so on that you know in the next 25 years or the next 50 years we will become so on so forth our nation will progress and so on.

[00:23:15] Yeah thank you. So I think this is again probably the mood of the discussion. So one is only five trillion dollar economy so you know we would become five trillion in a few years in terms of overall economic numbers and then there's an issue of Amrit Kahl itself.

[00:23:31] I think the bigger issue of Amrit Kahl is again something which requires some sort of thinking to sort of address the aims set out by the prime minister.

[00:23:41] I think one wonderful thing with Prime Minister Modi is that he has an uncanny ability to sort of get you know the population as it as you can call it to really start thinking about the future.

[00:23:56] But you know when he proposed the idea of a five trillion dollar economy it was at the beginning of the second term or somewhere around that time which is again ahead of its time and the idea of Amrit Kahl is similar.

[00:24:07] So I think what it would be you know good to you know set the context and I'll give an example. I mean Annamalai the you know the Tamil Nadu BJP chief recently in a gathering with us made a very important observation.

[00:24:26] I thought it was a good segue for our discussion. So his argument is that you know that for us to grow in the next 25 years and be a developed country hypothetically speaking and to sort of challenge or become near the United States that you had to grow about say 13, 13.5 percent.

[00:24:45] So for my you know calculation from whatever that I've seen his argument is that you know if you take say the United States growing at say 4 percent GDP on an average of 25 years and after after say 25 years how much would India need to grow.

[00:25:04] You know to reach that sort of GDP figure. His his numbers about 13.5 percent but I would put it between say 12, 12.5 to say 13, 13.5 percent.

[00:25:15] But the underlying thinking is very important right. So the underlying thinking here is that to grow on that scale right is has never been done in the past by any big country and consistently or period of time.

[00:25:32] Right. So what we are looking at is it's a very ambitious goal of course our plateau of economic growth is more or less at a seven you know on average seven to eight percent right over the last 20, 15, 20 years we could say about approximately you take out all the outliers the pandemic and all these things about 7 percent right.

[00:25:50] So if you are able to say in my view bring about say you know judicial reform say bureaucratic reform both of these key reforms which is you know very difficult but if they come through say we add one one percent to GDP right.

[00:26:07] So let's say eight nine ten percent. So still there is a deficit of say about two to three percent right of of GDP in terms of if you really want to make an attempt to say target the ambitious goal.

[00:26:22] Right. So either really sort of big picture view what it tells you is that status quo is not going to get you there right. There has to be some level of disruptive thinking right and I think a large section of the prime minister himself I think is is through his policies you can see that a lot of his policies are quite unconventional they are you know they are scalable and and you know at some level they also disrupt the policy.

[00:26:52] They also disrupt the status quo right. But that is needed for you to make the big leap because you know second generation reforms and in a first generation reforms at their own saturation second generation reforms are happening.

[00:27:06] So you know this you know would would still sort of make that marginal improvement so you need to have X factors coming through right artificial intelligence all these things you know add to this picture of what we're talking about how do you sort of scale one component of this of this sort of disruptive effect is actually in my view looking at the core you know essence of the Bharatiya economy which is the informal sector right.

[00:27:33] So whether you like it or not 80 85% or even probably 85 80 85% of employment in this economy comes from the informal sector right. So informal sector does work both organized and unorganized that's another subsegment right but broadly what I mean is much of the employment numbers that use employment in this country is in the informal

[00:27:58] sector for your again audience I don't want to get into the definitions of it but in a very simple term you know say the kirana shops that you have you know in your in your society in your in your households across the country right.

[00:28:12] So those are examples of institutions which which has a limited number of people who are employed but in an informal structure right. They're all small businesses which which which which you know which sort of aggregate to form large sections of the employment right.

[00:28:28] But the key is if you're going to grow in the Amrit Kal at these rates the transition of these people there's this huge informal economy or what you're going to do with it is it plays a very important role right either through technology I mean one we have seen the digital shift which means most of them are moving into some of these digital platforms and sort of getting formalized and things like that.

[00:28:52] But just making them formal I think is a very sort of naive view of the practical realities of how Bharat functions right. So before you know we do that we need to have an understanding of what the how they informal economy basically functions the amount of literature when you compare to the formal economy compared to the informal economy is very very limited right.

[00:29:17] The formal economy has like so much research done but the informal economy is focus both from a statistical and a conceptual and a philosophical point of view is still fairly limited right.

[00:29:29] So what I'm trying to say is that a large you know part of say what we study were you know in some of the behavioral choices that I mentioned in economic history helps you to understand right.

[00:29:42] The constructs of the informal economy right. So for example let's take finance right if someone in a small kirana shop is sort of wanting you know capital for expanding their business or on the other side let's say they are they're bankrupt right.

[00:29:59] The bankruptcy court is within the family and extended family of the of the individual of the owner of these shops right. Capital is pulled within these you know family set up and they make efforts and attempt to make efforts to rejuvenate the business and things like that right.

[00:30:16] So there is a level of trust which happens in transactions at the informal level which is a very important construct of how informal economy functions right.

[00:30:25] This level of trust in my view is also a component of what I define as you know that make capitalism itself because it is an important component of Dharma you know probably your swadharma itself to take care of your extended family.

[00:30:42] In terms of the financial needs that is taking place whether that is required for some of these institutions right. So what I'm trying to broadly say here is what we do about this informal economy and the transition of the informal economy through the Amrit Kal and how it grows right.

[00:31:02] And in a trajectory which grows with an understanding of how it functions and how you sort of implement policy to sort of maximize after this maximize you know the understanding that we have or how it functions right.

[00:31:18] That could help you to really expand one of the factors that could help to expand your production and the GDP numbers and efficiency in which you do in the longer.

[00:31:27] So I'm not saying this could be the next factor but this is definitely an important element for us to sort of consider and make a conscious attempt to enable right.

[00:31:39] So an example of how this is being done or you know in the recent past is some of these big schemes that the prime minister has successfully implemented right.

[00:31:49] So let's take Swachh Bharat for example right. What is at a conceptual again let's go big picture what at a conceptual level what is Swachh Bharat right.

[00:31:59] We are all most of us are very clean in our houses but we generally are not clean or some of us are not clean when you go outside the house we don't really give that much importance so that's why they the exterior is filthy the interior is very clean even in the most

[00:32:19] Empowered say homes right through the scheme we all have this ability to sort of I would say an ability to a Dharmic way of life to be clean.

[00:32:29] Socham as we call it inside our houses so basically the prime minister scheme took the start process and brought it to the neighborhood and scaled it by you know by the by the sheer scale of the PM's office and the bureaucratic machinery.

[00:32:42] And has literally transformed rural India's rural bar it's sort of cleanliness outlook right. So what I'm trying to say is this is an example of how an understanding of the behavioral choices in the way of life you know helps you to make a standard imagine you're having a policy which doesn't recognize this and and

[00:32:59] tries to you know implement its effectiveness might be say 80 percent but this helps you to push to the you know higher level of 90 95 percent now it's autopilot almost you know people see this their swadharma to be saw you know and to be clean both inside their houses and the outside of their houses.

[00:33:15] Especially in rural bar and I think that sort of an autopilot helps you to make policy for effective.

[00:33:20] Right so the source what I'm trying to say is that in this context what we do is we try to make policy more effective.

[00:33:29] Right so the source what I'm trying to say is that in this context what we do or how we first understand some of these contours of this informal economy and some of the choices we make this in this informal economy and how is it linked to our way of life is a very very important understanding of the way of life.

[00:33:47] So this is how you know I think I've spoken on quite a few things but this is how I view as as an economy and how we can make policy effective.

[00:33:56] Right so the source what I'm trying to say is that in this context what we do is we try to make policy more effective.

[00:34:03] So this is how you know I think I've spoken on quite a few things but this is how I view as as an important component which is sort of missing in the debate.

[00:34:10] So this is how you know I think I've spoken on quite a few things but this is how I view as as an important component.

[00:34:18] Which is sort of missing in the debate but we need to sort of engage in the debate.

[00:34:24] But there are two sort of binaries which again we need to I think avoid one is the standard binary saying look you know you make all these informal companies and make them formal everything will be fine.

[00:34:36] Formality will be the cure all for everything right and the second thing is okay all these rural sort of urban migration, you ensure that everyone from rural Bharat moves into urban India.

[00:34:46] Bharat moves into urban India and then you'll get employment you'll get everything else and it's a thought of an auto pilot.

[00:34:52] It just you know makes you into a developing one. I think both these theories are flawed.

[00:34:57] They have their own thresholds own restrictions beyond which I think we need to have sort of independent thinking on how do you want to address some of these problems.

[00:35:05] We can probably focus a bit more on these two things.

[00:35:08] Right, right. Yeah that's a very pertinent point that you bring up right.

[00:35:12] Right, so you mentioned 80-85% of the economy is informal right and though it is rapidly formalizing you know.

[00:35:18] I meant the employment if you look at the employment numbers.

[00:35:22] Yeah but still if you look at the overall GDP the substantial amount of it comes to the informal economy.

[00:35:28] Right, right. Would you say that's about like 40 to 60 percent?

[00:35:32] Yeah, you could say that definitely yeah.

[00:35:35] Right, yeah so that's an important point that you bring up right.

[00:35:38] I mean and considering that right what are those levers that will sort of you know help us progress from a GDP perspective.

[00:35:46] If you look at the classic you know labor capital or total factor of productivity as such right.

[00:35:51] How would you kind of apply this to the informal sector as such right because everything from enforcing contracts to you know giving credit access to maybe like a hundred other things are different in this context as you mentioned.

[00:36:04] Right, it's not something that you would perhaps implement in a developed nation with a more formalized sort of employment and economy.

[00:36:11] Is there a precedence for something like this and if you could also give us two or three levers that you know we could apply?

[00:36:19] Yeah see I will answer your question sort of in multiple layers.

[00:36:25] So first is you know why is I mean first how do advanced economies despite you know being advanced.

[00:36:35] How some of these factors still remain in some in some of their countries that's one point.

[00:36:40] Two is what is the principle based on which say why I feel democratization of economic thought needs to happen and why some of the prime minister's ideas sort of allude to that.

[00:36:53] And three I will come to you know how this sort of thinking can be sort of implemented at the ground level.

[00:37:01] So on the first point right even in the United States for example right large sections of employment comes from small and medium business right.

[00:37:12] I am not trying to advocate nor romanticize about informality of the economy right.

[00:37:19] Informal economy in its own way is quite inefficient. Efficiencies need to be improved to make them better to make them scalable increase in their number and for all those things right.

[00:37:31] But my principle is understanding how it functions as it is right.

[00:37:38] The the the sort of philosophical construct is what I am seeking people to sort of engage more with.

[00:37:46] What I'm trying to say is even in an advanced economy you know there are large sections of you know entities which which sort of work on principles.

[00:37:56] I mean the advanced economies are not as culturally sort of intertwined as we are.

[00:38:01] We are literally you know very much culturally intertwined with the choices that we make right.

[00:38:06] What do I mean by that? So for example if you want to spend you know for Diwali you know this year you don't look at the Reserve Bank of India and interest rates at that point of time and judge whether you want to spend Diwali or not right.

[00:38:18] Irrespective of what the interest rate is you know whatever that we construct construe as our way of you know life we keep doing those things right.

[00:38:30] Okay the quantum of your celebration might be you know if the economy is really tanking you might reduce the quantum of your celebration by say 5-10 percent right.

[00:38:41] Right it's not like you're not going to celebrate Diwali just because interest rate is at you know 10 percent of you know RBI increases the interest rate to say 10 percent right.

[00:38:49] What I'm trying to say is a lot of activities are driven by these consular constructs much more so in Asian societies right and in Bharat of course even more.

[00:39:01] So what I'm trying to say is this aspect might not be there in the West as much but they have their own sort of localized way of thinking and own sort of constructs which determine their choices right.

[00:39:15] So what I'm trying to say is the West itself has there's a nuance to it even in their developed economies right so that is sort of one picture.

[00:39:24] The second is democratization of thought right.

[00:39:29] This is another very important aspect which often gets missed is that much of you know like history like other aspects of our Bharatiya governance not just governance in any aspect of Bharatiya society right.

[00:39:47] Post independence has been highly Delhi centric right.

[00:39:52] Put it further you know Latins Delhi center right.

[00:39:55] So much of whatever is determined in terms of policy for a long period of time has been with a worldview which is concentrated among people of Delhi and you know and what they think of the world right from their educational experiences and choices which is you know predominantly privileged predominantly

[00:40:21] you know sort of from a Western background and predominantly you know their exposure is largely to the urban sort of you know the city base sort of understanding the world right.

[00:40:34] So, at least in the case of economics, you know I would I would feel that you know people who have I don't want to mention names but I think people who have been part of the system for such a long time are very well intentioned I know a lot of them.

[00:40:47] And you know they have done the best for the country at each point of time irrespective of the political affiliation yet and they've also sort of taken the country forward in terms of policy especially post the 1990s where you know a bunch of these people you know

[00:41:03] 50 hundred people I would put it that number have sort of you know taken policy forward but that doesn't take away from the reality that most of this is concentrated with the Delhi centric centric mindset right and if you really look at the chief economic advisors until recently most of them were all from this bracket right.

[00:41:24] So that's why the prime minister's ideas and thinking I think are different right if you really think about it.

[00:41:30] The prime minister is probably the only prime minister besides Lal Bahadur Shastri who's lived through poverty.

[00:41:38] Meaning has been really poor live through port.

[00:41:42] No other prime minister has lived through port.

[00:41:47] So his understanding of poverty is far more you know authentic.

[00:41:56] So so his ability to grasp things like sanitation you know usual your general ability to understand you know the impact of say Swachh Bharat.

[00:42:06] You know is all firsthand experiences right.

[00:42:09] So that's where you see a disruptor in in going back to numberless point of why he sees what he sees.

[00:42:18] That's the sort of thinking, which is, you know, which is experienced driven right.

[00:42:24] And it's very, very important for people who are understanding India about it after 2014 to come to terms with this fact because you know the definition of a lot of these policies is through firsthand experiences and their impact on the people.

[00:42:40] Right. So this is another important subject of why there's a need for democratization of ideas in general.

[00:42:47] In general, for the rest of Bharat, you know, both in terms of states, both in terms also in terms of, you know, rural urban divides.

[00:42:56] You know the poor and there has to be democratization of thought.

[00:43:00] Right. So this is another sort of principle to.

[00:43:04] And the third point that I was mentioning is how do you sort of implement some of this right.

[00:43:09] So one is understanding how these choices are made.

[00:43:13] Okay. And to trying to optimize policy in a way it where the policy doesn't trust itself on on the way of life.

[00:43:26] Rather, it's the other way around.

[00:43:28] The policy complements the way of life.

[00:43:31] So, if say for example we there is an there is a there's an ecosystem which which works wherever financing is done based on trust between say stakeholders at the smallest system.

[00:43:44] How do you sort of enhance this factor in a way where it is say you bring digitization to this, you bring greater efficiencies to this, you nurture this trust a bit more and formulate policies, which can enable these people to do.

[00:44:00] Some of these things within a more effective, efficient manner.

[00:44:03] So that is how I would sort of look at implementing some of these things and also moving away from the rural urban binary which is probably the next thing which we can address.

[00:44:17] Yeah. So before we talk about urbanization and you know some of those things right.

[00:44:23] I mean, whenever we talk about economic planning or thinking right.

[00:44:27] I mean, we tend to sort of hark back to the era of you know the five-year plans and so on.

[00:44:32] At least I'm still old enough to have lived through maybe a few years of that right.

[00:44:36] How is the economic planning different today?

[00:44:39] Right. Particularly in the last 10 years under Prime Minister Modi versus how some of these things were done in the past.

[00:44:45] You mentioned democrat democratization of thought.

[00:44:48] You mentioned moving away from a very Delhi centric approach and so on.

[00:44:51] Are there any other nuances that you notice?

[00:44:54] And is there something that we should also adopt?

[00:44:59] I think one is definitely, you know, like what you mentioned a different approach to policymaking.

[00:45:06] I'm not saying that the approach in the earlier approaches were flawed or anything like that.

[00:45:11] You see, the question is at every stage of development, you need a particular approach.

[00:45:18] So, for example, when you're bankrupt in the early 1990s, you had to consolidate, create a new system, establish norms, you know, bring through reforms,

[00:45:27] grow through the political, you know, chaos and get through these reforms.

[00:45:32] That requires a different temperament.

[00:45:34] That requires a different nuance and that requires a different sort of consensus building approach to policymaking.

[00:45:43] And that requires you to also follow templates, which the rest of the countries have followed for many years.

[00:45:48] We are at that stage where we are one of going to be on the path to be one of the top, you know, economies.

[00:45:55] And we're at a stage where we if you want to be the Vishwa Guru of the world, you need to have thoughts which are distinctly unique and thoughts which are, you know, ahead of its time.

[00:46:09] So, you know, because most of the policies could face roadblocks.

[00:46:14] So, for example, let's take export competitiveness, right?

[00:46:16] And, you know, the idea of exports being an important, you know, sort of catalyst for economic progress, which a lot of these East Asian countries and even the Chinese have followed.

[00:46:27] Right. If you look at the next 25, 15, 20 years, if you really think about it, the amount of protectionism that you see from the West is probably going to increase.

[00:46:36] The amount of resistance that you see from the rest of the world might increase as India becomes bigger and bigger.

[00:46:43] So what is the sort of scope for, you know, this sort of an approach?

[00:46:49] I mean, not an approach. What is the scope of cooperation that we can see from the rest of the world for this sort of a strategy that we have?

[00:46:58] You know, obviously we need to have an export, you know, expansive strategy as well.

[00:47:02] But how much do you sort of invest in this compared to say 15 years back?

[00:47:07] So what I'm trying to say is a lot of these things keep changing.

[00:47:10] I mean, are bound to change in the next 15, 20 years.

[00:47:12] So that's where you need sort of newer thoughts, newer ideas, which can sort of help you to sort of reassess and sort of nudge the ecosystem a bit more.

[00:47:25] Right. Right. Okay, let's talk about urbanization, which is the other thing that you brought up right now.

[00:47:31] I think about 35 percent of India lives in urban areas.

[00:47:34] Again, we won't go into the definition of what constitutes urban and so on.

[00:47:38] Right. That percentage may increase by about 10 points or so.

[00:47:42] Right. In another 10 years, let's say, right.

[00:47:45] I mean, we reach towards the 50 percent mark.

[00:47:47] Now, there has been this talk forever of this satellite cities, twin cities and so on and so forth.

[00:47:54] Right. Where you kind of develop areas around a key metropolitan city, let's say like Bangalore Mysore or Mumbai Pune, kind of a thing.

[00:48:02] Right. But how much of that do you think has succeeded?

[00:48:05] I mean, is there a different thought process that we need to apply?

[00:48:08] Are there ecosystems that we have to develop in tier two, tier three, tier four cities?

[00:48:13] What will it really take for us to make those areas productive and efficient contributors to the economy?

[00:48:20] Yeah, I think this is again an important question.

[00:48:24] Right. This is similar to the population issue.

[00:48:27] Right. For many decades, you've been saying you want to reduce population, reduce population, reduce population.

[00:48:33] At some point, you know, your population numbers are going much below the number that you want.

[00:48:39] Right. So in terms of rural urban migration, the question really is what is rural urban migration at least from an Indian Bharatiya context?

[00:48:49] Right. If you look at the West, it's a different story.

[00:48:52] I mean, in the United States, for example, you know, you have a say downtown or a major area where, you know, you have a lot of these businesses.

[00:49:01] You have most of the residences in the suburbs and then there's a rural area.

[00:49:05] Right. The much of the residential population lives in the suburbs.

[00:49:09] Right. And they just go to work and then come back to the suburbs.

[00:49:13] Right. That's a sort of an organized way of a society which says that no, no, you don't want to concentrate everything in the city.

[00:49:19] Right. Whether you like it or not, our form of organization is that everyone goes into the city.

[00:49:25] Right. For whatever variety of reasons, that's the status quo we are at the moment.

[00:49:31] Right. So this illusion that, OK, one issue is employment, right.

[00:49:38] Moving people away from agriculture into other streams of employment.

[00:49:42] Right. That is often confused with moving from rural to urban.

[00:49:46] Right. Those are two different paradigms actually.

[00:49:49] OK. The only thing that you draw the sort of connecting dot is that opportunity is more in rural and urban areas compared to rural areas.

[00:50:00] Right. If the opportunity factor can be shifted, right, then this employment argument also goes for a toss.

[00:50:07] Right. So what I'm trying to say is in modern cities today in India, if you take Chennai, for example, Chennai is extended all the way to Kanjiburam.

[00:50:15] Right. It's extended all the way to Mahabalipuram on this side, on the East Coast roadside.

[00:50:20] So Chennai per se is now far outside itself in its own construct.

[00:50:27] Right. Because it's not able to handle all these both population as well as density and buildings and all that.

[00:50:36] Right. So the question really is, is what is the threshold for this?

[00:50:43] I think the answer really lies in, you know, some of the smart cities and the development of some of these smart cities that have happened.

[00:50:51] Because I think the rural urban migration for employment or moving away from agriculture into formal employment into other forms of employment is a very important economic policy construct.

[00:51:02] Right. But whether we want to shift everyone out of that system into urban areas is another different sort of paradigm.

[00:51:12] I would say that building strength of tier two, tier three, tier four cities, infrastructure in these cities, creating opportunities and clusters in these cities is a very, very important sort of component of this in the Amrit Kalp.

[00:51:26] Because that is what is going to generate sustainable living.

[00:51:30] If not, you know, this mere rehash of just rural to urban, I don't think is going to take us anywhere.

[00:51:38] And building of these tier two, tier three cities, infrastructure in terms of what we're doing on, you know, railways and highways and things like that.

[00:51:47] These are the things that will help us sort of develop indigenous local clusters.

[00:51:52] For example, in the if you take the United States again, the university system, which the US has is an important component of this, where the university system itself forms a community.

[00:52:05] A lot of the tier two towns are all university towns, right?

[00:52:10] Which creates your own economy, own opportunity, own sort of thing to itself.

[00:52:15] I'm not saying we should replicate that, but what I'm trying to say is we have to evolve ways to develop tier two, tier three, tier four cities and create economies of scale within these cities through technology, through infrastructure.

[00:52:29] So that a individual could move from a rural to a semi urban area or a tier two area, which is about say 100 kilometers or 50 kilometers from his place rather than, you know, going to, you know, major metropolitan cities.

[00:52:42] So I think this entire, you know, illusion of completely moving from rural to urban needs to also evolve where we see thresholds and after that we build the strengths of tier two, tier three, tier four cities.

[00:52:55] Anytime we talk about the economy or let's say the GDP and so on, one thing that often comes up is jobs, right?

[00:53:02] Do we have enough, you know, jobs in Bharat for our youth?

[00:53:06] Right. And if you look at, let's say the EPFO or CMI service and they have their own constraints as well.

[00:53:13] I mean, the recent survey shows that, you know, I mean, we've bridged some of the gaps, right?

[00:53:18] We made some progress on that front and also that, you know, women's participation in labor has also increased.

[00:53:23] Right. But one of the things that people often ask is how do we create jobs?

[00:53:27] Right. How would you kind of address that?

[00:53:30] So, you know, would you just, let's say, increase these clusters that you mentioned and create sort of economic hubs and sort of expect that to sort of trickle down and sort of automatically create these jobs?

[00:53:42] Or I mean, is there something like a top-down push that you would suggest?

[00:53:47] So I would see this in two elements.

[00:53:50] One is measurement of data, right? Because of how the economy has evolved over a period of time and how, say, the gig economy, employment created through the gig economy and all that.

[00:54:06] And two is, you know, how do you sort of address this problem of employment, especially for an aspirational population?

[00:54:15] So I would defer to probably a combination of both in the sense you have sort of central schemes, you know, which, you know, methods with the private sector can sort of enable and empower.

[00:54:27] But the key is to sort of what do you do with the large sections of the informal economy which forms employment?

[00:54:35] So that is a derivative of, you know, I would say strengthening tier two, tier three cities and building economies of scale in these places which would sort of trigger greater employment in a more sustainable manner.

[00:54:49] But yeah, that's probably another debate by itself. But I would sort of, you know, look at how we sort of enhance the tier two, tier three cities.

[00:54:58] You know, I mean, one thing that has become mainstream conversation today is geopolitics, right?

[00:55:04] I mean, it's happened over the last couple of years or more post-COVID steadily that geopolitics seems to impact everything today.

[00:55:11] So how do you see that factor into India's competitiveness and the world stage, especially over the last couple of years?

[00:55:20] I mean, we've been actively trying to use some of the leverage that we have after the world has changed post-COVID to our advantage.

[00:55:27] Right. I mean, how do you see that going forward?

[00:55:30] Whether it is in terms of let's say being Atman Arbar on things like semiconductors to, you know, having competitiveness on the AI front, national security, etc.

[00:55:41] Right. I mean, so how would you factor geopolitics into our growth aspirations?

[00:55:46] Yeah, that's again a very central question. Right. I mean, my personal view is that we will have a good ride, you know, a rather free ride from a geopolitical sense till we reach a particular level.

[00:55:59] Right. So the Chinese had a more or less free ride from early 2000s till about mid 2014 or 15 when the moment you start becoming a power, which is sort of endangering the superpowers,

[00:56:14] that's when, you know, attempts will be made for you to be restricted. Right. So I think those are all other factors which are not under your control. Right. Geopolitical factors. What's going to happen in the US? What's going to happen with China? What's going to happen with all those things?

[00:56:28] Those are all other factors. But I think from our standpoint, what is important is engaging with the world.

[00:56:37] I think that's a very important aspect for us to expand both economic opportunity as well as our economy as a whole, but also building resilience in key sectors.

[00:56:47] I think semiconductor mission is an important sort of thrust in that front. So I would look at it in, you know, that we have to be, you know, expand what we're doing at the moment by a scale of say X, but yet be cognizant of the fact that we have to be

[00:57:01] more and more, we need to find newer and innovative ways to sort of build our strength and take it forward. Right. Yeah. Interesting times ahead for sure. Right. Again, this was a fascinating conversation, Sriram. We've covered like a wide range of issues under the whole economy

[00:57:15] ambit, I would say. Right. You mentioned that there's a sequel coming out for Kautilyonomics, your previous book. What can readers expect and when will it be?

[00:57:24] We're in the editing stage at the moment. So it should come out probably later this year. I would say this is, you know, as I was writing this, I, you know, I felt far more excited than Kautilyonomics.

[00:57:35] So I'm pretty sure people who enjoy these types of subjects would really embrace this. And I look forward to sharing more thoughts on this. And basically we're looking at economic models in the Cholas, in the Pallavas, in the Pandyas, you know, Vijayanagara Empire,

[00:57:47] Kambuj Desa, Champa, Java and all these places. And also a snippet to the Saraswati Srinu Civilization. It covers a wide range of ambit, much more simpler in terms of economic policy, I mean, in terms of economic jargon.

[00:58:01] But it does address a lot of these, you know, the continuity which I spoke about earlier. So I think it's a good time to talk about this.

[00:58:09] Awesome. So thank you again for joining us and wish you all the very best with your upcoming books and projects. And hopefully we'll host you again on Bharat Varta, this time perhaps, I mean next time perhaps in the studio itself. So thank you, Sriram. Thank you so much.

[00:58:19] Sure. Thank you, Roshan. Thank you. Really appreciate it.