‘PhDs are applying for peon positions, we’re simply not creating enough jobs,’ says Raghuram Rajan

The Ex-RBI governor talks about whether the Indian economy is growing fast enough, India's position on a global stage and his years working for the UPA and NDA.

Illustration: Soham Sen | ThePrint

Former Reserve Bank of India (RBI) governor and economist Raghuram Rajan says the economy is “growing reasonably” but the “fruits of that growth are not reaching widely enough”. In a conversation with journalist and columnist Vir Sanghvi, Rajan also talks about the difference between working with the NDA and UPA, what is needed to create jobs, why he thinks India’s democracy must be preserved and why he will not join politics. Edited excerpts from the interview:

Vir Sanghvi: There’s a way in which you become a sort of bogeyman for followers of the present regime, supporters of the present regime. It’s almost as though when their children don’t sleep at night or misbehave, they say, watch out, Raghuram Rajan is going to come and get you. How does that feel? Because you have never been portrayed in such terms before.

Raghuram Rajan: No, I think there’s a sort of campaign to discredit me and what they do is they take phrases out of context and then push it as hard as they can. But, you know, this has been going on for some time. It went on while I was governor of RBI, too. Sometimes you feel it is orchestrated, and it is sometimes. And sometimes it’s just, ‘let’s try and be sensational because we don’t have any other news’. So, it’s a mix.

I think what I keep insisting on is to read the whole. Even interviews, as you well know, are sort of cut so as to try and emphasise the new stuff, which tends to be sensational. But if you listen to me talking, you’ll hear what I’m saying. And that’s what you should focus on.

I can understand now why they are going for you. But why when you were governor of the RBI? Because that was a sort of policy job. You didn’t really express any political views.

Well, there were a couple of things that were going on. I think that we were initially raising interest rates to bring inflation down, and a bunch of people who had borrowed a lot suddenly started feeling the pinch. I got a bunch of threats from business people saying, you know, you better do it, otherwise we get you out of our job.

Really?

Absolutely.

These were influential business people who were in a position to do that?

Well, you know, sometimes business people have a greater sense of their influence than they actually have. The point was, if I succumb to their threats, then I would be out of a job anyway because I would be doing my job awfully. So, you just ignore it and go on and do your thing. But the other part was that we started cleaning up the banking sector and forcing people to repay loans. And that, too, didn’t go down well.

So, you know, if you want to speculate, there’s always conspiracy theories you can subscribe to. But I’ll leave it at that.

Most famously, while you were working, there was another person who had been the RBI governor who was also in government. So, did you talk much to Dr Manmohan Singh?

Oh, yes. He was very supportive. He is, you know, obviously a brilliant economist who made it through every position of government. And, you know, people don’t credit him enough with also having political acumen. He may not have been a politician, but he had political acumen.

Give us an example, because the criticism most often levied against him is that he may have been a good economist, but he really had no idea about politics.

Well, just in even in the way he brought me into the system. His sense was that you need an outsider. You need to bring them in by ensuring that they sort of show their colours before they are entrusted with something as important as the RBI.

So, he, you know, along with Dr Rangarajan, brought me in as chief economic advisor, which is sort of an important post, but not critical. It doesn’t matter if the chief economic advisor goes off the rails, because that can be contained. But you can’t contain an RBI governor who goes off the rails.

And so, I think we had established trust. It allowed others in the party, in the government to observe me and allowed me to work with Mr Chidambaram, who would make, along with Dr. Manmohan Singh, the final decision. And so, it sort of paved the way.

What was the difference working with Mr Chidambaram, who is known for being a man who knows his own mind, and does not have a reputation, shall we say, for being particularly flexible, and Dr Manmohan Singh who, you’ve seen, is a gentler figure. Is that caricature accurate?

No, well, they’re different people, of course. Both very, very smart. I think Dr Manmohan Singh, you know, has a more, what’s the right word, enabling personality. He sort of wants to sort of figure out what you want, and work with that.

Mr Chidambaram has strong views of his own, for sure. But it’s not as if he didn’t listen. He was always open and receptive to ideas. In fact, he desperately wanted ideas.

What is interesting about Mr Chidambaram’s manner of working is that he wants to find the person who knows. If it’s the secretary, that’s fine. But if the secretary doesn’t know, he’s quite willing to go to the deputy secretary who knows, and, you know, talk to him — ‘tell me what I want to know, and tell me why I’m wrong’. It’s not that he’s unwilling to be contradicted. He genuinely wants people who know their subject.

But when you deal with Mr Chidambaram or Dr Manmohan Singh, you’re dealing with people with experience of economic ministries. Chidambaram is not an economist, but he has done enough economics in government. What was it like when you dealt with Mr Jaitley, who was a lawyer with no economic background?

Well, so Mr Jaitley was, again, very, very… I mean, they’re obviously smart people who come into their position because they understand how to put one thing together.

I think Mr Jaitley was less interested in the economics relative to, say, Mr Chidambaram, but he was much more engaged on how to make things possible politically. So, he also looked at an economic problem from a political perspective…. So, different interests, different emphasis. There were different personalities, too, but both, as you know, were extremely eminent lawyers. And so, they could get to the gist of the arguments very quickly.

So, there is a perception that you didn’t really get on with him. Is that accurate or inaccurate?

Totally inaccurate.

Really?

Yep. I got along with both prime ministers I worked with, as well as both finance ministers. I think the issues were outside.

Explain that. I mean, you can’t leave that open-ended. What were the issues then?

I mean, there were a couple. One was, I had my own sense of discomfort with growing majoritarianism. And as a public official, you want to be careful about bringing your organisation into disrepute or into controversy when talking about it. But as I said, the people looking for controversy did follow me because I was one of the few who was willing to speak out on some issues.

Give me an example of an issue that you spoke out on.

So, I used to speak on inflation and so on. And, you know, again, you didn’t want to send the wrong message. So, Mr Jaitley suggested, why don’t you speak on non-economic issues? Because that then takes away this thing from…. I got invited to a lot of speeches. Either you give a totally boring speech, in which case they look for controversy within the speech and manufacture it, or you give them something to work with.

So, I started moving to non-economics — economics, but not related to monetary policy. But what was important was, you know, as the environment of intolerance started increasing, I thought it was important for public figures to say that was not the India that was intended. And you wanted a more inclusive India.

So, I used, importantly, one platform, the IIT Delhi Convocation, where I was giving the convocation speech to say why respect and tolerance were really important for India. And that our history suggested that people like Akbar, which was a red rag to some, and, you know, Raja Raja Cholan and others had, you know, over time, set up an environment of tolerance. It was in our history. And it would be a shame to move away from it as we get near the frontiers of economics, where debate, creativity is really important.

I remember that speech. And I wondered if you’d realised the impact it would have before you made it.

I absolutely realised the impact, but that was the intent. It was deliberate.

I mean, using Akbar in many contexts is non-controversial. But given the environment you were in, it was certain to be a red rag, no?

It was deliberate. But it was also that I was going back as an IIT Delhi alumnus, talking to the young graduates and giving them a message of hope and, you know, idealism. And it was in that context that I thought it was important that I speak, rather than, you know, to FICCI or somebody else where I would be expected to speak as RBI governor, talk about economics. And actually, I met Mr Jaitley the next week, and he said, I would have said everything you said.

Really?

Yeah, absolutely. He said, I have been saying this. In fact, he said something more. He said, I have been saying the same thing, which was interesting. This was after the speech started getting the usual controversy. So that’s an example of people, you know, respect and tolerance.

What you have said is very interesting. So, did you have the sense with Mr Jaitley — who you clearly have respect for, judging by the things you’ve said — that he also didn’t want a very majoritarian, oppressive India. That he appreciated the diversity and plurality of India?

Well, I don’t want to go to the extent of knowing his thinking. In your conversation with him, he is urbane. He is not your, you know, expletive spouting street radical. And it is easy to find common ground. Now, whether he would stand up to something which was against certain forms of majoritarianism that we’ve seen, I don’t know. But I would say that he certainly wouldn’t lead the charge.

You’re saying he was a nice fellow, a chap you could talk to, who was urbane. And perhaps even if he didn’t approve of some kind of expletive sprouting majoritarian or whatever, he may disapprove silently, but he would not lead the charge against them. That’s really what you’re saying.

I mean, that, I don’t want to sort of frame him in that, but if I were to gauge his thinking, it would be that he would not be leading the charge on either side, either towards the majoritarianism or against it.

Did you get the sense then — because there was so much controversy on social media — a lot of it, as you suggested, was orchestrated — that the government wanted you out?

I think certain elements clearly were not happy. Certain elements certainly did not see me as conforming. And I don’t want to entirely dissociate this from business interests either.

Exactly.

I think business interests have political connections. And those political connections then work in their interest silently or explicitly.

So, Dr Rajan, forgive me if I’m caricaturing what you’re saying, but what you’re saying is that there were business interests who felt they would be adversely affected by the clean-ups and the things you were doing, and they lobbied to have you removed. There were elements within the ruling dispensation who didn’t like it because you stood up for your vision of India, which was not their vision of India. And ultimately, perhaps there was a coincidence of interest and that contributed to your exit?

Well, look, I think the point you have to ask is, given my performance, why didn’t we get to a point of agreement in my continuation with the government? And so, you have to go beyond the, ‘oh, you know, he raised interest rates or whatever’. In fact, I cut interest rates throughout the BJP regime to look at interests. And I mean, you mentioned a couple, there could be so many more. It doesn’t give me sleepless nights. I don’t think about it. I think what I did was the right thing for India. I feel very confident and proud of the record we established over that time. And I think it has helped India over the years since.

The clean-up we started of the banking system has proceeded to the point where banks by and large have clean balance sheets and can lend as the nation sort of starts growing. UPI is such a flourishing system now. Of course, success has many fathers. I think the true father is Nandan Nilekani. But, you know, I feel I played a small part in that. And similarly, some of the banks we started, I see branches we licensed, I see branches all around and I say, well, that’s a bank we gave a license to. I feel happy.

Does it surprise you when, let’s take UPI, there’s now a campaign on Twitter and social media to say, this Rajan guy is claiming credit for UPI, he had nothing to do with it. There’s an attempt to airbrush your achievements or photoshop them out of what really happened and attribute them to other people. Have you noticed that?

Well, you know, this is politics, right? So, I mean, even the finance minister sort of gets into the act and says, ‘oh, he presided over phone banking’. I was in the process of, you know, the political establishment calling banks to lend to their favourite sort of industrialists. I was in the UPA government for eight months, in the NDA government for 28 months.

So, when did this phone banking take place? During the eight months I was with the UPA or the 28 months I was with the NDA? I mean, this is just political, you know, talk.

What we really did was that we started the clean-up of the banking system… (Nirmala) Sitharaman wasn’t there, I was with Mr Jaitley. I remember going to Mr Jaitley and saying, this is going to cost you. But if we don’t clean up the system, you will have to take more and more blame for the size of the NPAs that build up. And it will not be possible for you to blame the previous government at that point. We have to start the clean-up now. And it will cost you money.

And you know, when we did the clean-up, we did the assessment, we were amazed at how much it would cost, given the bad loans that had accumulated. And so, I went back to him again, and I said, this is the amount. But to his credit, he was perfectly supportive. He said, if it has to be done, it has to be done.

Okay. Because the view that is now current in sort of conventional wisdom is that the UPA gave loans to very dodgy characters, the banks were stuck with non-performing assets, and then they got rid of you and they cleaned it all up.

No, I think we started the whole process of clean-up. In fact, they were upset because we were cleaning up. They got rid of me and cleaned it up. But see, this is the narrative. Oh, he raised inflation. Well, no, inflation was close to double digits when I came in. When I left, it was 5 percent. We brought it down significantly. In fact, we brought it down within the range that we could implement the inflation targeting regime. They didn’t want to do it in my time, because that will give me a last success. They did it under Urjit Patel. But that regime was fully negotiated, ready to go at the end of my time. And it stood us in good stead. It has kept inflation relatively contained in the face of widespread global disruption.

So, they see me as part of the opposition. The problem with this establishment is anybody who criticises is seen as opposition and political, rather than they are criticising because there’s reason to criticise, because you are doing something wrong. Of course, this government wants to believe it can do nothing wrong. And of course, the whole hordes who are enlisted in the trolling attacks basically don’t think for a moment. They’re empty headed.

When do you think all this started? Because you come to India, and you become chief economist. At that stage, you’re internationally renowned, you predicted an economic crisis. You were a star at the IMF (International Monetary Fund). You’re seen purely as a technocrat. And yet, if you see the narrative now, you were always like a UPA stooge, always anti-BJP, always political. When do you think that perception changed?

So, it’s very interesting. I worked with the NDA first installment too, fairly closely with Mr Yashwant Sinha. And he acknowledges the fact that I have, you know, offered some useful advice in his book. I have great respect for Mr Yashwant Sinha. I think he was one of India’s finest finance ministers. Because he took the process of reform head on, and he continued, which was important, because we were slowing down.

NDA-1 did a bunch of reforms, which didn’t show up in outcomes until UPA took over. But I think the initial years of success were in part…for this government, nothing happened before 2014. Everything happened after 2014 that is good. I mean, that is, you know…

…especially after they got rid of Rajan, not just after 2014.

They can’t wait that long, because the highest year of growth was 2016. In my last year, so they can’t eliminate me completely, because growth actually picked up quite strongly. But no, the point I’m trying to make is that there were good years, even before 2014, even under the NDA-1. And so to say that I was UPA man, no, I have been with multiple governments over time, advising them when they have cared to listen. And, you know, hopefully, the point is, this is for India. I was very critical of the UPA when I was an advisor to the prime minister.

I’m sure there is a video of a situation in 2012, 2011-2012, when Isher Ahluwalia was releasing a book in honour of Dr Manmohan Singh. And in the room, a huge auditorium, an event organised by ICRIER (Indian Council for Research on International Economic Relations), it was Ahluwalia, TN Ninan, Dr Subba Rao and me, and a fifth person at the table. And we were discussing the economic performance of the Manmohan Singh government. And three of us are really critical, starting with Isher Aluwalia, who is a close friend of the prime minister. She is critical, TN Ninan is critical, I am critical, and I’m sort of an economic advisor to the prime minister. And Dr Subba Rao, given his office, is appropriately measured. And then the fifth person speaks, and it is the prime minister.

Oh, really? This was in front of him?

He’s sitting at the table with all of us. I mean, he’s consorting with ordinary mortals. Something unimaginable today. And he goes up and he says, look, I have heard a lot. I am not going to try and defend myself. I mean, this was to celebrate his reforms in the 1990s, but ended up being critical of what was happening in UPA. And a lot of it was because the Opposition was simply not cooperating in sort of reform measures, which there were plenty of on the table. But he said, look, I have heard, and it is important for me to reflect and do something about it. And one of the consequences was that, you know, Pranab Mukherjee went to the presidency and Mr Chidambaram came back as finance minister, which was probably important in changing the tenor of the fiscal situation. And probably was important to do that before we were hit by the taper tantrum crisis.

So, I think what he heard then and what he did subsequently, who knows how much of it was influenced by that panel. But he did listen to criticism. And he didn’t put us all in jail for criticising him. You know, that’s the kind of dialogue that we need, because there’s a lot that can go wrong in a complicated economy like India’s. And you shouldn’t basically label anybody who criticises as an anti-national.

But clearly, you’re not anti-national. But how far would you go? Assume purely for the purposes of argument, that the phone rang just now and it was the prime minister. And he said, never mind what they’re saying about social media, India needs you. Will you come back and accept such and such job in my government? Would you do it?

No, I think it’s not so much the job as, you know, taking the right economic steps. So, I’ve been happy to talk to government officials, the few who call me sometimes, and tell them what I think is the right thing to do. The problem of associating with a particular government you get is that you get associated with all its policies. And then you have the moral dilemma of what if I don’t agree with a vast majority?  I mean, there’s no government you’ll agree with all the policies completely. It depends how fundamentally you differ on certain measures, right? And so that is a question that I will have to answer at some point whenever anything happens of that kind. 

I mean, at the moment, you have to admit it sounds a lot like a no.

Well, I sort of hesitate to answer speculative questions. What will you do if doesn’t such happens?

Fair enough. Let me ask you another question. Let’s assume for the purpose of argument, unlikely though it seems, that the BJP loses this election, and there is an Opposition government in place, and they call you and they say, ‘look, things are a mess. Come and clean them up’. Would you go?

Well, you know, whenever there has been a need, you know, for example, when Dr Rangarajan called me to be the chief economic advisor in 2012, that was a point where we were actually in fairly deep trouble in terms of slowing growth and high debt and large fiscal deficits. But there was a need.

And I didn’t feel that, you know, while I was certainly against the corruption that, you know, some of these probes at that point raised, I didn’t feel that I was unsympathetic with the views of the leaders of that government. And I went. So, what’s important is that I feel that, you know, overall, the government is going in a reasonable direction. Again, you never agree with every last detail.

But it’s the direction that’s important, right?

Yeah, it’s the direction that’s important.

There’s criticism constantly on social media, that you’re a great pal of Rahul Gandhi’s, that you advise Rahul Gandhi, you’ve been called a Rahul Gandhi stooge. What’s the truth?

Look, first, I think that Rahul Gandhi is often depicted — (going by) that totally disfiguring interview with Arnab Goswami way back — as someone who doesn’t have the capabilities to think and lead. And I think that’s such a wrong portrayal in the sense that, you know, he’s smart, intelligent, and also brave. I think what people discount, which they should not, is, this is a family which has seen a grandmother assassinated, father blown up, to engage in politics, to be in the midst of crowds.

I mean, if I had that experience, I would be hiding in a bed all the time.

So, I think there are lots of attributes which are commendable. And if you look at his record of what he has been saying on events, I think he’s been right in (pointing out), including during COVID, our need to do more preparation, our need to act early. And, in fact, it was the Congress calling off rallies, which eventually led to the stopping of politicking during the second wave.

But I mean, I don’t want to say that he has all the answers. I don’t want to say that, you know, I mean, I just think that he is a very reasonable leader, contrary to what has been portrayed. I think the issue more is, yeah, like with any person, he has strong convictions, you have to debate those convictions, if you disagree with them. But he’s perfectly willing to engage in that debate.

Which leads to the obvious next question, there has been speculation throughout the last few months, that you will join the Congress & speculation, that you would stand at this election, was there ever anything to it?

No, I mean, look, I have said repeatedly, and people still don’t believe me that I’m an academic, my business is not kissing babies. And I have a family and a wife who doesn’t want me to enter politics for good reason, which I perfectly believe in. So, rather than enter politics, what I would like to do is help guide where I can.  And that’s what I try to do. So, where I feel government policy is going off track, regardless of whether I’m in government or not, I talk about it. Now, you know, actually, I see this young guy, Dhruv Rathee, and he actually is so interesting in what he says. But one thing that he says resonates with me too. When people ask, you know, are you doing all this for power? The easiest way to get power today is to succumb to the narrative and be a fellow traveller with the BJP. Right? As you said, the chances look relatively dim, I wouldn’t, I don’t think they are as dim as publicly portrayed. But I think the point is, if anybody wanted a shortcut to power, and had no scruples whatsoever, would join the ruling party. We see so many people doing it, that would be so easy. But then, you know, you have to ask yourself, are you doing the right thing? Something you said in that answer intrigued me.

 

But let’s talk a little bit about the economy. Many people watching this programme have heard various characterisations of the economy. There’s the government characterisation, which is that we’re galloping ahead, most of our people have never had it so good, etc, etc. And that’s gone down. Okay, if you look at the Lokniti poll, you look at many polls recently, people believe they’re much better off than they’ve ever been. So, I’m not going to argue in terms of figures, there is that sense of well-being. My point is, will this continue? Do you see us as being in a good position?

So, well-being is going to happen. And that’s what if you are a poor country, and you’re growing, you are going to make people better off, right? The question is, what is the base at which well-being is improving? So, if people say, ‘Oh, today, I can use UPI, I couldn’t use it four, five years ago’. I mean, that’s true. Things will keep improving over time. It was true of the UPA, it was true of the NDA before it is true of this NDA. The question is, are we moving fast enough? And are the benefits spreading widely? So, there are some. We can get into disputes about GDP numbers, but I would say…

Let’s not talk about numbers, because we lose the audience.

Yeah, I would say, I would say we’re growing reasonably.

Yeah.

But the fruits of that growth are not reaching widely enough.

There are two different arguments. One is, are we growing fast enough? And the other is, is the growth reaching the average Indian?

Okay, so I think the answer to both is no.

Right.

So, when you say fast enough, right? The question is, how fast do we need to grow? Well, one way to think about it, which I think the Prime Minister correctly puts it is — he doesn’t put it this way, but I’ll put it this way — by 2047, we’re sort of running out of our population dividend. We’re no longer staying young, we’re starting to grow old, which means our labour force is shrinking, more and more people will be dependent on it. The time for growth is going to start ending now, as it has for China, because China’s population dividend was much earlier. So given that, we need to, if we need to grow rich before we grow old, we need to become developed, more or less, by around 2047, which is about 24 years.

Okay. Now, the problem, of course, when we say we’re growing really fast, you know, we are growing about 6 percent when you correct for all the fluff in the GDP numbers today, which is healthy. But at our stage of development, China and Korea were growing at 9 percent, 10 percent. Okay, so we look good relative to Germany, which is growing at zero, or Japan, which is growing at one.

But there are different stages of development, surely.

Exactly. Poor countries grow faster. So, saying we’re the fastest-growing country in the G20 doesn’t really carry as much weight when you realise we’re also the poorest country in the G20. So, as a result, we should be growing faster. Are we growing fast enough? No, relative to the pace at which these other countries were growing. So, if we want to become a developed country, by 2047, we should be growing at 9 percent and 10 percent today, because we will slow. As we get closer to 2047, we will slow because we’ll become a more developed country by then. Today, we should be growing at 10 percent, not 6 percent.

So why are we not growing at 10 percent?

Because we’re not doing enough in terms of creating employment. That gets to the second point, which is, you know, is everybody benefiting? No. As you can see, the middle class and the lower-middle-class are suffering because it’s not getting enough jobs. One statistic, and this is going to hit your viewers, the single largest source of growth in employment shares in agriculture. We are increasing the share of jobs in agriculture rather than reducing them over the past few years. This is mind boggling.

You know, we say we’re growing so fast, but we’re not creating jobs in manufacturing and services. We are creating jobs in construction. The government’s infrastructure programme is working well. But otherwise, we are just, you know, we’re not doing well on job creation. And, you know, for all the statistics, just look at how many people are applying for government jobs.

You know, you’ve got something like 19 million applying for 60,000 railway jobs. PhDs applying for jobs as peons. This is a reflection of a labour market, which is simply not creating enough jobs.

And so, while we have the upper middle class doing really well, you can see it in another statistic, which I’ll give you. If you look at passenger car sales, they’re resuming, they have gone beyond the pre-pandemic levels. If you look at two-wheeler sales, for the past decade, they’ve been inching up. And they’re still way below the pre-pandemic level. Two wheelers, of course, bought by middle class and lower middle-class people. So that’s a clear sign that things are not going well with them.

And to counter that, the chaps who bought scooters earlier, now can afford Cars…

Which is such nonsense… I don’t know which person is peddling this. I mean, this is just rubbish. Are you going to say that those households, those 16, 17 million households are satisfied with 1 million cars? No, I mean, these are entirely different demographic groups. And, you know, the blatancy with which such nonsense (is peddled today)…. I was on a panel with a government-related person over the weekend. And, you know, they were peddling, ‘Oh, India used to have 100 start-ups, now it has 400,000 start-ups’. I mean, again, this is nonsense. Every individual who is self-employed becomes a start-up in this new definition.

They are self-employed because they can’t find a job. And rather than call themselves unemployed, they call themselves self-employed. So, I mean, yes, we can debate the statistics until the cows come home. The number of people applying for government jobs is not something you can dismiss. I mean, take even the people sitting for the IAS, the number of jobs in the IAS have not increased. But we have three times the number we had in the early part of the century. And why is that? You know, in the early part of the century, the private sector was growing. People were not so interested in the IAS, they were moving towards private sector jobs. I mean, that’s not happening anymore. Because the private sector jobs are not as alluring relative to the safe government job. Because they’re not enough.

I take your point. I don’t dispute any of your figures, because those are indisputable. Those figures are there. But answer me this, if this is true, why are people continuing to vote for this government?

You know, that’s, that’s the great mystery. People don’t just work the pocketbook, of course, they vote other things. But it’s also the question of whether they feel they’re alone in their misery while everybody else is doing well. So, it must be them. See, the dominant narrative in the mainstream press, or as in the Godi media, as Ravish Kumar would say…

Is that you mentioning Ravish Kumar and Dhruv Rathee to go on…

Yeah, is that all is well? Yeah, we’re growing so fast. You know, the government document, the white paper that the finance minister put out, in which everything good has happened in the past 10 years, that doesn’t mention the word unemployment. I actually looked for it. It doesn’t mention the word unemployment. It’s not there. It’s absent. So, you know, in that narrative, where all is well, if you’re unemployed, or your son is unemployed, you feel well, it must be us. Because the rest of the country is doing so well, the prime minister is inaugurating a railway station every day. You know, it’s booming. And so, it must be us. So that’s one part of it.

The other part is, it’s not just about the economics, right? You know, I’ve heard people say, and obviously, this is important, that we now feel that we are a respected nation. And when we see Prime Minister Modi received so well by others, we have a sense of how important India is. And I think that’s, you know, I feel a sense of pride when India is taken seriously. I don’t think it’s just the leadership. I think it’s also the country, and what it stands for, and the size of the country, all those things help us.  But I think that there are other reasons.

And, you know, you’re actually endorsing a claim the BJP regularly makes, which many people consider controversial, which is that since this government took office, India has gained in global stature.

I don’t think that’s right. I’m not endorsing that claim. What I’m endorsing is the claim is India has become much more important over time, both because of its size, as well as the fact that we have had growth over time. And we’ve become more and more important. And of course,China has become the bogey person — the bad boy.

All those things have contributed. And I would say that, you know, our current leadership has taken advantage of those circumstances. Yes, I mean, they could have not done that. But at the same time, you know, remember, Prime Minister Manmohan Singh was admired in the United States, including by somebody like George Bush, who painted him and has said repeatedly that he thought that we also were known for our values, even when we were a small country.

Our democratic values, our sense of values allowed us to, in a sense, punch above our weight. I think now we’re punching at our weight. But our weight has become much stronger, much, much higher.

Ordinary people watching the show, I think many of whom in their hearts will agree with you that unemployment is a problem, that this whole manufacturing boom has not happened, the private sector has not created the jobs we expected it to, will ask you then, should we worry? Should we be optimistic? Will things be okay for us? Will there be more unemployment? Is there some kind of bust coming? What’s your answer to that?

You know, when you look at the details of our growth, it has become much more capital intensive. And one example of that is the government wanting to push chip manufacturing. Chips are the most capital-intensive product you could think of making. They just consume money. We have now set aside $10 billion for chip subsidies. And these are, you know, essentially capital subsidies that will pay up front to set up these chip factories. That’s a source of worry, because those aren’t going to create many jobs.

You know, government puts out some job numbers, but those aren’t going to create many jobs. What are going to create jobs, you know, we have 300,000 chip designers, the IT minister says this, that’s a lot more jobs than we’ll get from chip manufacturing. But we’re not creating the universities, the strong universities that will create many more chip designers. So, I think the priorities are misplaced.

If you look at the IIP, the index of industrial production, 12 out of 23 sectors have lower production today than they had in 2015. And typically, they’re labour-intensive sectors like leather, like textiles. What is succeeding in this country today is infrastructure related industries, steel, etc, etc, plus capital-intensive industries. That’s not good for jobs. Our growth is skewed. So, we need to think about that. We need to rethink that, and focus on how we create both a more employable workforce, but also the jobs for that workforce. And that requires serious economic thinking. It’s not done by seat of the pants.

The other thing that they’ve gone on and on about recently, on social media, both sides, is the stock market, how much it grew during the UPA, how much it grew during the BJP period. What do you think is the truth? Is the stock market going to keep growing? Is it just a normal function of the way the economy is growing?

Yeah, well, I think it’s when I last saw the numbers, the BSE Sensex has, you know, about tripled since 2014. And it did about that much, or if not a little more under the UPA. So, there’s nothing spectacular about the stock market performance. In fact, my former teachers at IIM Ahmedabad, Dr Barua and Dr Raghunathan wrote a piece, which actually showed this. But I see the stock market reflects the upper tiers of the economy, the sort of the traded firms, as well as this mania for investment, which is now, for right or wrong, taking over the upper middle class. In the longer run, a healthy stock market is really important for an economy. So, I’m actually positive about that.

But it doesn’t reflect what’s happening with the small and medium sectors with the jobs situation, etc. And so, you can’t take the stock market as a full barometer of health. We have done better than a number of other countries, but also, you know, look at the US stock market, it’s at an all-time high and surging. So, it’s not that we’re alone, it’s that a bunch of countries are doing well. I mean, if I look at the US S&P growth index, it has beaten India by a couple of percentage points this year. So, it’s good. I don’t want to downplay it. But let’s not take it as a full barometer of the economy’s health.

So, judging by the things you’re saying, let me try again and summarise and probably wrongly, but you’re saying things are not gloomy or terrible in India. But we should be growing much faster. Of course, because we’re on the course to grow, we continue growing. The question is not whether we’re growing, the question is how fast we’re growing. And the nature of our growth is a cause for concern, because a country like India should be able to create jobs, rather than creating more jobs in manufacturing, in the cities, etc. We’re not. In fact, there’s job growth in agriculture, which is a reversal of the normal role. So that if you were in a position of authority today, you would be worried about unemployment, unlike the government, where it’s not even mentioned in the white paper, as you say. And you’re saying that therefore, this inability of people to find jobs, the fact that so many people queue up for government jobs, is a worrying sign of what the future holds. Is that a fair summary?

It’s an absolutely perfect summary. But I would also add that, you know, there are alternatives. And what we tried in this book, Breaking the Mould (by Rajan and Rohit Lamba) is to offer some of them. But there is a different growth path, which can be more job intensive, which can give us the stronger growth we need to get to 2047 and be a developed nation. But we need to debate that. I’m not saying we have all the right answers. But if we suppress debate, and say the only true path is the one that our leaders set, I think we’re not going to get to a good place.