 Good afternoon. Thank you everyone for being here. I'm really excited and thrilled today because Mr. Montek Singh Alubalia is here to give a talk. He's an Indian economist and a civil servant. And I always like to say that he's one of my favorite economists because as a young girl, eight, nine, 10 years old, he and his colleagues made it possible for me to get more than two kinds of chocolate and drink Pepsi and get Michael Jackson CDs and all other things that were not possible. Before some of the, you know, reforms that were introduced. So I did have a favorite economist growing up and he was one of them. Over three decades, you know, Montek has held various positions in the government of India, including the deputy chairman of the planning commission. He was literally, you know, the last of the transition economists pulling India out of socialism into a more, you know, market friendly welfare state during his time there. He's been part of the economic advisory council to the prime minister as finance secretary, commerce secretary, special secretary to prime minister and so on. And if I go on, we'll spend the whole lunch or, you know, sort of reading his resume. One of the things that I would like to highlight though is he's the author of something that we now call the M document. He wrote a memo in the late 80s which turned into what became the blueprint for the first set of reforms that happened in India. He's talked about this a little bit in his book. It's called backstage. It's sort of a travel log for those of us in policy, you know, talking about how a career in policy can take big ideas and convert them into implementable executable reforms. And this is of course, particular to India. He's also written, you know, dozens of papers, book chapters and so on. Some of this is listed on the 1991 website at Maketa. You know, you should be able to find it quite easily. And he's always been a champion of economic growth, fiscal discipline, free trade, things that I thought were only pertinent to India. But last night over dinner, I realized some of these themes are now becoming very important even in the United States, right? We need some of the champions for these themes and many of you are working on them. So today he's going to talk about India's growth story, sort of what happened in the past and also some of the challenges that India is facing today and in the future. So I'll stop there. Montek, thank you for being here. Well, thank you Shruti for those very kind words and thank you and your colleagues at the Makata Center for inviting me. I think the work you're doing is enormously important. When I first heard about the idea of a 1991 project, which would not only collect a lot of people's opinions and podcasts and interviews and articles and so on and become a sort of definitive source to for anyone wanting to study this transition. You know, it struck me that the technique used is actually very innovative. I mean, in the sense that I can imagine somebody collecting all the published articles. And I don't think that would be good enough. The main reason is that I mean I'm kind of trained as an economist. And my training technically stopped in 1968. So frankly, I mean, if there is such a thing as being outdated, I would be it other than sort of having seen younger people coming and assisting me and realizing that the subject has moved on. But you know, in a way, I think what was more true in those days, that people's viewed economics as more of a narrative than they do today. I mean, there are distinguished except particularly in American tradition, I think that probably owes to Paul Samuelson, that you know reduce everything to what is quantifiable and mathematical and that has huge advantages in many ways. But you know the loss of the narrative content is also a huge loss because we're really talking about society is changing. And the idea, I mean, anybody who's an academic is going to make his reputation by applying an innovative technique to studying something. And that is invariably going to reduce the study to whatever there is for which both the theory and the data are available. And where the theory is not available of course is very difficult but many times there's a kind of rudimentary theory but no data at all. And those are not subjects that anyone studies. So I think it's very important if you're looking at it as a transformation that you go beyond what is actually publishable. And that's why I find the idea of the 1991 project extremely well conceived so congratulations Shruti and all the people behind and above you who must have got this thing going great idea. You know when I thought about about this, I don't know how many of you are familiar with Kurosawa's film Rashomon. Those who've seen it raise their hands. That's not bad actually but you know, in my days in university 90% of the hands would go up. Actually, I'm sure it's available now on YouTube. I'd strongly advise any young person who hasn't seen it to actually see it, because I found it an incredibly powerful demonstration of how four different people, looking at the same facts came up with completely different explanations of what was going on. And you know while, I mean it's only a one hour quarter or something film, but anyone who's doing empirical analysis would do well to just watch the film. And at the end of whatever they're doing, ask themselves what would Kurosawa say of my analysis and I think that would be very helpful. And that's why what I want to do here is to sketch out what happened, more in the form of a narrative, and also indicate where you know there are different explanations. And I'll spend, I'm watching going by the clock only about seven minutes to give you a summary thing and then we look at focus focus on, you know, in the light of what we've seen in India. What we do now, and sort of maybe therefore half the talk will be on the narrative and where we are now, and the other half will be on what we do. So on the narrative, you know, I left the university in 1968, the University of Oxford and joined the World Bank. At that time, I mean, India was not actually regarded as a failure. I mean India was regarded as a promising country lots of positive things democracy this that and the other, not necessarily doing everything right. In the United States, particularly, the blame for the socialist tilt has been placed on Jawaharlal Nehru, our first prime minister, there's no doubt that he had that socialist inclination but he's also a practical guy. At that time, the notion that a poor country that wants to get ahead fast must resort to some kind of state intervention and state planning in order to grow more rapidly was pretty widely accepted. In the United States, I think I mentioned in my book, none other than Paul Samuelson in his famous textbook as early as the, I think the early 1980s would say things like the Soviet Union is growing very rapidly. And at this rate, they'll overtake the United States and whatever 1986, and then two additions later he would make it a little bit later. If Samuelson got these things wrong, you can be forgiven that you know we have whatever view you have. And I think this is this illustrates in a way the difficulty in making projections about the future. You know, I think it was yogi bearer who is report he's reported to have said so many things that all the clever ones people remember. But the best one I like is the one he says it is very difficult to make predictions, especially about the future. And this is a good example of that. Now in India, you know my good friend, they know ready who became governor, and was a part of our reform team and I think you'll see his picture in that slide somewhere. He once made this wonderful comment he said the future is always uncertain, but in India, even the past is uncertain. And this is the result of people looking at data again and saying you know the methodology was wrong, we must do it differently, etc, etc. So therefore it's very important, while there are these analytical pieces. It's very important to keep in mind what's the broad narrative that you have. The broad narrative is that what Nehru was doing was not unreasonable at all, partly because I mean the, I mean the success of the Soviet Union as a production machine was not doubted. I mean remember he died in 1964. He was not doubted at that time. What was doubted and he doubted hugely was what they were doing to human liberty. And he did his bit for democracy and you know he didn't fall into any of that kind of the communist trap if you like that deny you democracy but we give you development. So I think on the whole he wasn't too bad. And where things went wrong, where from the late 60s through the 1970s and that's the Indira Gandhi period. Okay. Now she also did some good things, but the if you like the liberal economics pro market type of fellows, I guess that includes me. They tend to hold it against her that she tightened the restrictive controls of the state, much more than her father had done. She was much more anti private sector than her father ever was. And it is in that period that India's growth performance really worsened compared to other countries. In the late 50s, early 60s, India's growth was not worse than other developing countries, and it was better than it was under colonialism, which is usually the comparison you may okay. But in this the 1970s, it was quite clear that we were doing worse. And so I attribute that and I say that in the book to bad economic policy, etc, etc. And I think it was bad economic policy. But I have to say that there is the other narrative, the other narrative is those were periods where India went through quite exceptional external constraints. You oil shocks 73 79. You had the Bangladesh liberation war which did impose a cost on us since we sort of help them in various ways. It alienated the United States big time from India, because the US sent the USS enterprise up the Bay of Bengal, which irritated a lot of people. They were more into the Soviet camp, simply because they didn't do anything I mean they didn't actually invade or engage the Indian forces or whatever. But it made the security establishment feel that you can't, you can't rely on the United States, given that we felt the biggest problem was Pakistan, and at that time it was very clear that Pakistan was doing pretty awful things in Bangladesh. We had to help Bangladesh get liberated. Pakistan would of course quite legitimately call it totally unreasonable interference in our internal affairs that's a separate matter. But that narrative gets further complicated, because, but I think I mentioned the 1973 oil shock the 1979 oil shock. So the defenders of the old system will say that well you can't say that India did badly because the external circuit. I think if somebody were to do a proper analysis. They would find that while that may explain some of the poor performance it doesn't actually explain. If you like the departure from what I would have called India's potential. Okay, now that's worthwhile PhD for somebody to do. The narrative then changes slightly in the 1980s. Mrs Gandhi after having imposed the emergency on India. And by the way, in the emergency one of the things emergency did under the leadership if you like of a younger son was to impose a rather intrusive family planning program with compulsory, near compulsory sterilization etc. And vasectomies and what have you, which interestingly the middle class loved it. I mean is the poor who hated it because the middle class was in any case engaging in various kinds of population control methods. And this thing was really applied to the larger group outside the elite and the middle class always been frightened of the growth of population etc etc. Anyway, whatever it is, Mrs Gandhi gets thrown out after the emergency incomes, her opponents, and that has to be one of the most catastrophic historical failures, because instead of sitting right to the economic policy. Mr Decis government dedicated itself just to putting her in jail, one of the stupidest political decisions you can think of, and they completely wasted the three years that they had and they did absolutely nothing on the economic front. And then of course there was an election, things weren't going too well for the country, Mrs Gandhi comes back. In the 1980s, Mrs Gandhi begins a sort of incremental reform, I won't go into it too much. It's not wholehearted, you know, it's not like saying get rid of these controls. It's like these controls are too tight, let's lose them, but retain all the controls in place. And as it happens, the economic performance is also a little better. Now the contrary narrative is that the world economy was doing quite well in the 80s. So whether it was better because of this incrementalism, or that is a subject for another PhD thesis. But by the end of the 80s, we ran into a classic balance payments crisis, kind of the sort of thing is not exactly like what's happening in Africa. Because I think what's happening in Africa is over many years of very loose monetary policy, countries could cheerfully borrow all sorts of things and they have now incurred a huge amount of debt. We didn't incur a huge amount of debt but given the degree of openness we did do, we did find that exports were not doing well in the late 80s. The current account balance was widening, and we were financing it by running down reserves, and by doing short term borrowing, and this kind of thing is not sustainable. And the, if you like the cookie finally crumbled in 1990 when Saddam Hussein invaded Iraq, you had a huge increase in the oil price. And of course, you know, the government was very unstable for a variety of reasons that I won't go into now. And it was very clear that this is not a government that can take corrective measures, which is by the way the situation in Africa, because they're all weak governments and nobody believes that they can take the tough measures needed to get the economy back on track. I think in India we had been discussing the what's wrong with policy when Shruti was very kind to mention my note, which is talked about in the book. But I think it's not just my my note was an input. And the interesting thing about it is that it was produced in response to a request by the Prime Minister VP Singh. He had both gone and he had gone as a head of the Indian delegation to the Commonwealth heads of government meeting in Malaysia and Kuala Lumpur. And he had said to me, I was part of his team. He said, you know, Kuala Lumpur looks pretty prosperous and he said I was here as Deputy Commerce Minister in 1973 and at that time they look pretty backward to me. That's absolutely right because I visited in the early 70s for the World Bank and it was distinctly more backward than say Delhi. Anybody flying into Kuala Lumpur would have felt that you know your provincial city compared to Delhi and Bombay and it's transformed. So he said how do they do it. And I says very simple they're doing a lot of reforms and you're not. He said, why don't you do me a note. What is it you think we should do. That's how that note got produced. Now the interesting thing is not that the note got produced if he had asked any halfway intelligent economists who have probably done the same thing. But he decided to send that to the committee of secretaries that is presided over by the cabinet secretary with the directive from the Prime Minister that this should be discussed he didn't say by the way this is what we should do. So he said there's a note which says I'm interesting please discuss it but you know obviously when the Prime Minister sends such a note people guess that he thinks there might be something worthwhile. I mean it was complete rubbish he wouldn't send it. And that created a lot of discussion because people thought that the Prime Minister's mind is open so huge number of discussions. And it seems to find that the number of people who supported what I was saying definitely exceeded the ones that didn't. So if you took that as an indicator of what Indian thinking was the thinking clearly was in favor of change. Well when the new government came in. Mr. Narasimha Rao appointed Manmohan Singh a very well known technocrat, and basically said look, we've got to do things differently. And I know that Mr. Rao was he was not at all wedded to the old Congress control mentality. He knew that we needed to change but I don't think he knew how to do that change. Because you know when everything is screwed up. The way you make a change, I think is not that you make a list of 200 things that have to change and say now do do this all which is what the IMF did in 1997 in Indonesia. You say it's all mucked up. Actually if you're a developing country it is all mucked that's what being a developing country means that you're everything is wrong right. So the skill really lies, I think in identifying the four or five critical things which are the logical first step in reform, and they should be chosen so that they are mutually supported. I mean you could choose four or five important things, but don't do the things that are supportive of that. And I think what we did was we picked the industrial controls and trade policy and the exchange rate and opening up to FDI as an integrated set. And basically within two years, we wrote the landscape on those things. Very controversial and many people said you're opening up the country. This is going back the East India Company will be back you're sacrificing sovereignty you are subject to the IMF's dictates etc etc. You know we were able to say that look, it's true the IMF loved what we were doing. Actually we did more than what the IMF wanted. But what we were saying is look, this is the result of internal thinking. There's the end document there's something else etc. But of course the critics said that you know that doesn't mean anything because these fellows are all under the influence of the IMF so that's why they wrote these papers You can go into that it becomes impossible to to come to a conclusion. But at that time, I think we chose a set of reforms, which together made a lot of sense. I'll just give one example. You know, everybody in Indian industry wanted to get rid of investment controls. Okay, I mean they said what the hell I mean if I want to expand I want to expand and I'm the businessman and I know what I can do. And they were right. But whereas they wanted to want an investment licensing to go, they wanted to be able to import the machinery etc they would need to set up the capacity they needed. Okay, and they then expected that imports would become freely available to as it were to realize their investment dreams. But that would make you run into a balance of payments constraint because the exports are not doing well. And the imports is excess demand because you've liberalized investment. So what do you do. Our solution was free the exchange rate. I mean that will automatically cause the rupee to depreciate. But many of the guys who were quite willing to import stuff at a certain exchange rate would not find it attractive. If the exchange rate depreciated and they would automatically sort of walk out of the, the line. See, otherwise what would happen is people who were queuing up in the Ministry of Industry to get licenses would just queue up in the Ministry of Commerce to get licenses. Because the Commerce Ministry would say we can't give that many licenses because we can't import that much by getting rid of that control. That thing, essentially, the excess demand was pushed on to the exchange rate in the market. Now there are lots of things we didn't do. I mean we should have done a build institution all of that happened in the next 20, 30 years or so and some of it has still to happen. We were hugely criticized hugely for not starting with agricultural reforms. Okay. Now I felt that this was quite wrong because the biggest reform that we did which was pro agriculture was freeing the exchange rate. Because an overappreciated exchange rate really meant that imports from outside agricultural imports were greatly undervalued and therefore looked like a good deal. Whereas once the exchange rate was liberalized automatically agricultural imports became less compelling and therefore it didn't really hurt Indian agriculture that much. And people also say that we should have done a lot more to build more agricultural research and I think we should have and that's a pity, but you know you can't get everything right. In this area that we did act. It looks like a wonderful thing but even there there were pressures. The pressure is really word vested interest do not want change. It's interesting that we have two kinds of vested interests that we have to cater to one is we liberalized investment for the larger industry which is good. If they want to invest they could bring their own money and put in investment, but there were, there were many sectors, which were reserved for the small scale sector. There was a belief that the small scale sectors inherently more labor intensive. Actually, this was wrong, because what is correct is that it's easier to survive as a small industry in a sector that's labor intensive. It's impossible to exist as a small industry in a sector that's capital intensive. We had a lot of small scale industry that the labor intensive. But that didn't mean that that was the best way of employing labor in that sector. We should have actually allowed the better ones this lot to expand modernize become more competitive and cash in on the export potential This is what the Chinese did. We took the existing small scale industries unwillingness to be subjected to competition by larger units, or even competition from their own brethren who might become large. We had a policy that said no new investment in this sector, but any, any firm in this sector that wants to expand for the next 10 years is freely allowed to do so, and then we'll allow others to come in. Even that would have been advantage but the small scale sector was not in favor of this. And you know there are more votes in the small scale sector than in the large scale sector. So consciously a decision was taken that yeah we need to liberalize this but not immediately. So actually the list of reserved sectors was pruned gradually and took about 10 years before it got completely eliminated. So that's one compromise with vested interest. The second compromise with vested interest related to import liberalization. We freed up imports of capital goods imports of intermediates components etc imports of raw materials. We did not free up imports of consumer goods, because most of the Indian industry the larger Indian issues producing consumer goods. These guys were absolutely religiously in favor of liberalizing capital goods import liberalizing imports they needed for production and were equally religiously opposed to liberalizing the outputs they produced. So one of the best, one of the most one of the strongest advocates for the liberalization of investment control over the private sector was Rahul Bajaj, the head of the largest scooter manufacturing company in India Bajaj scooter. He used to really regale audiences both in India and in Davos that we're running a stupid policy, and that you know I produce a product for which there's a 15 year waiting list, but the maximum output that I can produce is controlled by my license capacity. I mean I can't produce more scooters, because the government controls me and then this should be got rid of and I should be allowed to freely expand. I was totally opposed to allowing any import of scooters. I mean, and he famously said, you know, we must not consume confuse the national interest with a consumer interest. We made a sharp distinction between consumer interest and national interest. Anyway, we, we we didn't succumb to that temptation too much. And their view, by the way, was not that it shouldn't be done. But their view was you should do it more slowly give us more time. And we often said to them that listen you lived behind protective walls for 30 years. So how much more time do you need. But you know, the interesting thing is that Bajaj scooters has done very well in the open world. I mean, it's not it wasn't run by Rahul Bajaj run by his son. And he actually modernized it, it did well in exports, it did very well and competed very effectively with the new scooters that came in. Of course, tariffs were still there on the high side, you know, my argument was look, tanning imports is really bad. It's better if you were to put in an import tariff, because then you judge how much of a preference do people willing to exert. And that was quite helpful. But these are two examples where the Indian reforms didn't take a look at what exists and say they're all wrong. And now let's redraft the whole thing started in a limited way. Also, put in the stuff in a phased manner, kind of a bit. This is I think what Deng Xiaoping had in mind. I mean, he's the world's greatest economic reformer no question about it. You know, when he said crossing the river while feeling the stones. And that's exactly what I think in a way, you could describe the Indian reforms as doing. Once that first set of reforms was done, then on the financial sector various other things you move to more reform. I won't go into all that that's actually still a continuing story. But there were some, to my mind, rather obvious things, which I think we should have done more on. And one of them is privatizing the public sector. I mean, this is something that had been discussed internally. It's even there in my end document, but the political resistance to that was really immense. And it's not just a political resistance of the politicians. It's also a political resistance of the people who work in the public sector. And in a funny kind of way, the strongest advocates for the continuation of the public sector are the professionals who work in the public sector. Because they view the private sector as family dominated, whereas the view the public sector is genuinely competitive. I mean, if you happen to have an engineering degree and you've got into a public sector company, the chance of your becoming CMD, these things are always probabilistic, but chance may be X. If you did the same kind of guy in a private sector would deem his chance of becoming CMD zero. I mean he would assume he could rise but only up to a level, whereas in the public sector they'd go all the way up to the top. And a lot of the technical people. And ultimately, I mean, the value of a system depends on the quality of technical people. They were suspicious of the private sector. And to a large extent that's because a family dominated non competitive private sector is not going to be motivated to give opportunities to the very best. Later, they become kind of forced to compete that they start looking for who's the best person to manage that transition hasn't actually happened even today in India. But I think today it's true that while the very few private sector firms have had the founders walk out of management. They still hang on to management, but they don't put their cousins and their second cousins into all kinds of medium positions. So there's a big change from what the situation was in let's say 1980. Now, you know, these are attitudinal changes and they have to be the foundation of reforms, but takes a very long time to get this done. And I realize that if somebody is 55 and running a company, you know, he's going to change. I'm I'm firmly convinced that when I lecture that's why I prefer lecturing to younger people. And I say this that it's quite useless in India lecturing to anyone above the age of 50. I'm 79 by the way so I'm going to pitching the thing much below because I just after 50 people don't change their mind. If you say something you like there's a great lecture wonderful I couldn't agree with you more. If you say something they don't like that's a bit confused hasn't got a full perspective etc. So the younger people who are willing to say I am thought about that maybe there's something here right. So look at it that way that it. If you do a bunch of reforms, and at the top and the one below the top you have a whole bunch of 55 year old people. And they are extremely unlikely to do things differently or accept different ways of doing things. So you've got to keep in mind that you have to keep the plugging away at it until this lot move away and younger people use the top. I should say that there are exceptions I mean, possibly the most successful software company in India is emphasis. It's divided by Narayan Mutti and a few other people these guys actually walked out of the management they still have whatever shares they have. But it's not being managed by either Narayan Mutti or I mean Nandan is the chairman non executive chairman of the board, the CEO is not a family relative or whatever. I don't think any of our other major companies have quite got to that stage yet. So I expect that to happen in the next 20 years but that gives you an idea that when you change a system, the software part of that system takes a lot of time to change. So having said that, in summary, I think there's general agreement that India did well after the 90 wonder form is certainly the growth rates went up and I won't go into all that detail. And there's a lot of debate, you know, sometimes people try to make comparisons between the this government and the other government and that government and the BJP government that has a certain value to my mind. But if you take a longer view, my view would be that although we are running a very polarized system politically. If you look at some of the political statements that are made in India, you would get the impression and in fact some would actually say that you know nothing good happened for 70 years, and then our government took over in 2014. But realistically, people even this lot recognized that 1991 was a major break and they don't mind conceding that. You got more continuity. But you know the continuity is of the kind which says we're going to change but we're going to do it slowly, and not one where you make a change dramatically. So virtually in every dimension. Our continuity is evident. It's reflected in an improved growth rate but not a stellar one. I mean, India has never grown at the kind of rates that China did or South Korea did. But it's grown at a rate that is quite respectable over a over a 10 year period. I mean when I last did the calculation for the for the government that I was there as deputy chairman for 10 years 2004 2014 growth slowed down in the later period but the average of that whole period is 7.7, which is pretty good. So the present government the average is nowhere near that good but then they had the pandemic so it's not fair to add that in so you have to look at how do they perform in the pre pandemic period well 6.7. It's not as good as the previous 10 years. I mean, the narrative here in defense of the government would be that the world economy didn't do that well. So the 7.7 was buoyed upon a much more buoyant world economy was 6.7 was post global financial crisis, all kinds of problems. And now you've got the pandemic and you've got the Ukraine war and you've got geopolitical fragmentation and no one knows what the hell is going to happen in the world economy so it's very difficult. But there's a lot of discussion you know how what is India capable of. You know that there seems to be a general consensus that the likely growth of India growth rate that is will exceed the growth rate of other emerging market countries including China. And China is of course five times as rich as India is now, but they've now reached the point where you know they're going to tail off and growth and there's nothing wrong with that. So for the first time in India everybody's delighted that you know we're going to be the fastest growing country. I think there's a tendency to exaggerate the growth possibility because we're looking at what was a good recovery. I mean India was hit badly by the lockdown and the pandemic. But on the positive side it recovered quite well. It's a great mistake of course to think that because we recovered quite well we're going to keep growing at this rate so we need to factor out the pandemic and look at what's the underlying growth rate. There are some again that's a good thing for your PhD guys to do and there are many different ways of doing it but very roughly. Many people feel that the underlying growth rate of the economy before the pandemic had slowed down probably to five and a half percent that post pandemic it could go a little better than five and a half percent depending on what policies are. But against that the ambitions that have been set up today are much greater and people are talking about you know it will be so many trillion dollar economy by this year and so many trillion dollar developed economy by 2047 whatever. Now these things are very difficult to convert into growth targets and I think they should be converted because you know if you say I'm going to reach this level in 2047 but to say nothing about the trajectory. Then theoretically it's always possible to say if you're not satisfied wait until 2047 it's going to happen. But if you convert it into a growth trajectory it's reasonable to say well look that thing required an average of eight percent or something somewhere between eight and nine. And you're only growing a six and a half and six and a half is quite good but it's not going to get you to where you want that debate needs to happen and I'm sure it will happen. But my own guess is that if the Indian political situation. Can reach a stable equilibrium with a 6% growth rate. The probability is that we can do it with a little bit more effort still require a little bit more effort but can do it. If on the other hand the political equilibrium requires an 8% growth that requires a huge increase in the effort. In terms of reforms and the questions that I posed earlier that you have to avoid the mistake of making a list of 100 reform because I'm sure that there are 100 things that need to be improved. A real question then is given where we've got to one of the most important four or five for the next 10 years and work at them. And that is, I mean I assume the government's thinkers etc working on it. But if you ask me what are the positives. I think the positives are that we have a pretty diversified private sector now, which has demonstrated its ability to function in the world that exists and even to carve out a reasonable export presence particularly in services, not in manufacturing yet. I mean there's lots of people so labor is not going to be a constraint but the quality and the skills that are embedded in labor this is a major constraint. It isn't a constraint if you're going to grow at 5% because you're producing enough people to support 5% growth you're not producing enough people to support faster than that. And that's a huge, huge task before the government and the private sector. I think one of the positive things that's happening is, you know infrastructure for the last 20 years, every government has emphasized it this government is also emphasizing it, and they're doing something. I mean I think on infrastructure, there's a fair amount of progress anybody who flies into India will see that the airports look different etc etc if you haven't been for 20 years. So that that change is there. But I think another dimension in which there is change, and which is more modern is in the whole digitalization process. Now that, you know, is that's one year when I mean digitalization I don't just mean lots of people with smartphones watching Netflix on it. I mean that's not bad, but it's doesn't do much for productivity. But the truth of the matter is they're also networked, they can make payments. If they're using it to make payments then fintechs can use that information to make an assessment of their credit worthiness. Fintechs are coming up and partnering with banks and saying look if you will allow us access to the data of these people these people themselves will allow access to their data which they have to. Then we can do a lot of analysis and tell you whether a particular person is worth lending to. Now in a world in which people migrate. The south is growing faster than the north. So a lot of the more dynamic people move from the north to the south. I mean, it's very difficult for a regular bank to do a traditional type of credit analysis of such a person. But with digitalization if he's using the payments modern payment system is a lot easier. And lots of people tell me that that is happening. Many many modestly placed people are able to get modest sums of money from the banks and earlier the extent of exclusion was very sharp. I mean banks love lending money to people who had assets. So if you were asset heavy, you could become even more asset heavy. But if you had a lot of skills and you need a little bit of assets you just couldn't get a bank loan. And that they say is likely to change. I believe it is likely to change. And that's an important factor. You know, one critical thing that looking long term. I mean, India is going to be very badly affected by the climate change which is underway. And I think we have a problem in the sense that if you ask somebody shouldn't we do something to manage climate change. They will say yes, of course we must. But you have to tell them that look there's nothing you can do as a country which is sufficient to manage climate change. The whole world has to do it. That means we have to be part of some international consensus on what countries should do. And the good news is that during the COP26 discussions two years ago. For the first time all developing countries agreed to get to a particular to net zero at a particular time. Now you know this this end date approach is not in my view the right way of determining what is a just transition because you can get to net zero following this kind of trajectory or this kind of trajectory and the carbon burden that you impose in the first is hugely greater than in the latter but they haven't. They have agreed to 2030 and 2070 and India's subscribed to that. So this is going to be a big challenge that can India start undertaking the energy transition that is required to achieve the targets we have ourselves set for the bad news is that if everybody achieves the target kind of a glass of water. If everybody achieves the targets they've set, we still won't be achieved the climate goal so that has to be left to the negotiating process for everybody to do more. And I think climate tracker tracks every country. And in in that tracking thank you. They deemed the US to be insufficient. In other words, the US is not doing enough to achieve its own goals. Almost nobody is sufficient. India is highly insufficient. And many countries are completely off track. So in that environment. You can get stuck in that and say look we must have negotiations and we will but limited objective to carry credibility. We should be deemed to be sufficient for the targets we've ourselves set knowing that if you want to save the world these targets will have to be tightened, definitely not relaxed but tight. And I think that's a huge challenge, because what it means really energy accounts for 50% of the, I mean, the power sector generation of electricity accounts for 50% of the CO2 emissions in India. A sensible strategy will involve, first of all, a lot more electrification. So people like transport etc there's relying on fossil liquid fossil fuels has to electrify. So the electricity demand will expand. And the electricity has to move away from cold to renewable. So you're causing a structural change within electricity in a framework where the role of electricity will increase. And that raises the question of how you're going to do it. How are you going to bear the cost, even if the costs are bearable how you're going to finance the extra capital expenditure, because the renewable energy is going to be the capital intensive upfront with a lot of saving in the recurring costs. There are some benefits because we won't be importing petroleum products. So the balance of payments, a huge benefit but over a 30 40 year period. But how to get this transition going. That is the big challenge. The good news is that if you ask yourself is anything happening, or are the Indians just talking and doing nothing. The answer is no things are happening. I mean the, the, the growth of renewable capacity in India is amongst the fastest in the world. Of course it's from the one of the lowest basis, but the amounts are not trivial in the sense that from six gigawatts in 2005 or so. That's about 120 gigawatts. That's a very big increase in terms of gigawattage of renewable solar and wind capacity. But our target was 175 gigawatts. So while it's great that we were not stagnating at five. We got up to 122 but we fell short of what we needed by about 50 gigawatts. So these are long term trends and these messages hopefully will get internalized and somebody left do something about it. Say the same thing will happen on electrification of transport. At the moment about two or 3% of two wheeler and three wheeler vehicles are electric, which is miniscule. I mean China is about 15 or something of that order. So we need to set higher targets. But you know these targets have to be pushed by statutory enforcement. I mean, the EU has said that no internal combustion engine vehicle will be sold after 2035. And I'm working backwards if we want to be is net zero by 2070. We should certainly expect the entire transport fleet, not the new sales the fleet to be electrified by let's say 2050. And if the average life of a vehicle is something with the order of 15 years in India, that really means somewhere around 2035 2014. You should say no more electric vehicles to be sold. Now that in one sense it's a 17 year transition period. But you know the transition is not a trivial transition because basically electric vehicles produce require very few components compared to the internal combustion engine. And a lot of our industry is geared to providing automotive components. These guys have to be persuaded that they must either disappear and do something else or change their production pattern or somehow or the other get into. I mean either producing or servicing batteries or all the new things that will have to happen if that transition has to occur. You know the Indian corporate sector is giving out signals like we're going to move to green hydrogen and this and that. But that's that's also a very cost based factor because I am told that if you want to absorb the higher cost of green hydrogen on the user industry. It needs compared with what they're using at the moment. You need to reduce the cost of production about a dollar per kg from something like $5 at present. So you know this is another area where it's not just India that has to do it the whole world has to do it. So we've seen in the case of solar panels, massive reductions in cost. Will we have the same thing in in green hydrogen. Similarly the question of the efficiency of electrolyzers. New areas of research where everybody in the world will be looking at me either that or the world's going to burn. So I mean, because you know at the moment heavy trucks and all these kind of stuff. There are no simple ways of taking care of that problem India doesn't have to lead in this we just have to watch what's happening and be able to absorb the relevant technology. But in certain areas we might want to actually produce the stuff that's relevant. Certainly producing solar panels, if you're going to have a we may end up with some people think that by 2050, we may end up wanting needing a renewable energy capacity, which goes up to about 7000 gigawatts capacity. Now if you have that scale, then it makes sense to have a capacity to produce panels and even cells and modules and what have you. So how to orchestrate a policy that does that without insulating the country from the rest of the world I mean the worst thing would be that we simply say that we will only allow Indian modules irrespective of cost and ban all imports. There are people by the way who might be tempted to do that. You have what you really want that basically means that you're burdening the user with the additional costs if it turns out that other people are producing this stuff much cheaper. You ask yourself why you're denying yourself that offer so these are questions that I don't think they've actually been addressed. They need to be addressed failure to make the right decision will repeat what we did in the 1970s. I think we're too smart to make that sort of mistake, but I don't think the dangers adequately realized yet hasn't been spoken about yet. I mean to some extent, I'm afraid the rise of protectionism in the United States is serving as an intellectual stimulus to these kinds of ideas. Because you know people say look we've heard you guys talk about the open economy and so on but anyway, in the universities that used to spew these ideas they've changed their mind, and they're all now supporting protectionism. The inflation reduction act, for example, I mean many people say is a wonderful example of creative nomenclature, because instead of calling it the protection in order to become self sufficient act, which hundreds of people who've done PhDs on the cost of protection and the mistaken idea of self sufficiency would object to you call it the inflation reduction act. So who's in favor of reducing inflation, everybody will put their hands on ergo please go out and vote for this bill. Everybody will go and vote for the bill. So we'll be doing something similar. So I think this is a real issue that. It's not in my view to be honest it's not adequately discussed in the United States. And it's certainly not adequately discussed in India but I think academic communities ought to ought to think about that. And I think this is linked to the kind of world that we're moving into because you know if if the world is actually getting fragmented if the United States is not going to be. One thing is the United States doesn't want to be very open with China because China is after all declared national policies to challenge the US militarily and economically and technologically. So if you say that kind of thing you expect the other country to say hang on a minute I'm not sure I agree with you. But you know if you're going to fragment between the US and Europe. I mean it's a very peculiar world that we're moving into. I mean right now, we are about to have a G 20 meeting. You know I had the privilege of being the Indian Sherpa on the first G 20 summit that was held in Washington DC 2008. It's really a moment of, if you like, substantive multilateralism because decisions on what to do in the aftermath of the layman crisis would normally have been taken in the G seven. I think it was a recognition that the G seven isn't the whole economy, you gotta get these other guys involved, because they're an important part and they set up the G 20. The G 20 was explicitly set up to be the principal forum for the resolution of international economic from them. Now it's going to meet in September, under the chairmanship of India, and the G 20 consists of the G seven, the G two, which is Russia and China, four or five other countries like India, South Africa, Brazil, etc. How the hell do we handle this. And there are a few small countries that really are looking at everyone else. But you know in a world in which the world simply doesn't have a common view on how to resolve, let's say the Russian Ukraine problem. How much we expect out of these four on other issues becomes an open question. So those are that's the world that India has to negotiate in and I think we need to think a lot more about it and I'm sure we will. Thank you so much for attending. Monte will be here and you can pick up a copy of the book to you know understand more about the journey, he'll be around to answer some questions but I think we'll officially call an end to the lecture because I know many of you have questions. Thank you so much Monte for doing this. This was a lecture.