 What you see is the current economic situation in India right now, especially over the last four years of the five years of the Modi government So how much would you see this as something the Modi government is actually pushed further versus something that has been part of the larger framework for the last 20 years? You see, that's interesting because between 2004-5 and 2013-14 You had a 10-year period in which the first four years were characterized by rapid economic growth World Bank has put a document where the Modi government has been quoting all the time the ease of business index But it's not putting the rest of the document which actually shows that You know post 2009 there was a slowdown global economic crisis and so on and what you are finding in terms of reported growth rates post 2013-14 is really a recovery from the crisis growth of the post 2008 global economic crisis and even those numbers if you Measure them if you back-end the series you go back to earlier ways of measuring GDP the growth rates would not be very different so what the Modi regime has done is to lose an opportunity of Not just improving growth rates, but having a much more broad-based economic growth post 2013-14 In a especially favorable international context for about two and a half years through the Modi regime international oil prices fell very sharply This would have been the occasion for you to give the economy a big boost. We didn't do this Now what do you have? We have two or three things working against you because I mentioned unemployment and agrarian crisis But I did not mention the balance of a minute issue. You will remember that way back in 2013 When the UPI government second version was in office There was a lot of discussion about the sharp rise in the price of the dollar with a rupee In fact went from 45 to 63 in a fairly short period $1 became 60 to 2045 And they were saying we'll go to 65 and 70 and this is all terrible Congress up a mismanagement of the economy Fact was that, you know, you were declining in growth rates You were post the global economic crisis and of course you also had been doing trade liberalization So one element of continuity Since the liberalization policies came into force in the early 90s and got further intensified Is that throughout this period There has not been a single quarter, mind you, three months period during which the merchandise trade deficit How is that defined? It is the value of exports of physical goods Minus the value of imports of physical goods. This is the merchandise trade deficit That has been consistently in the red. India's merchandise trade balance has been always in the red Meaning that your exports have never financed your imports of goods So, how do we survive? One part of the survival mechanism comes from net exports of services, IT, IT-enabled services, tourism These may give you a bit of a help. The second more important element is the Remittances of Indian working people abroad which comes not only from software professionals Which is of course more easily recognized but from very hardworking people from all parts of the country from rural areas Who go and work in very difficult conditions in difficult countries You know forgoing their civil liberties, sending money home to the families working long hours whose efforts are never recognized They have they are the major sources of foreign exchange for you beyond your IT, IT-enabled export services So together these two Flows of income into India or foreign exchange in India both from remittances and from net exports of services They've helped shore up a little bit your large deficit on the merchandise trade 2013 the merchandise trade deficit touched about 10.4 percent it was huge really big and Was brought down to about 6% by these remittances and so on but at the end of the day Throughout this period. We have had a persistent current account deficit We want to accept some of that but by and large we had a current account deficit Which is basically the merchandise trade deficit then showed up a little bit by remittances and by Net export of services this deficit current open deficit compels you Desperately seek foreign capital inflows Regardless of whether they come for productive purposes or unproductive purposes So you're desperate for example to attract portfolio investment Which contributes zero to the economy Going to the stock market going to the commodity markets speculates makes money and leaves But you don't mind because you wanted to keep coming You so desperate in every quarter for your you know overall forex deficit that in a sense the Modi regime has taken this forward and despite doing all that and despite a Very significant segment of the rule which was favorable to them in terms of oil prices They have no got us to point by the rupees now moved from 63 or 64 rupees to something like 72 rupees now What is happening two things are happening one is that the easy money policies in the advanced countries has been reversed recently Especially in the US Fed has been raising interest rates now the US Fed Interest rates are close to about three and a half percent or three percent there about so This is causing an outflow of finance capital from emerging market economies including India second in the more recent period there's been this big trade war with Trump and Targeting China and so on and Of course Chinese can handle it You see for contrary to all the media reports that are appearing saying the Chinese economic growth You know a slow down this year and we will be the fastest going all this breastfeeding about our being the fastest doing economy really Chinese have actually Deliberately slowed down the economy a bit because they are worried about credit issues They're worried about he overheating of the economy But 6.4 percent growth rate Over about 45 years isn't peanuts. It's just phenomenal. I mean people don't recognize this No, China is another planet. We're another planet. Although Raghuram Rajin has said three more recently I'm very surprised to say it is that oh eventually India will overtake China. You've got larger numbers So in absolute GDP may overtake them, but per capita GDP what's gonna happen to you? The in any event we are not doing a running race between China and India. We're looking at what is happening to Indian people Working Indian working people under the regime and I would have to say that we lost a golden opportunity to Rejig the economy to help create mass employment Provide a boost for the domestic market and instead we squandered that period of you know, low oil prices We did not reduce our dependence on imports of oil We did not build infrastructure and you know, I've not even referred so far to the mess in the financial sector That's coming you see if you trying to address any of these issues from me have that you've got this large infrastructure investments for which loans were taken by private corporate entities Look at the absurdity of this. You have a notion of a fiscal deficit target You have a you have legislation for be a Mac. It says the governments should not treat borrowing as legitimate income Your entire corporate sector invests by borrowing from publicly owned banks That's okay. Somehow they're totally unaccountable to the population But that's okay a government accountable to the people cannot borrow or it is not legitimate This is the political economy of the whole notion of the fiscal deficit leave that aside. I mean even if for argument's sake you were to say Okay, fiscal deficit may not have a big impact on interest rates or inflation I mean to agree with you on that but since international investors or made to look at fiscal deficits by rating agency like you know All your modi and powers or whatever standard powers modis or fixed or whoever these rating agencies tell investors Don't go to country X because go to high fiscal deficit So maybe there is a compelling necessity for you to keep your fiscal deficits down in the current global environment Where you allow footloose finance capital to enter and exit freely across the world So that may be a compulsion even if theory doesn't demand that you address fiscal deficits Question is all right after all the fiscal deficit the difference between two terms right expenditure and revenues Why can't you? Tackle the fiscal deficit target Through better resource mobilization than only through expenditure reduction. Why are you doing only expenditure reduction? Why well? You know you this is a brilliant ideological Feet that the new levels have achieved by calling whatever goes to working people as subsidy and Calling whatever goes to the corporate is incentive. So if you provide Food grains the PDS if you provide some subsidies on transport. These are all subsidies. That's a bad word right on energy On food on fertilizer. You're providing subsidy. It sounds awful You know in the World Bank laments that in one year it became 2% of GDP what you're not saying is that you're providing huge tax concessions Explicit and implicit through all kinds of exemptions and through outright, you know Condoling of tax not being paid. We have a finance minister. Well, not today We had a finance minister two days ago. You might be a different minister of portfolio right now But who keeps all talking about tax terrorism? He's saying that you know even to demand that corporates pay the taxes is tax terrorism. You had a corporate sector which has been pampered You had a foreign capital sector which has been pampered in the hope that they will bring in money here and The narrative in 1991 was that if you open up the economy if you remove all control and regulations If you allow more space for the private sector then everything will be fine and dandy investment will flow in we learned the hard way that It is not enough to open up. You have to offer them concessions as well Once you offered the foreign capitalists concessions you had offered domestic capitalists So your budget takes a hit. So where do you squeeze? You squeeze the people Cutback on education cutback and healthcare. This is neoliberalism. We are currently Harvesting the wages of neoliberalism, but the one difference is that at least in the up a two regime up a one regime particularly Left for support. One could push through some popular pro people schemes. We had the employment guarantee are coming in at the time you had the Forest rights are coming at the time you had the national food security bill discussions going on for a number of years But in the current regime There's been merciless application of Neoliberal principles and a complete disregard for the suffering that has caused the various sections of our working people So currently we face in addition to the unemployment and a gradient crisis We face a crisis on the balance of payments So what is happening is that you are not able to increase your exports What is all this thing about make in India about? The idea was that you would produce in India and you export to global What you had instead is a fake in India And then it then with demonetization became Q in India So you really had this all these words that have been thrown around but effectively on the ground I'm afraid the the track record of the Modi government is not something that even the Modi government can be proud of So considering that the government has lost a series of elections recently Do you think that there's a possibility of them trying to bring in some last-minute measures, which may seem like Propy, you know, they may do something dramatic on dramatic meaning dramatic in the newspaper sense Not in terms of the current content and impact on the ground on let's say Agriculture for example loans or they might also do something on small and medium industries recent business about Within dispersing the loan within one what 24 hours or something Some of these gimmicks have been already out put out there, but they're also constrained You see they it is difficult for them to do a whole lot of that because they are also determined to Keep the fiscal deficit. However, as the CAG pointed out recently The one feature of the Modi government for the last four or five years They have done a lot of the borrowing of budget. They've concealed the borrowing of budget so that the budget figures look fine But a lot of borrowing takes place through State entities, which are not part of your budget. This is a this has been done earlier also it's not peculiar to the money team, but money team has put a lot of the money that they borrowed of budget and That'll come back chickens come back to us. In fact, you're dead I think it's about 50% in the modernity inferior to 82 lakh crores or something But more important is the other side of it, which is the private sector is also heavily in debt It's not just the government which is in there private sector was a lot of money to your banking system and They have shown no inclination to pay it and the government has no show no inclination to make them pay So you are really sitting. What did it happen? I mean important question to ask is what did this happen a good part of the crisis in the banking system and the likely Defaulting of large corporate entities on their loans to policy them that they have taken from all these other banks There's a lot of it mentioned to infrastructure Traditionally post-independence we dealt with it through long-term development finance institutions We had the IDBI the ICICI all of which have become private sector institutions I mean ridiculous your IDBI Indian National Bank of India ICICI Industrial Credit Management Corporation India IFC Indian Finance Cooperation India Industrial Finance Cooperation India Whole UTI you name it. You're a whole lot LIC a whole lot of large long-term lending agencies in the public sector because you were focused on Development banking, but in the 90s you moved into a regime of universal banking What are the people who were who welcomed it at that time who had also been RBI governor someone like Rangarajan I subsequently said maybe we made a mistake in going in for universal banking now if we had retained development finance institutions Some of this borrowing would have taken place on better terms and would have been taken by Publicly held entities which will be more accountable to repaying their debts. So currently we have actually Unfortunately got us into a mess and Given the government's attitude, which is basically save the private sector Never mind about the public sector. We are really Doing serious harm to the long-term prospects of engineering economy. That's what worries me a lot That's all we have time for today keep watching your sneak