 Hello and welcome to NewsClick. Today we have with us Rajat Nag, who has written this book, Asia the 21st Century, question mark. Rajat, this has been a long time coming because you have been working on this issue inside the Asian Development Bank and subsequently after your retirement from there. You talk about this being possible in the Asian century, provided certain conditions are fulfilled. Let us start with what you think is a positive element that Asia has lifted a significant part of its population out of poverty. But in this your poverty estimates seem to be what used to be the old World Bank 1, 1 dollar 25 cents and it also leaves out the issue that you could have an issue that a lot of the people who have been lifted out of poverty, particularly in countries like India could fall back into poverty because they are in some kind of precarious condition or in a vulnerability band as it were. So how do you see this poverty, particularly structural poverty in countries like India? I think that's a very valid point and what I talk about in the book is yes it's great that we have pulled you know a large number of people out of poverty but defined a dollar 25 and sometimes a dollar 90. But even that is very low, the bar is very low. So you know a simple illness or a natural catastrophe or anything can push people back and therefore that vulnerability band as it were where another about 900 million Asians are not Indians but Asians. So the vulnerability band in Asia is large and in India even more so because China has done much better than India has. So my concern is really that though we have got much to celebrate even in India in terms of putting people out of poverty the vulnerability band is quite huge and therefore I think there are some major concerns about India's fight against poverty or India's victory against poverty or for that matter Asia's. And this is why in the book as you just showed I put a question mark because though of course one hopes that I'm wrong but I think the fight against poverty is far from over and then of course you superimpose on those serious concerns about social deprivations about rising inequality rising not just high but rising inequality and you have a picture which is mixed and that is the whole thrust of this book. Will that question mark be answered any positive or not? I think that's an interesting question mark of course that what are the causes of possible shall we say not being able to grow out of poverty and what are the possibilities are getting or getting stuck in a poverty trap and of course the issue of is also that the line of poverty is a socially moving one that's not something which should be considered absolute though it did we do tend to take $1.25 or now $1.90 as the absolute poverty measurement not this social poverty in terms of distance inequality and so on but even in terms of that the argument is that countries like India while it has done something which is significant in terms of moving it out of what would be considered absolute starvation level as it were which is really $1.25 but the middle class in India is also very narrow that means that the people who have grown out of poverty are still very much largely in what would be considered or should be considered as poor and they could easily slip back I mean that's the that's the whole point you know you're absolutely right so the poverty story in Asia in one sense is a very positive one because Asia has achieved in one generation what took other parts of the world in a couple of hundred years but the victory is far from in the bag as it were precarious it is a precarious one and therefore what I do point to there is the need for inclusive growth the green growth and clean growth but inclusive growth which is that you provide people the means to not only benefit from growth but also participate in the growth therefore investments in health and education for example become very well come to that but you also have talked about and I think that's a very interesting point in the book the issue of the middle income trap now of course that is a country where a middle income it's not really about the structure of the poverty or the income as it were it's really the averaged income right you're calling it middle income trap now you have said that the middle income trap exists if you do not invest in education and technology and so on so that you do not you're not able to participate in what society is moving towards that means particularly when you talk about technology it's not doing what already exists but doing what new things are coming into being being able to participate in that and you've contrasted Brazil and South Korea in that because South Korea did participate in the tech revolution if you will while Brazil got stuck into a commodity production service economy which is what really is today so how do you what do you think are the elements which create the possibility of escaping escaping the middle income trap two things one is higher productivity so with the same inputs you produce more and and both labor productivity and capital productivity so that's one but I think the more important one to escape the middle income trap is innovative capacity so that you know you not only produce the iPads or assemble the iPads but you actually design them and that is where the sort of you know money is that is where the value added is so for Asia and I'm talking about Asia but this applies very much to India as a matter of fact more to India than China or or Korea that our education system has to be such that not only do you improve the basic literacy the basic numeracy but also at the higher end of the spectrum so investments in the primary education basic education is very important but so is investments at the higher end because unless a country can innovate it will not be able to participate in the so called growth ladder and we will not be able to compete with countries above us on that because we're not as innovative or productive and we'll not be able to compete with countries below us because our wages have gone up so then that's how you get corner middle income trap so I think the ability to be more productive and the ability to be more innovative are two critical elements for a country like India. When you talk about being more productive you're really talking at the end of technology okay that's that's or through the process but at any level being more productive with a given amount of capital given amount of labor would obviously help but that's not going to be enough it might have been enough previously but now innovation as I said I think is going to have to be so technology development is going to be the key for the future and let's let's be very honest about it what differentiate the developed country from a not so developed one is a level of the human capacities therefore it is what what we build into the people is what finally reflects its development now coming back to that issue what you talk about it would then mean investing in people but this is the problem that we have now that for instance in a country like India there's a lot of investment in so the IIT is the Indian Institute of Science and they do take a disproportionate amount of resource out of the education system in order to create the so-called centers of excellence which then compete at the global level but the problem with that is that if you see today these are the sectors which Indian state is not investigating further we're talking about building new IITs new aims but the kind of infrastructure we are building is abysmal in those places and even it would take an IIT for IIT for instance and I've had very senior scientific members community people coming and telling me that India was at the cutting edge once upon a time even if institutions are few today we really have third-grade infrastructure over the IITs now how do you see your move out of the middle income trap and what India seems to be doing I'm focusing more on India because Korea and China have invested quite heavily in scientific and technical infrastructure in terms of education and institutions how do you see this happening this seems to be actually extremely retrogressive in terms of policies yeah I think we've got to think both in terms of the spending on education as part of the overall macro and then within education higher education basic education IITs first of all I think India just has to invest much more on education per se period per se or we invest in a less than 2% of GDP we should be spending more like 5% and and health and education together we spend less than 4% it should be closer to 10 now the 12 five-year plan does talk about increasing it significantly and it is increasing yes but not enough but there's no plan at the moment as you know well I mean you know there's no official plan but the the the notional education expenditure and education health is increasing good news bad news is nowhere enough the other part is what you're saying the intra-sectoral distribution there I think it would be a mistake if we think that we will invest more in primary education at the cost of investing in higher education I think we just have to increase the pie for education because unless we invest more in higher education including in the IITs and of course the number of IITs and all that is another major issue we will not be able to compete on the global scale at all and what's happening now I'm afraid is we are playing a numbers game we're playing a numbers game in terms of number of engineering colleges or number of IITs or AIMS and quality is what's going to matter and I think and you're right that we are I think losing that sort of you know edge that we had we still have IIT graduates who do very well elsewhere but the question is can they do better inside the country and the answer is no for a variety of combinations but one is public expenditures on education needs to education and health I should add needs to increase very significantly see we had significant investments in building up science and technical institutions and if we look at the issue of escaping the middle-income crap coming back to that you really have to then invest in those institutions as well as you said and our science aren't the expenditure is also extremely poor and that's why we had science marches in the country of scientific community saying what's happening because even in CSI aren't the expenditure is now being cut severely and without research and development you're not going to get anywhere the implication of this is the belief that private sector will come in and fill the gap the point is even in the United States a lot of this is public infrastructure in public investment and that's the education and health has to be a public good up to a point and that's not mean you know 100% but certainly not sort of where we are and yes the private sector will have a role to play but I think it will be a big error of policy judgment if we sort of say we'll free up the space and just let the private sector come in I think we should not make artificial impediments for the private sector but there's no getting away from the fact that you know you need significant public sector investments in social infrastructure as somebody once said how many Einstein's do not get to study physics and how many of them are in India will not get to study physics if you depend on we can't get away from that for education and help segueing to the second point that you have in your book the question of inclusive growth and this of course what we've discussed touches upon the issue of inclusive growth and you've talked about that there is bad inequality and good inequality irrespective of whether I agree with you about good inequality or not but the bad inequality we have to completely agree with you that if there is no equality of opportunity access that means access not just simple being able to attend a school but getting quality education in the school affirmative action if it's a first-generation learner because he or she might require more support by providing health and other facilities for 0 to 5 years you've talked about malnutrition means they're already compromised out of the out of their lifetime security in fact because that 0 to 5 years is crucial for growth of the brain as well now all of that are we not sort of going at least if you see the policy pronouncements being made of the government and we're going in a retrogressive direction you know one way or another I'm not so concerned frankly provide on the policy pronouncements is the implementation now policies aren't bad I mean even in India but I think is the implementation that we are we are talking about so for example we talk about let's say the bad inequality we'll talk about the good equality if you have time but not being able to invest enough in education basically means you are exacerbating the access to opportunities to the primary school which results in more inequality and therefore I think it's not our policies but the implementation we have a right to education great I mean but so what I mean you know if you don't have the schools if you don't have the facilities and as a matter of fact sometimes and you're right sometimes these can be regressive because this automatic pass through for example visiting many schools in the last couple of months actually actually has worsened the situation because the emphasis has now become on quantity and just basically pass through so students will automatically go up to grade eight without the necessary skills to even go to grade grade five or six. So I think in India or in Asia in general in particular is the implementation of these policies which I think are important. Well let me distinguish between policy pronouncements and policies one is what you do in terms of public relations make good noises implementation is what physically happens on the ground ground you know I do believe there are also policies but that's a nomenclature issue we can debate. What we are seeing is really cutbacks and cutbacks in terms of teachers in terms of investment being made without even talking about need to upgrade them. That's that's where I'm saying that gap is actually widening in terms of the pronouncements and actual implementation. Exactly I have no problem. So there's no policy which says will reduce investments but that's exactly what we're doing and that's a problem.