Transcription
Good evening, sir, and welcome to IIT Madras. We are incredibly honored to have you here with us today evening.
And incidentally, one of the questions, one of the first questions that we wanted to ask you relates to a point that you raised towards the end of your talk. As we speak, the Canadian Prime Minister is on a visit to India, to further the cause of greater reliance on what he calls middle power countries. But in a highly connected and globalized world, how pragmatic and successful do you think these attempts promised to be? Especially in the context of countries like us, India.
I think the worry in any kind of naked bargaining is that you'll all be picked off individually. If you don't have a united stand, divided, you get eaten up. And that to my mind is the challenge for the new world order, whatever is emerging. In a world where the superpowers themselves have no incentive to be bound by any kind of order, can you recreate an order amongst your middle powers? But it's not just middle powers. You cannot stop at that because it's the smaller guys also that you have to worry about. And if they join with you, you have greater strength. So can you recreate a kind of order with them? That will take time. That will take values because other countries have to be confident that when push comes to shove, you'll back them rather than drop them. But I think it can be done. And it may be the way we rebuild an order based on a multipolar world while respecting the fact that the biggest polls have no interest in the order. Thank you for your insights, Kavan.
Have dominated the news globally for quite some time now. What does this recent tile for teach us about the future of global trade? Given India's dependence on US for exports and China for key imports, does this create a risk for India in the long term? And how should India respond while still staying connected to global markets?
Well, I talked about some of this, you know, how we try and diversify inputs, how do we create alternatives, create second sources. Maybe find uh some friends who have some of these, especially when you go to rare earths and so on. It's a process of muddling through to reduce your dependence on anybody. At the same time, let's be careful. The United States does account for, you know, approximately, if I'm correct, about 80 billion of our exports of goods. There's another service component, which is probably as big, but that's not being affected right now by all this discussion. The US seems to be focusing on goods rather than on services because they're vulnerable on services. They export a lot of services also. So I would say as far as goods go, net, you know, what we import from the US versus what we export is about 40 billion. That's 1% of GDP. It's big, but it's not devastating. So we're not overly dependent on the US. Unlike some other countries. That said, if we can stay on a good relationship with the US, we should. But at the same time, it doesn't mean that we need to totally cave to any demands that are made on us. We can negotiate with some sense that it's not going to be devastating if we don't reach an agreement, unlike for other countries.
Thank you for your response, sir. Even as countries form different alliances and enact different security measures, terrorism continues to thwart attempts for peace across the globe. In particular, we have seen our neighbors use funds for nefarious purposes against us. Unfortunately, several international organizations provide loans to them despite clear evidence of them sponsoring terror. What success in this view suggests?
So, as a brain and end to this pick and piece? It's a good question. I think if you go across the border, they'll say the same thing of us. We're financing terrorism there. It's... Without commenting on who's right, I think the relationship between these two countries are vitiated, whether it be Pakistan, but also some other countries. uh And there are vested interests who benefit from the state of affairs. You cannot change that overnight. As you know, every time India has reached a handout, there's been some major event which has disrupted that reaching out. Coincidence or action by those Western interests. But let's try and reduce the temperature where we can. So for example, are there some issues on which we can find common ground? And this is where I say, let's not treat them as mortal enemies, otherwise we'll never get anywhere. We're never going to find a way to reduce that temperature. And it's in both countries' interest. If we're talking about Pakistan, to reduce that temperature. So you mentioned, let's get the IMF to stop lending to them, maybe. But if you do that and their economic growth plummets, what's your sense about terrorism? Does it go up or does it go down? What's your sense about cross-border military activity? Does it go up or does it go down? You've maybe seen the movie Wag the Dog. When a government finds things are becoming hopeless, what's the best way to change people's thinking and make them come behind the government, start a war. Then they basically say, let's be patriotic and come behind you. So let's be careful about grinding our neighbors' faces in the dust. That may imply much more pressure on the borders in terms of immigration. It may mean much more terrorism. It may mean that, uh, you know, they even find reasons for cross-border conflict. I'm not saying that's the only response. I'm just saying let's be careful. I think there are other ways of building ties which don't hurt us. Let's shake hands with them on the field, right? In every country, there are good people. Let's try and connect to those good people. Often sportsmen are good people. You just saw Sunil Gavaskar and Kapil Dev write a letter to the Pakistan government saying treat Imran Khan better. Because our sportsmen played with their sportsmen and they built some ties. I'm not saying that that's the only thing, but that's a starting point to build on the positive side. That doesn't mean ignore the negative side. That doesn't mean ignore the terrorism, you know, forgive it. It means that if you don't have anything positive going, you will never overcome this, you know, tit for tat. Gandhi used to say, an eye for an eye makes the whole world go blind. Let's remember that and find a way that we don't do just an eye for an eye.
Thank you for sharing your perspectives. Along with securing our borders, ensuring the integrity of our democratic institutions is also an important prerogative for democracies like India. However, the trust in constitutional bodies, the judiciary is at a high level, not just in India, but increasingly across the globe as well. So how do we take steps to curb this erosion of trust, which is important for maintaining unity and fraternity in countries around the
So I think it's a whole of country effort. There's not just one person, et cetera. But let's also be positive about developments when they take place. Yesterday, we saw a court in Delhi uh basically threw out eh a set of accusations. Know the merits of those accusations, but that a court was willing to stand up to something which may have been favorable to the ruling party suggested that we still have institutional integrity. It's not a lost cause. And again and again, we see that in our institutions. I remember a time when our elections were hopeless. There was a term called booth capturing, which you don't hear nowadays. And there was one guy, the Chief Election Commissioner then, T.N. Seshan, who, he had been cabinet secretary. He was a bulldog. He was a tough guy. And he said, it has to be a clean election. And he brought about this whole system of moving central forces. To man the electoral booths. When you find a CRPF guy with a sub-machine gun, the gundas don't take pangas with him. So, booth capturing became history. There are other forms of election manipulation still, but we made progress. And I would say, let's not give up in this country. We're a young country still. We can make progress. We have to constantly remind ourselves of the need to make progress. What uh upsets me the most is when we beat our chest and say we've arrived. We cannot have arrived at a $2,500 per capita economy. We cannot have arrived when we see the kind of not absolute poverty, but still poverty around. We cannot have arrived when we have 30% malnutrition in our kids. There is a lot to do. We don't need to feel ashamed of who we are. We should feel proud of what we've achieved. But there's so much more to achieve. And so absolutely feel confident. Don't keep worrying about, you know, the gulami of past years. We're no longer gulams. We are an independent country. Let us look forward and not fall into a second slavery because we're not innovative enough. We don't... you know, innovate our own AI, we don't innovate our own products. That's where we should focus our fight. Fight in a forward-looking fashion, not fight about the battles of the past. They're gone. Just forget about them. Move forward.
Thank you for your insight, sir. Let us now change tracks to focus more on recent economic changes, both globally and closer to home, one of which was demonetizing change, which was a major policy change. Intended to modernize the economy a and reduce black money.
Are you a reporter? Just pulling your leg. Look, demonetization so far back, 2016, it's one of those old battles we should move forward. I did not think it was a wise idea. I made my views known to the powers at peak and my term came to an end before demonetization was implemented. I did. I was very worried that demonetization was on track and we would demonetize without having printed adequate amounts of money. And so we started printing 2000 rupee notes in an accelerated fashion because we knew demonetization was coming. We printed the biggest note we could so people would actually have money to make payments. Without money, the system, the economic system can grind to a halt. Not everybody has access to bank accounts and checks and so on. So we wanted to print that money. ah But right till the last day, I thought it was a bad idea. And I made my views clear to the powers that be. They proceeded. Has it made a big positive difference? Mean, the reasons for demonetizing changed many times as it evolved, right? That is enough to say that it didn't work as advertised. I'll leave it there.
Thank you for your response. Let us now talk about a retesting form of currency that has emerged over recent years, which is cryptocurrency. Despite more than a decade of poor, cryptocurrencies are still not widely used for everyday transactions and public understanding remains low. Do you see a long-term role for crypto in finance and systems? And what major risks should regulators and users be watching as the ecosystem expands?
Great question. I am not a huge fan of cryptocurrency per se as a speculative asset. That has been the focus, know, Bitcoin was 10 cents, now it's 100,000. So many stories about how you can make money speculating. And some of our poor, you know, uh youth borrow and invest in crypto with the idea of becoming rich overnight. I think that's bad because uh get rich quickly typically makes money for the guy giving you the idea, but not for yourself. Right. I think there is virtue to the technology behind cryptos. And what I'm most optimistic about is stable coins, uh which are not about the speculative value, it's actually a fixed value, but is backed fully by treasuries or some safe asset and can be used to make a variety of transactions. uh Take, for example, borrowing. Borrowing is safer when you borrow against collateral. You have some underlying asset, you're promising that. Take gold loans. It's the gold you're promising. So the lender is not taking a big risk, but you also have the incentive to repay because you pledged some of your assets. What you can do with stable coins is if assets become tokenized, treasury securities become tokenized, you can get a loan against the treasury security as collateral. And that becomes available to ordinary people. So credit expands in the economy with something like that. Not only can you get a loan one time, but that collateral can move backwards and forwards depending on where the collateral is needed. So lots of uh things that are enabled by this technology. ah But I would say, uh know, cryptos as a speculative investment, I'm not sure that's worth it. The other technological aspects are much more favorable about.
Thank you, sir, for sharing your discerning perspective on a whole range of issues from international... ah politics and international relations too, finance and so on. However, due to paucity of time we now come to conclusion of fireside segment and open the floor for the audience questions.
You made a deadline when you actually could predict the housing crisis a long time ago. So currently, while you're talking about speculative assets and not speculative safe assets, most are traditionally considered a very safe asset. Today, I've become a speculative asset. So what is your prediction to prediction and what do you think would happen if it on certain international affairs that could affect the price of gold? One thing, second thing is you are talking about this appointment of LAC Commissioner which is done by the CJI, the regional opposition and the government. Which should be done, it's not done. And in the sense that you end as well, is appointed by the government. Now these are supposed to be independent bodies which are supposed to be able to oppose the views of the government. When these are done by the government itself, what? Credibility can be having how they function because you were stripped of your office. Let's be careful. My term ended. Happens to be in the good clear of the government. This could be the public perception. Now when this happens, what credibility can we have in these offices?
Right. So uh on the first, gold, very easy. I don't comment on the value of any asset because people think I have some inside knowledge and then they act on that basis. Mean, gold is what it is because, uh, you know, maybe speculative. But a lot of central banks have been buying gold because they worry about being subject to the punitive payment sanctions that have been put on them, have been put on some countries like Russia. you uh know, bunch of central banks have been buying gold. Also, you know, people have been looking at gold and looking at some of these cryptocurrencies and saying, well, they call them, they call Bitcoin digital gold. Why not buy the real gold? At least uh there's some long-term uh sort of value there. Variety of reasons, you know, what is sometimes called the debasement trade. What do I trust when even the treasury uh might fall in value because the US government is borrowing so much? So maybe I go into gold assets. So variety of reasons. uh Is it fairly valued? I don't know. And I won't comment on that. On the other, Again, it is possible, even when you're appointed by the government, to stand up for your institution. And typically, I mean, at the RBI, often the appointee is a finance secretary. But when they cross to Mumbai from Delhi, somehow things change. And they start echoing the position of an independent central bank because of the culture of the institution. You cannot be a poodle to the government and have the respect of your staff in Mumbai if you're constantly kowtowing to the government. Okay. It's true if you look at the U.S. Who appointed Jerome Powell? It was President Trump in his previous avatar. And now, Jerome Trump is, in President Trump's view, the biggest thorn. People of integrity will be a person of that uh caliber. But it is also possible when appointments get done in very sensitive places, that you appoint people who you know will not stand up to you. That's when the institution gets eroded. When there's somebody who is going to be your man in the institution. How do you tell the two apart? Well, that's the difficulty. And that's why it's better to have an independent or a quasi-independent body, choosing the people rather than allowing for biased choices. uh
We should not be treating our neighbors as water young Indians and the regional cooperation is very much needed for the development of all the penalties. but when you look at the statements and rules of the leadership on the West, you see that they kind of do think as the modern enemies. you look at the eastern side, uh they talk about disconnecting the seven sisters from our country. So when Such statements and such sponsor coming from the neighborhood. How do you navigate a situation like this?
Look, they're not angels. But I'd say, you know, look at some of the statements by our politicians and you will see enough examples where they can say, oh, these people are against us. So at some level, and again, I'm not saying it's even handed or whatever, but I'm saying that paying too much attention to some of this will mean we never move forward. Instead, look for people who are holding out their hand, who want to work with us, who want to play in India, who want to uh make our friendship better, who value some of the common ties, common language, common culture. I mean, remember there are a ton of Hindus in Bangladesh and not all of them are against You don't want to leave Bangladesh and come to India. They believe in a stronger Bangladesh. Work with some of them. But work with the Muslims in Bangladesh also. We help them get independence. Right? And there's a number of them who will remember that. So I think it's always possible to build, but it's equally possible given what you just said, to break saying, yeh kaita hai and that is not right. You can keep pointing on either side to people who make comments which are derogatory, which are terrible. Including at the highest level. And I think if we are to move forward, we should be willing to overlook those. And I would say, I I've participated in number of SAARC conferences, including with central bankers there. As Big Brother, there is some fear in other countries, oh, this is Big Brother, they may squeeze us. So as Big Brother, sometimes it helps to be a little You know, I will help you. Let me do this. Let me step out a little more beyond what is equal because as a big brother. I can do that and not lose too much. I think we need to see how much we can do of that. Again, without being naive, I can think we can do better. um
Another side, should write up to New York, Tomko or India, if I would have been the EIC Secretary of course and I would have sent you straight to the Rajya Sabha. Oh, but that's another thing. So, our honorable Prime Ministers have been talking about being the leader of the Global South and this has been a discourse which is the prophet of India and India has been trying to go for a long time. But just as we saw a couple of days back, like yesterday, honorable Prime Minister was in Israel with Netanyahu. And I don't have to tell you, everybody there, that they're certain. oh What's happened in the Gaza, the genocide, and know, the ruling is there. And prime ministers of India, China, the largest democracies there. then also, uh when he was addressing the parliament, what's it Nasset. Nasset. And he did not even mention atrocities that happened in Gaza. oh My question to you is, and now uh right after that, today we saw that Israel and the US, you know, win the war on Iran? So as being the self-acquainted leader of the Global South, how do we interact with this sort of behavior of the government of India, which has a very historic and pertinent position on what the Tennessee and Howard should be doing, Howard should be there? and going back to Mahatma Gandhi as the Nehru.
I hear your question. I hear your question. Look, um I don't want to comment on the Prime Minister's trips and his actions. uh I will say that, um going back to what I said in the speech, that if we want to be a leader with many friends, we have to be very clear about what we stand for. And what we stand for cannot be naked self-interest. Because who's going to follow you when it's all about naked self-interest? The beauty about the US dominated post-World War system was the US said, it's not just about me, it's about you. And I'm going to give you space to grow. And that was a system that eventually worked both for the US as well as the rest of the world. Yes, there were power imbalances. Yes, sometimes you felt the US did the wrong thing. And yes, the US did do the wrong thing sometimes. But by and large, it was a system that worked for the world. Similarly, if we want to be leader of the global south, what kind of values are you propagating? What is your support to different countries in the global south other than yourself? And if we can articulate that in a way that gets people to come behind us, that's when we get true power. Otherwise, it's going to be based on how much did you give me in terms of, uh, you know, rupees for me to, for investment and stuff like that. Self-interest on both sides. That's not fellowship. That means nobody really cares except for the money you're giving them. And we do a bit of that, but we need to get beyond that where they really think we lead from a values perspective. uh
As in your speech, you mentioned how India, we as a country should navigate the uh world without orders. In today's uncertain world where the global economy is very uncertain and AI driven, what skills, habits and long-term decisions do you think individuals as youth of India should develop so that we can uh ensure adaptability and economic security in the future?
It's a fantastic question, which I don't have an answer to. Right. I don't think anybody has an answer to. I would say, you know, the best you can do is, you know, acquire a few skills that you think are going to stay. I mean, learn math, learn physics, chemistry, whatever you, m whatever field of engineering you're in, learn the tools of the trade. But most important, be adaptable. Be curious, be flexible. Ultimately, that's your basic protection. The more you can, I mean, look, every person in this room has been through a really, really rigorous test. You're all smart people, undoubtedly. But you have to be flexible. And if something gets closed down because we've figured out a way to make the machines do that, what other thing can you do and move to that? So flexibility to my mind is the name of the game in a fast changing world. And that's more a state of mind than any knowledge that you pick up. It's how can you navigate? That's the best I can do. I'm sorry. I don't know what AI is going to do. I don't know whether all that's being talked about is just puff, that AI reaches some limit at some point, at least the, you know, LLMs at this point. And maybe we need to go back to a different way of doing AI and it takes much longer to get out to AGI. But I would say nobody really knows, including the people at the forefront of the puffery.
Very good in you, sir. oh Actually, my question cuts right to the point that you can embrace this. The thing is, India's power projection has drastically changed. oh Probably not drastically, but it has changed lot over the years. They now look towards subsistence and depending on the situation, courts and stuff like that. But for some reason, it still feels like a very low income household. I don't know if that is the case in general or something. Since we feel that we should spend on something today, we have to cut our spending from somewhere else to get through the year something. Year's income has been going up over the years, our spending has been going up over the years, everything looks to be only uptrend. But something doesn't just seem right. We need to have... We would have killed and by 2014, the prices of the infection was... At this rate, are we looking to our neighbors or the other countries and thinking, we are not as worse as, let's say, some other countries and we are like nothing that old and then... So what's the question?
So the question is, are we not on the uptrend that we were thinking? We are! Look, again, cup half full, cup half empty. If you look back over the last 30 years, right, ever since... ah liberalization in early 1990s, 30-35 years, we've grown at about 6% a year. Right? That's fantastic relative to almost any other country except perhaps China and South Korea. Right? I mean, look at the West, they grew at one and a half percent a year for a century. We've grown 6% a year for 30 years. So, There's a lot to be happy about. When I was uh young, there was a lot of reports of starvation deaths. Today, you don't, and it's not because of lack of reporting, it's because most people have food. The Right to Food Act was a good act and put food on the table for everyone and the government, current government has expanded that. So there's a lot to be happy about. What I was railing about is not so much happiness, but complacency. It's too early to be complacent. There's a lot more to do. But that reflects my optimism that we have the capability to do that. I am frustrated that we don't have a player in the global AI framework, despite having companies like TCS. Infosys, Wipro, why aren't they big players on the global AI scale? Why does it have to be the Chinese and the Americans alone? Why don't we have a battery technology at the frontiers? And that is where I think people like you can make a difference. Be really ambitious. And I know I've met some of the entrepreneurs that come from exactly your milieu, and they are truly ambitious. They want to change the world. But let's also change it technologically, not just through logistics or just through giving better services to customers, but technologically what advances can we make? And you're the people who can do it. So I'm hopeful. The only thing, our only enemy is complacency.
Thank you very much. It's been a fascinating evening with you guys.