Transcription
Thanks for coming here. It's great to see all of you.
Reminds me of 40 years ago when I was in IIT Delhi and, you know, I write like many of the students here. I remember IIT Chennai was formidable in many ways. You had a fantastic sports team. I used to play cricket and, you know, invariably we got beaten by IIT Chennai. You also had a really good music band. I remember these names may not resonate with you, but you had a band which came to Randevo in '90 Delhi and played Uri-heap and we're really fantastic.
But I'm not gonna reminisce here about the past. I wanna talk about the future, a future which is rolling out even today. When you look at what's happening in Iran at this point, this is a very dangerous time in the world. The two big economic superpowers are behaving in really short-sighted ways. Not just short-sighted, but also self-interested. And that means the rest of us have to watch out. To extract short-term bargaining advantage, the United States is dismantling a world order which worked both for it and for the rest of the world for many, many decades. China continues with a manufacturing-intensive export-led economic growth model which no longer works for China, but also doesn't work for the rest of the world. But are they changing? No, they continue with it. So increasingly, superpower growth, and forget military pressure, et cetera, but just economically, increasingly, superpower growth will come at the expense of others. And the superpowers will impose economic policies that serve their interests rather than a win-win situation for the world as a whole.
Now, one check on this kind of behavior is if they compete with each other and, you know, check and balance each other. But it looks as if one possible model for the world going forward is where the superpowers divide up who serves as lunch for each one. One set has a sphere of influence in the western hemisphere, the other set has a sphere of influence in the eastern hemisphere, and they divide up the world accordingly. In which case, we're in the wrong hemisphere and we have to deal with the unable to the north.
Now, artificial intelligence could well exacerbate the power imbalance. Both superpowers investing in higher and higher amounts of compute, racing to be the first to create some kind of artificial superintelligence. Intelligence that can be self-improving and take them to a much higher plane. Now, if that was all, maybe we could still cope with it. But as we know, artificial intelligence is increasingly being used in military activities also, and this could exacerbate not just the economic imbalance between the superpowers and the rest of the world, but also the military imbalance. The extremely smooth US extraction of a well-protected Maduro from Venezuela is a sign of the technological capabilities that the US today has at work. And this can only increase if the divide gets exacerbated.
Now, when you look back at the old international norms, given what is happening, the old world doesn't look so bad at all. Yes, everybody had their pet peeve. We in India had our concerns with a global order. When we see a world without order, as we're seeing today, where cross-polar trade and investment become a source of vulnerability, where payments and investments can be weaponized, all this happens before military action, which we're seeing at work even today. This world is infinitely worse. The world without order is infinitely worse than the world with order that we had, even if we thought that order was biased.
So, the question I want to address today is how can a middle power like India, and we are still a middle power, how can we navigate this uncertain landscape? So, very quickly, the answer is we need more growth. We need to become bigger. We need to grow from middle to much bigger than middle. And that will give us the resources to defend ourselves and the economic heft to push back. But we do need a sensible path for that growth. We still hanker after a focus on the way other economies developed in Asia, which is through manufacturing exports-led growth. That's how Taiwan became, sort of developed. That's how China's becoming developed. But the question is, does that path still work? Again and again, you hear a leader saying, "Yeah, we need more manufacturing." Absolutely. We need more manufacturing. But is the world ready for another China? And the answer is absolutely not. Because the world is becoming protectionist. To the existing China, to the extreme production that is emanating from China today, how will it have space for an India which produces China? Okay? Even if China gave us the room, China is very competitive in manufacturing. Even if China gave us the room, the markets simply will not be there, given that every country wants its own manufacturing.
So, we need to be much more clever. Rather than compete with China at their game, we need to find new games that we can compete at. Innovative, differentiated products, rather than competing in commoditized manufacturing with the Vietnams, the Malaysias, and the Chinas, has to be the path that we choose. Now, what that means is we need to emphasize much more our own inherent capabilities, not just in firms, but also in the universities. I was here in IIT Madras Research Park. I met the founders of Agni Kul maybe a year and a half ago. Very impressive. But we need many, many, many more such parks, and we need many more people like you engaged in the kind of research activities that absolutely will propel our firms to a different plane. Well, we also need our firms to be ambitious, right? Where is the Indian deep tech? It doesn't exist. Where is the Indian EV that competes with BYD? Where is the Indian battery that competes with Chinese battery companies? It's not that China had a head start in all this over us. We are a pretty good auto industry. We need more ambition. And their ambition should not be to do commoditized stuff, but to capture the higher end, whether it be design, whether it be R&D, it's the higher end that we need rather than commodity manufacturing.
There is one place we capture the higher end, that is in high-skilled service exports. Now, obviously, the threat in recent weeks has been AI. "Oh, AI is going to decimate software services. AI is going to decimate every service." That is a serene report. And there will be no jobs available in white-collar services. I think that's alarmist. It's not going to happen so fast. Yes, software may be we have to learn how to use AI rather than be displaced by AI. But in many other services, especially the ones performed by our GCCs, there will be jobs. But what is important is we need to train many more skilled workers, many more skilled people like you in our educational institutions, and give them the capacity to exploit the new tools like AI that are coming on board, because typically a human plus technology beats technology alone or human alone. How do we create that kind of environment? But apart from the fact that we need to invest much more in our human capital, we need to spend much more, we need many more varieties, but we need much stronger strength in our existing varieties. They have to be, we need many more institutions that are top 100 in the world. And that means investment right across the education spectrum.
But we also have another strength that many countries didn't have when they were growing from where we are growing, which is a large market. We have a $4 trillion economy. That's a pretty good-sized market, especially when you convert it to purchasing power parity terms. We have a third-largest economy in the world according to purchasing power parity. Many of our people live in cities. You know, by UN standards, we are about 85% urbanized. Typically, the number that's bandied is 50. The UN in its latest findings suggests it's actually much greater. And many Indians living in these cities can provide a variety of services. But for that, we need much stronger skilling. Many of you, when you go back home, you want a plumber. Finding a good plumber is really hard. We need many more plumbers. We need carpenters. We need masons. Remember, we sent masons to Israel, and they turned out they didn't know any masonry. We need them to be skilled. That means if we want jobs, it's not just low-skilled manufacturing or moderate-skilled manufacturing, it is much more also moderate-skilled services. And if we can do that skilling, the state of Orissa has done that wonderfully well, we can actually make big strides. And skilling is partly about the resources through educational institutions, but it's also a state of mind. Many Indians prefer giving the civil service exams ten times over. They're actually spending time starting a small business where they work with their hands. There's so much scope for doing that, but we all want white-collar jobs, sitting in the office with the AC on, rather than working out in the field with our hands. That attitude has to change, otherwise the jobs that are available are going to not be enough for the kind of people we are producing. We need much more of a system which involves both skilling but also working with hands. And that has to start at the school level. You have to persuade people that it's not a bad thing to work with your hands. And many of the big inventions in the world, remember Edison, he worked with his hands. Yeah, he also worked with his mind. Working with both is actually ideal.
Let me give an example of the kind of jobs we could get if we did a little bit of training with a little bit of handwork. Think, for example, of the medical profession, right. Everybody wants to be a doctor, but we don't need a doctor for every ailment. What we need is a moderately trained nurse practitioner. Even an informal, a Kama, or, you know, some of these compounders who start providing medical services. What is good about them is they know how to do a variety of basic things: treat a wound, dress a wound, a cough, a cough, a cough, etc. If we could equip these informal workers with AI tools, okay, you have a patient coming in, they feel unwell, here are a set of questions which will get you a little closer to what the true ailment is. And if they could then decide, "Why, treat this person here or do I kick them up to a doctor?" Imagine how much more our medical system could treat if you could combine the informal with the formal. How many, many more jobs would there be, but also how much better the service will be. We need to think differently, and we can. But if we want to become a developed country, we said Bharat by 2047, we need to grow a little faster. But there's so much scope for growing faster if we're willing to try different ways. Let's not just hanker after manufacturing-led exports growth because the others did it. Let us think about new ways. Let us not spend tens of billions in subsidies for chip manufacturing when we're going to get nowhere near the frontier in the next decade doing that. Let's spend those tens of billions of dollars in our IITs, in our NITs, so that we can give our students a much stronger, better education so that they can become the chip designers and the chip engineers of the future. Let's invest in minds rather than invest in physical stuff. Those are the kinds of choices we need to start thinking about in a big way as we go forward because we don't have money for everything. Okay? We need to think of different patterns of code.
We also need to reduce our economic vulnerability. We need to think of different patterns of code. We also need to reduce our economic vulnerability. We are vulnerable. We have seen it from the kind of pressures that are being placed on us, to which we have few options other than to succumb to those pressures. What every country in the world is doing is checking its supply chains and saying, "What are the kinds of inputs we need to secure? We need to make at home." Now, what we need to do when doing this is being realistic. To make advanced chips, China has been doing that for 20 years, is still below the frontier. We are starting to get to the frontier, it will take a fair amount of time. Is that why we want to put our resources? Remember, Russia has run a war in which it puts chips into every missile, but it has been cut off from the chip ecosystem. There are sanctions in Russia, it's still managed to get the chips. How does it do that? This muggle it. How many chips can you carry in a suitcase? Many. It's the easiest thing in the world to smuggle. Now, you may not get top-of-the-line chips which are carefully controlled, but the next level, very easy to smuggle. Do we need to have chip manufacturing facilities to ensure our security? No. Let's make friends with the future manufacturing countries. Let us, you know, maybe set up some facilities to allow us to get chips when we're sanctioned, if we're sanctioned by anybody, but it's not that difficult a proposition.
Now, there are some places where we are really vulnerable. Think of our pharmaceutical industry. Where do all our APIs, active pharmaceutical ingredients, come from? A lot of them come from... We're vulnerable. And it's hard to smuggle those things in suitcases. At the same time, China's much cheaper than India in producing some of that stuff now. So, what should we do? Well, one is start production domestically, and maybe we get to the scale where it's cheap enough. But it may be that we can't produce it cheaply enough now. So, one alternative is create the facilities which will manufacture a little so that we know the technology and we can ramp up. And we may have to subsidize that as a government. But then have the capacity to ramp up whenever we have shut off. That gives us bargaining power. But don't have to ramp up whenever we have shut off. That gives us bargaining power. But don't have to do it now. Have to do proof of concept, have to do a maintain a little bit of production, but we need the capacity to improve. We need to be clever. In some cases, the cleverness is in building up buffer stocks. We should build up buffer stocks of maybe chips, of chips that are essential to our military. But in some other areas, maybe we don't need buffer stocks, but we need priority access. In all these free trade agreements we're doing, why don't we write in that when there is a shortage and you are the sole producer in the world, we get priority access to some of these things? We need to be clever, basically.
But also, over time, it's not just defense that we can play. As a market becomes bigger, we can also play offense. We can say, if you prevent us from accessing your markets, we prevent you from accessing our markets. Did for that, we're almost half of the size where countries care. We're not quite-- there are five, six countries that are about four trillion in size. But as we get bigger, as we get to seven and eight, which need not be that long away, we start maturing much more, and our size itself becomes a source of security. So, I would say there are many ways we can move to reduce economic vulnerability, but we need to be strategic about it, and we need to start moving, which I presume the government is doing right now.
Now, I want to spend a few moments talking about non-economic factors that are really important in a world without order. The obvious non-economic factors: defense, right? And as we've seen from the Ukraine war, as we're seeing from Israel's attacks on many around it, we have to learn new lessons about what works on the military side. The Ukraine war is not about tanks. The tanks have been decimated. It's about drones. It's about missiles. So, our military has also to become much more agile in its choice of technologies. And it's very appropriate that the private sector is getting involved in supplying defense needs. Earlier, we used to shut out the private sector, but we were willing to borrow, to buy from foreign countries. That makes no sense. Why not trust your private sector to engage in military production? But we also could do joint ventures with friends, with countries that we trust, like Brazil, Canada, Germany, France, Japan, UK. These are countries with which we can work together to reach technological frontiers. And for that, we need people like you participating in the kind of military production that we do. Now, we also see from Ukraine that there's enormous amounts of technology involved on the battlefield. Military powers are much more technological today than they used to be, which means again that the military has to have the capacity to attract people like you into the army. Finally, I would say, we also need realistic assessments from the military about what works. In country art country, the military often is hide-bound. Prefers is a corrupt career and it stands because the generals grew up with that. And so, what we need is a flexible military in which your thinking, contributed by people like you, helps advance where we are.
Defense is one aspect. Internal unity is another aspect of being able to navigate a world without order. How do you get more internal unity? A healthy democracy, an affair judicial system, United S India. It's because we have that that our differences are negotiated, rather than becoming a source of conflict, and our diversity becomes a source of strength, rather than a source of divisiveness. We are a varied country because we can negotiate these differences. So, democracy is really strong if the internal debates are vigorous, and that requires a strong opposition, not a weak opposition. Now, nothing forces the electorate to choose a strong opposition, but it's really important that the significant advantages any incumbent party in India enjoys not be further tilted by the election process. Now, I have two issues I want to raise here, which is we're talking about moving to a one nation, one election move. I worry that when we move towards that, it enhances even further the power of the party at the center, which has access to many more funds than any other party, and which also has access to resources like press resources, etc., etc. Because the press is often willing to accommodate the party at the center. One nation, one election will create a uniformity across the country, and therefore make it harder for a viable opposition. I don't care who the party at the center is. I'm saying that this tends to exacerbate the unlabeled playing field. I think one nation, one election's time may come, but it is not today when everything else is unequal.
The other place where I think we need much more fairness is in the entities supervising our elections. The Election Commission must not just be fair, it must be seen to be fair. In the remaining ways, we can assure that fairness. For example, the Supreme Court suggested, how do we pick the Chief Election Commissioner? The Prime Minister, Leader of the Opposition, and the Chief Justice of the Supreme Court states, said together and choose the Election Commissioner. I think it's both the Chief Election Commissioner and the Election Commissioner. That seems like a fair process. Why don't we go towards that? Because if we pick people who are seemingly fair, I think it will build a lot more trust in the system, and we need trust in our electoral system.
As the international environment turns dangerous, it is really important we don't exacerbate the domestic fissures that have no existed way before independence. It is important we stop demonizing our fellow citizens on the basis of religion, caste, tribal identity, or state of origin. State of Virginia is becoming a recent. I don't walk a worker's from that state into my state. Why do we call ourselves a country if we see every source of division as problematic? So, I would argue that, you know, we should prevent the kind of divisive activity that we see sometimes. Layering it said, party leaders should stop, you know, politicians from raising the kind of divisiveness that we've seen. And far better for us to have a more united front, which means pre-doll Indians wherever they come from, whoever they be, a requirement that our opposition work hard to propose good alternatives. Then people will not just vote if the opposition doesn't have a plan. Tim Geitner used to say, "It takes a plan to be the plan." The government has plans. You can't keep just criticizing government plans, you have to have a plan if you're on. And if you run. And if you look across the opposition states, there are actually quite a few plans which make sense. How am I going to get better education? Off as a plan. How am I going to do better for the farmer? Some opposition state has a plan. Putting all these together, the opposition has a plan, which is an alternative to the government plan, but they need to articulate it better, otherwise they're not going to get people to accept that there is an alternative.
Let me end by talking about two other international issues, not domestic. So, so I talked about a strong economy, I talked about stronger defense, I talked about a more united nation. We need all these if we are to navigate this world without order, but we also need friends. And I would still say the first place to look for friends is in your neighborhood. Look around, who are the people you can be more friendly with. Dr. Manmohan Singh used to say, "Let's build relationships with our neighbors. The South Asian Free Economic Zone." It would be really populous, you know, almost two billion people. That's much bigger than many of the regional economic zones, but it also reduced the temperature in the region. What if we could undertake joint military exercises and joint anti-terrorist activities with some of our neighbors instead of having military forces sort of staring down their throat at the at the border? Of course, everybody will say, "You're naive. We have these deep-rooted antagonisms." And of course, there are interests on both sides of the border which want to keep it that way. But we can reach out a hand to some of our neighbors. We are doing that with Sri Lanka, and the temperature is reducing. And we need to find ways, as the big brother in the neighborhood, to do that with more countries. And if we can do that, we can build a free economic zone, but also a zone of peace in the neighborhood, rather than having our neighbors fighting with each other, neighbors fighting with us, etc., etc.
Finally, I mean, I often hear people ask me, "Oh, we want to become a superpower." "We're now going to become a superpower." I say, "Why do we want to become a superpower?" The reason to become a superpower is if you want to make the world a better place. To do that, let's start first with our region. There are sure we can make the region a better place, right? We are a superpower already in our region. Let's sure we can make the region a better place, and that means holding out a hand to our neighbors, investing in them, accepting their investment, doing cross-portive flow of people, etc., etc. Unfortunately, I think the one place where we are a superpower, we have not really acquitted ourselves well, and we have to learn from that experience. I'm talking about cricket. We run the ICC. We are a superpower. How well have we managed the ICC? Let us introspect and ask, when we become a superpower, what happens to our behavior? Do we behave differently from the superpowers elsewhere? Or do we just throw our weight around? I think we need to ask us why we want to become a superpower, and do it much better than we've been doing so far.
Finally, we need to join with the middle powers. There are many middle powers, as Mark Carney put it in his Davos speech. If we join with the other middle powers, your Canada, Brazil, etc., we can push back against the superpowers because we have friends. But there's one important aspect of our international behavior we need to change if we want to have more friends. We have moved in the recent past to away from a values-based approach. Remember how we used to emphasize values in the '60s and the '70s and the '80s? We are about developing countries, and we were a very big voice, even though we were a small country in terms of economic footprint, because we stood for values. More recently, we moved to what some sometimes is called a transactions-based approach because the values-based approach was hypocritical. We have people talked about values never geared towards. The transactions-based approach is the right way. We do what benefits us, what is convenient in the moment, rather than what is the right thing to do. The problem with that transactions-based approach is it works until you meet somebody else who's more powerful and more transactional. And then you find that being subject to a transactional-based approach, what is it that you have for me today? And tomorrow, the same question, "What is it that you're going to bring to me today?" Is actually a very, very bad way of conducting international relations, especially for the smaller guys. But if you have a values-based approach, based on our democratic values that we have had for, you know, many centuries, then we can actually make friends with a bunch of democracies, and they do understand what our behavior will be. We will support them if they get into difficulty, rather than ask, "Is it an interest today or not?" Right? You get much more reliability and commitment when you move towards a value-based approach. And I think that's where we should go back if we want deeper, stronger friendships, rather than friendships of convenience.
So, bottom line, I don't think we can go back to the old world, the world with order. We are for a while in a world without order, and, you know, today's actions just contribute to that. Maybe in the future, the US goes back to, you know, not dismantling the order it put together, but actually rebuilding some of it. And maybe China re-thinks its disruptive model. But in the meantime, we have to take the world as it is. And that means being much more clever about navigating it. But importantly, we have friends. Our population, our democracy, our diversity, and smart, energetic, innovative people like you. And with those kinds of strengths, I think we can absolutely succeed, especially if we stop fighting the battles of the past and look to addressing the challenges of the future. I have no doubt that all of you in this room will help in that.