TRANSCRIPT: The World's Largest Democracy Scans Voters' Eyes with Raghuram Rajan
Raghuram Rajan:
I think a lot of Indians value democracy. So if it comes at the cost of sacrificing the democracy, my guess is many would think twice.
Ian Bremmer:
Hi, I'm Ian Bremmer, and welcome to the GZERO World podcast. It's an audio version of what you can find on public television where I analyze global topics, sit down with big guests, and make use of little puppets.
Ian Bremmer:
This week I sit down with University of Chicago, Professor Raghuram Rajan. He was recently the governor of the Reserve Bank of India. During that time, he sparred publicly with Prime Minister Narendra Modi's administration. Today I'll get his take on India's current political scene, and we'll talk about the massive five-week-long national election period, which just wrapped up. Let's get to it.
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Ian Bremmer:
And I'm here at the University of Chicago with Professor Raghu Rajan, was chief economist of the IMF, was governor of the Reserve Bank of India, and it's really nice to see you again.
Raghuram Rajan:
Well, thanks for having me.
Ian Bremmer:
The scale of everything is extraordinary in India. I remember when Modi was campaigning back in 2014. I mean, one of the big promises was we are going to create an enormous number of jobs.
Raghuram Rajan:
Yes.
Ian Bremmer:
The last time I was there, one of the biggest things that I heard was, "We haven't seen all these jobs". Why is it with the high level of growth that you presently have, and actually faster than China now, significantly. Why do you think that jobs aren't happening?
Raghuram Rajan:
Well, one of the big places where China created jobs was construction. And you can see that in the kinds of cities they have, the kinds of infrastructure they have. That's one place where India hasn't done as good a job. In part because being a democracy, it's much harder to acquire land. Now, think about trying to acquire land in the Netherlands. It's going to be very difficult because any highway that you build there is going to run over somebody's backyard. You're going to have a whole lot of groups standing up and saying, "Not in my backyard." You'll have civil society standing up and saying, "Why do you want to spoil the environment here? Why do you want to do this here? Why do you want to do that here?"
Raghuram Rajan:
That's what we have in India, that you have a very strong first world civil society which stands up whenever there is an attempt to build infrastructure.
Ian Bremmer:
So if the problems are principally about internal governance and structure, are you starting to see the average Indian look to China and say, "You know what? That system just feels a lot more effective."
Raghuram Rajan:
I think a lot of Indians value democracy. So if it comes at the cost of sacrificing the democracy, my guess is many would think twice. Now, the way I like to see it is as follows. China had a wonderful system to reach middle income. It was a little more coercive, but maybe that's the way you have to operate. You take the land rather than acquiring it against the pressures of democracy. You can build a lot of infrastructure very quickly. That gets you to middle income.
Raghuram Rajan:
From middle income to rich is a different ballgame. That's when you need creativity, innovation, all those things where perhaps you need a little more freedom of thought to make mistakes. And I think that-
Ian Bremmer:
So India is stuck now. China's about to be stuck.
Raghuram Rajan:
... I mean, that's one way of putting it. But China will have to reform its system, in my view, in order to take their country more towards the frontier. I think today there's a lot of angst in the US. Are they going to catch up on us? Are they going to beat us? My sense is, yes, they will narrow the gap, but whatever remains of that gap will become harder to traverse with the kind of system that they have. I think the one party system is going to become more of a burden for China going forward than it has been so far. It's been quite effective, very effective in many ways thus far.
Raghuram Rajan:
For India, the challenge is to get to middle income. Once it gets to middle income, I think it's got the right system to move much faster. But how do we get to middle income? How do we acquire that land, build those highways, build those ports that will give more people jobs and allow them to be more productive? Because eventually we have the system to harness the intellectual power.
Ian Bremmer:
At the high end, of course, India's education, India's business community is extremely functional. But so many Indians that are still not in the cities, not gaining literacy. Despite the unemployment problem, do you see significant progress being made in terms of developing human capital?
Raghuram Rajan:
Not as much as we should. Even at the high end, we used to have significantly better universities than say China. China now has much better universities than India has, partly because they can put more money into those universities. We had Jawaharlal Nehru who focused on building out universities. We had that before we had universal primary education. Now we are focusing more on building it right through the system.
Ian Bremmer:
Because the stereotype of India is that the central government has money. But you can't actually get it to the people because the layers of bureaucracy at the state level and the local level are so strong that everyone is taking a piece. No one is getting anything done. How do I reconcile that with the idea that actually the central government is too strong and we need to empower villages and stuff?
Raghuram Rajan:
Well, I think we are saying is the same thing in different ways. A lot of the revenues were collected and flowed to the center, but the flow back into the lower levels of government were more difficult and didn't happen. And every finance commission which decides how these revenues are spent, has been pushing towards, "Let's get it down to the local level. So the local level has more funds to do what it needs to do." Take Mumbai for example. The mayor of Mumbai has very little power to change the kind of infrastructure that Mumbai has. It's all powers that lie with the state government or with the central government.
Raghuram Rajan:
So pushing it back to the mayoralty so that the mayor can actually do things that benefit the citizens of Mumbai would be a benefit for Mumbai. And similarly down to every level. Now today, we have technology which can allow us to bypass those layers of bureaucracy. We have this Unique ID across India called Aadhaar. We have the -
Ian Bremmer:
Which is the universal ID system. It's a biometric system.
Raghuram Rajan:
... It's a biometric system.
Ian Bremmer:
So in principle, you have this universal ID and it is supposed to allow every Indian citizen to have direct access to benefits.
Raghuram Rajan:
It is. So you need the ID, you need a bank account and you need your mobile phone. With these three, you basically have the ability to first get money into your bank account. And second, use it pretty much anywhere because now that mobile phone allows you to pay pretty much in every store.
Ian Bremmer:
Again, we're talking about over a billion people. This was rolled out fairly quickly.
Raghuram Rajan:
Yes. The architect of this, Nandan Nilekani, who-
Ian Bremmer:
From Infosys.
Raghuram Rajan:
... From Infosys structured it in such a way that it was a platform that was public that was not owned by anybody, but you could build a lot on it. And India's building out a lot of stuff on it.
Ian Bremmer:
Now number one, there is a privacy question. I remember at the beginning there a lot of this was going to be voluntary and now it's not. How do you think about that?
Raghuram Rajan:
Well, there is a serious privacy question. One is keeping your data and all the links to it to people who need to know and who have your permission to actually see it. And we need to do a better job on that. The Supreme Court has been engaging in trying to understand the limits of privacy, what should be allowed and what should not be allowed. And that's an ongoing debate.
Raghuram Rajan:
My sense is that we don't want the state which is already very powerful, to have too much power over the individual. At the same time, this offers a way to essentially make many services much more efficient than they are today. For example, the Unique ID can become the basis for developing credit information. The Unique ID can be a way of transferring so that it doesn't go to ghost entities, but goes to real people. Those are all ways that services can become more efficient.
Ian Bremmer:
So we go to this election here, and we have now what looks to be a pretty tightly fought contest between the BJP and Modi on the one hand, and Rahul Gandhi and the Congress on the other. One interesting point to me is that the Congress Party is arguing for the rollout of universal basic income in India, would be the world's largest experiment with that. What do you think about that as a concept and as a practice for India?
Raghuram Rajan:
First, I think it's not quite the universal basic income that is contemplated in the West. An income sufficient for a middle class person to live without a job. This is more, I would argue, a targeted poverty alleviation scheme. There are a whole bunch of schemes that go to the very poor.
Ian Bremmer:
It's the bottom 10% they're talking about, I think. Correct.
Raghuram Rajan:
They're talking about around 250 million people. So about a quarter of the population at the end of it, or slightly less than a quarter.
Raghuram Rajan:
The idea here is that there are lots of these poverty alleviation schemes such as subsidized food. Can we give a direct transfer to those households at the bottom so that they have enough to keep body and soul together and also avoid problems like malnutrition, like poor health, so that they can actually become functioning members of society and contribute to the workforce? They get a decent education. So the idea, I think, is more poverty alleviation rather than helping the middle class stay at home.
Ian Bremmer:
And do you think that that is a appropriate measure? Is it fundable? Do you think it'll make a positive difference if Congress gets in?
Raghuram Rajan:
I think both sets of parties have been going towards this idea of direct income transfers, of course facilitated by the Aadhaar Unique ID. And the idea there is, look, we have too many poor government services that don't work particularly well, that are inefficient. Is there a way that we can leapfrog by giving the money directly to the poor so that they can command services, whether from the public sector, whether from the government or the private sector with their money, they have money, power. There's a way of empowering at the bottom. And to that extent, I think both parties are going towards the same idea. The Congress, of course, has a larger scheme than the BJP has, but the principle is essentially the same.
Ian Bremmer:
And making the central state a little smaller as a consequence.
Raghuram Rajan:
I think if you wanted to fund it, that would be the eventual outcome.
Ian Bremmer:
So next prime minister, whether it's Modi or not, what's the one thing that if you could get them to do that they're not doing right now that's credible, that's plausible, it's near term that you'd wish they'd listened to Raghu on?
Raghuram Rajan:
Well, two things. Give me two things.
Ian Bremmer:
Okay. I'll give you two things. Sure, sure, sure. If you got two, I was trying to make it easy for you.
Raghuram Rajan:
No, I just look at land acquisition and make it fair but fast. It has to be-
Ian Bremmer:
Some sort of eminent domain.
Raghuram Rajan:
... No. Some way of allowing people to share in the benefits. So I take five acres from you, I develop all five and give you back two so that you have two acres now, but of much more developed land. That works because people then have a stake in the future. But it also makes the process of acquisition faster, things like that. If we could share in growth, make people partners in growth, you could make it much faster.
Ian Bremmer:
But allow the government to actually take the land if they need to.
Raghuram Rajan:
If they need to acquire it, yes.
Ian Bremmer:
Okay. That's number one. Number two.
Raghuram Rajan:
Number two is education. India needs to do a far better job on education. We talked about mass education. We have mass education. Kids all enter basic school. They enter primary school. They don't stay. They leave after fifth grade or sixth grade because they simply are not learning enough.
Ian Bremmer:
And it's a lot worse for girls.
Raghuram Rajan:
It's a lot worse for girls. We are changing that. It's getting better, but we need to do far more. We need to have a much more educated workforce at every level. So the other thing I would emphasize is education. Put your smartest minister, your best minister in charge of education.
Ian Bremmer:
It's so rare that governments do that.
Raghuram Rajan:
It often it's a parking spot for somebody you don't care very much for.
Ian Bremmer:
And minister of finance, minister of foreign affairs, right? I mean, minister of defense, but education ...
Raghuram Rajan:
It's a by way. It's dead. And I think it's not. It is the place where our futures will be determined.
Ian Bremmer:
If Modi came back and said, "You know what, Raghu, you want to be my minister of education?" You're going to go back. You're going to do it.
Raghuram Rajan:
You keep asking me questions about my next job.
Ian Bremmer:
But this one where you could make a big difference, most important young people, then would you do it?
Raghuram Rajan:
I'm very happy where I am. If the opportunity arises to do something meaningful, I will always take it up.
Ian Bremmer:
See, that's not bad. Now, when you were head of the Reserve Bank, I saw articles that said that you were the sexiest central bank governor in the world. That's because it's a low bar, right? Is that what it is?
Raghuram Rajan:
Yeah, yeah. The barrier to meet the competition was very low, and I think it was right. But actually I take that back. There are some pretty good-looking central bankers.
Ian Bremmer:
Okay, give me your top two. Come on. You just said it. You're on air.
Raghuram Rajan:
Mark Carney is a-
Ian Bremmer:
Look at that. Mark Carney, go for the Canadian.
Raghuram Rajan:
... Is a really dashing central banker.
Ian Bremmer:
I'm going to tell him you said that. Okay. Number two.
Raghuram Rajan:
No, I think I just ...
Ian Bremmer:
Just Mark. Okay. Raghu Raja, very good to be with you.
Raghuram Rajan:
Thank you.
Ian Bremmer:
That's our show this week. We'll be right back here next week same place, same time. Unless you're watching on social media, in which cases, wherever you happen to be. Don't miss it. In the meantime, check us out at gzeromedia.com.
Announcer:
The GZERO World is brought to you by our founding sponsor, First Republic. First Republic, a private bank and wealth management company. Imagine a bank without teller lines where your banker knows your name and its most prized currency is extraordinary client service. Hear directly from First Republic's clients by visiting firstrepublic.com.
