Money Matters: Mission 2047 – Dream or Destiny?

Summary

Sanjiv Sanyal, a member of India's Economic Advisory Council, discusses the nation's economic growth and the challenges of sustaining high rates. He emphasizes the importance of consistent policy, supply-side reforms, and maintaining macroeconomic stability to prevent a middle-income trap. Sanyal also addresses unemployment, the need for growth-oriented policies, and the significance of regional development to ensure a prosperous future by 2047.

Takeaways

• 📈 The speaker emphasizes the importance of consistent policy for high economic growth, stating that it's not natural but must be earned.
• 🚀 The Indian economy has reached a critical mass where compounding growth can significantly propel the economy forward.
• 💰 The speaker highlights the rapid increase in India's nominal GDP, from $260 billion to a projected $30 trillion by 2047, if the growth trajectory is maintained.
• 🛠️ Continuous supply-side reforms are crucial for sustaining growth, including improving ease of doing business, infrastructure development, and private sector investment.
• 🌐 The speaker warns against endangering macroeconomic stability, citing the Asian financial crisis as an example of high growth followed by a devastating downturn.
• 🤔 Concern is expressed over the focus on a specific GDP growth rate, emphasizing the importance of natural growth and avoiding fiscal strain.
• 🌳 The potential demographic dividend of India's large working-age population is highlighted, with the caveat that unemployment must be addressed to realize this potential.
• 💼 The necessity of job creation through growth is underscored, with the speaker arguing against the idea of creating government jobs as a solution.
• 🏢 The speaker suggests that India needs to focus on growing certain regions that have been lagging, particularly the eastern part of the country.
• 📚 The importance of administrative reforms is mentioned, including judicial reforms and improving municipal service delivery.
• 🏗️ The need for further reforms to enhance ease of doing business, including contract enforcement and reducing legal case durations, is stressed.

Q & A

What is the significance of the term 'Mission 2047' mentioned in the script?

Mission 2047 refers to a long-term vision for India's economic growth, aiming to transform the country's trajectory and potentially reach a prosperous state by the year 2047.

What is the current role of Sanjiv Sanyal in the context of the script?

Sanjiv Sanyal is a member of the Economic Advisory Council to the Prime Minister of India, providing insights and suggestions on economic policies and reforms.

Why does Sanjiv Sanyal emphasize the importance of consistent policy for high economic growth rates?

Sanjiv Sanyal stresses the importance of consistent policy because high growth rates are not natural; they must be earned through continuous supply-side reforms and maintaining macroeconomic stability.

What does Sanjiv Sanyal mean by the 'compounding process' in the context of India's economy?

The 'compounding process' refers to the accelerating effect of economic growth, where the economy's size and capacity to generate wealth increase exponentially over time, given consistent growth rates.

How does Sanjiv Sanyal view the potential impact of India's current economic trajectory on its future GDP?

Sanjiv Sanyal believes that if India maintains its current growth trajectory, it could reach a GDP of around $30 trillion by 2047, highlighting the power of compounding growth.

What are the key factors Sanjiv Sanyal identifies for sustaining India's economic growth?

Key factors include continuous supply-side reforms, ease of doing business, infrastructure development, private sector investment, and maintaining macroeconomic stability without endangering fiscal or financial health.

How does Sanjiv Sanyal address the concern about India's unemployment issue in relation to its economic growth?

He emphasizes that rapid economic growth is a necessary condition for job creation and that focusing on growth should not be compromised. He also suggests that targeted support and investment in infrastructure can help address unemployment.

What is Sanjiv Sanyal's stance on the idea of Universal Basic Income (UBI) for India?

Sanjiv Sanyal is not a big fan of UBI, arguing that it could be an inefficient use of resources. He prefers targeted support for those who truly need it, such as free food grain for the very poor.

How does Sanjiv Sanyal view the role of taxation in India's economic policy?

He suggests that taxation should be kept low and stable, avoiding drastic increases. He also mentions the need for tax reforms to simplify the system and make tax paying the default in society.

What are the areas of reform that Sanjiv Sanyal believes are crucial for India's future economic success?

He highlights the need for judicial reforms, administrative reforms, improving municipal service delivery, and focusing on sectors like tourism that can contribute to both growth and employment.

What is Sanjiv Sanyal's perspective on regional economic disparities within India?

He believes that there is a significant divide between the economic growth of the eastern and western parts of India, emphasizing the need for better infrastructure and dynamic leadership to stimulate growth in the eastern regions.

Outlines

00:00

📈 Economic Growth and Policy Consistency

In this paragraph, Sanjiv Sanyal, a member of the Economic Advisory Council to the Prime Minister, discusses India's potential for high economic growth rates and the importance of consistent policy to sustain such growth. He emphasizes that high growth rates are not natural and must be earned through continuous supply-side reforms. Sanyal outlines India's economic journey since 1991, highlighting the acceleration in the compounding process of the economy's growth, which is expected to reach $30 trillion by 2047 if maintained. He stresses the necessity of avoiding macroeconomic instability and ensuring social stability by supporting the poorest.

05:01

🌐 The Power of Compound Growth and Economic Stability

This paragraph delves into the significance of maintaining a steady growth rate for long-term prosperity and the pitfalls of stagnating growth, as exemplified by Brazil and certain Asian countries. Sanyal points out that China's success was due to its sustained high growth rates. He discusses the importance of India's consistent growth over the past 30 years, which has led to an increase in the economy's size, making the additional product created each year increasingly substantial. Sanyal also addresses the misconceptions about universal basic income and the importance of targeted support for the needy, as well as the need for low and stable taxation to foster growth.

10:03

🏛️ Policy Reforms and the Importance of Growth

Sanyal emphasizes the role of policy in economic growth, advocating for restraint in fiscal policy, especially during difficult times. He discusses India's response to the COVID-19 pandemic, highlighting the government's restrained fiscal measures and supply-side policies that maintained cash flow and prevented economic collapse. The paragraph also touches on the need for tax reforms, simplification of the tax system, and the importance of direct tax reforms. Sanyal addresses the concerns about unemployment and the importance of growth for job creation, cautioning against the distraction from growth by focusing on government jobs, which could detract from resources needed for infrastructure and other vital sectors.

15:05

🛤️ Regional Growth Disparity and the Need for Infrastructure

In this paragraph, Sanyal discusses the regional growth disparity in India, noting the lack of growth in the eastern part of the country compared to the western half. He argues that improving infrastructure and leadership in these regions is crucial for overall economic growth. Sanyal also shares his view on the importance of place-based growth, using the example of two brothers from the same background having different economic outcomes based on where they live. He concludes by stressing the need for reforms in judicial systems, administrative processes, and municipal service delivery to improve the efficiency of the Indian state.

Keywords

💡Economic Advisory Council

The Economic Advisory Council (EAC) to the Prime Minister is a group of economists that advises the Indian Prime Minister on economic issues. In the script, Sanjiv Sanyal, a member of the EAC, discusses India's economic growth and policy strategies, illustrating the council's role in shaping the country's economic trajectory.

💡Mission 2047

Mission 2047 is a vision for India's economic development by the year 2047. It is mentioned in the script as a dream or destiny for India, suggesting a long-term goal that involves significant economic transformation and growth, which is a central theme of the video.

💡Compounding Process

The compounding process refers to the ability of an amount of money to grow exponentially over time due to the effect of interest or growth rates. Sanjiv Sanyal explains how India's economy has reached a critical mass where this process can work in its favor, emphasizing the importance of maintaining growth momentum.

💡Supply-Side Reforms

Supply-side reforms are economic policies aimed at improving the productive capacity of an economy, often through reducing regulations and encouraging private investment. In the script, Sanyal discusses the need for continuous supply-side reforms for India to sustain its growth trajectory.

💡Macroeconomic Stability

Macroeconomic stability refers to a state where an economy maintains steady growth without significant fluctuations, such as inflation or financial crises. The script warns against endangering this stability, as it is crucial for sustaining economic growth and avoiding the fate of the Asian tigers in the 1990s.

💡GDP Growth Rate

Gross Domestic Product (GDP) growth rate is the measure of economic growth within a country over a specific period. The script mentions the concern over India's GDP growth rate, highlighting the debate over the importance of achieving and maintaining high growth rates for economic prosperity.

💡Fiscal Policy

Fiscal policy refers to government actions, such as taxation and spending, to influence economic activity. The script discusses the need for restraint in fiscal policy, especially during times of crisis, to maintain economic stability and support growth.

💡Tax Reforms

Tax reforms involve changes to a country's tax system to improve efficiency, equity, or simplicity. Sanyal mentions the need for direct tax reforms and simplification of the tax system in India to encourage more people to pay taxes and reduce complexity.

💡Unemployment

Unemployment is the state of being without a job while actively seeking work. The script identifies unemployment as a significant issue in India, with the potential demographic dividend at risk if there are not enough jobs for the growing working-age population.

💡Infrastructure

Infrastructure refers to the basic physical and organizational structures needed for a country to function, such as roads, bridges, and public services. The script highlights the importance of investing in infrastructure as a means to stimulate economic growth and create jobs.

💡Ease of Doing Business

Ease of doing business is a measure of how friendly a country's regulatory environment is for the operation and growth of businesses. Sanyal discusses the need for reforms to improve India's ranking in ease of doing business, which includes judicial reforms and reducing bureaucratic hurdles.

Highlights

Sanjiv Sanyal, a member of the Economic Advisory Council to the Prime Minister, discusses India's potential to reach an 8% GDP growth rate and the importance of consistent policy for sustained growth.

India's economy has reached a critical mass where the compounding process can significantly work in its favor, emphasizing the importance of maintaining this momentum.

The journey from a $260 billion economy in 1991 to a $3 trillion economy in 2021, showcasing the power of compound growth over time.

The necessity of continuous supply-side reforms, including ease of doing business and infrastructure development, to support the private sector's investment.

The warning against endangering macroeconomic stability, drawing lessons from the Asian financial crisis of the 1990s.

The significance of direct support to the poorest to ensure social stability and address absolute poverty.

The natural flow of economic growth should not be forced, especially under current global conditions that limit export capabilities.

The importance of maintaining growth at a certain rate for a longer period to avoid the middle-income trap and achieve prosperity.

India's consistent growth rate of 5-7% over the past 30 years and its implications for the country's economic future.

The power of compounding in an economy as large as India's, where each year adds significant value to the economy.

The need for targeted support rather than universal basic income, to effectively utilize resources for the welfare of the people.

The role of taxation in maintaining fiscal stability and the importance of restraint in fiscal policy.

The impact of the COVID-19 pandemic on economic policy, emphasizing the importance of supply-side oriented policies over stimulus checks.

The importance of tax reforms and simplification of the tax system as more people come into the tax net.

The concern about unemployment in India and the need for job creation through rapid economic growth.

The argument that there are no poor people, only poor places, and the need for regional growth to lift people out of poverty.

The call for further reforms in ease of doing business, judicial system, and administrative efficiency to boost the economy and employment.

Transcripts

[Music]

and it's my great pleasure now to uh

invite on to the state sanjie s who's a

member of the economic advisory Council

to the prime minister no doubt was

listening to some of the suggestions

that have being made as to how to take

India to 8% and and and further um is a

is a set fine I guess so

yeah so sanjiv SEL um you're a member of

the economic advis

Council uh to the Prime Minister now

there's this clear Mission 2047 that's

being worked about I mean is it a dream

is it our destiny that's some of what we

are going to talk about um a lot of the

experts you've been talking to are

saying there's a Confluence of factors

right now that is potentially working

that could transform India's entire

trajectory it's already happened a lot

of the work has been done a bunch of

reforms have taken place infrastructure

has been built a few more changes need

to be made and then India can be on a

trajectory that leads it towards

Prosperity are you a believer in that uh

presumably you are if you're the member

of the Prime Minister well yes and no so

let me explain to you well there's a

possible no in that also no because you

see people think somehow this is uh

there's something natural about growing

at very high rates it's not it has to be

earned uh you know and that requires

consistent policy so let me tell you why

I'm very positive because finally you

see the economy has reached a critical

mass where the compounding process is

now going to flick in our favor in a

massive way so let just allow me to talk

you through this when we started our

journey in 1991 as a as a reformed

economy we were only 260 billion uh as

nominal USD economy it then took us 16

years to hit our first um uh trillion

dollars then it took another s years to

hit the second trilon

which we only managed to hit as recently

as um

20145 and it should have taken five

years to hit the next trillion dollars

lost two years in Co so yet another s

years so it's only as recently as 20

2122 where we managed to hit $3

trillion the next trillion dollar has

only come in three years this financial

Year we will hit $4 trillion and the

next fin next trillion dollar will come

in 2016 6

months so the point I'm making is this

compounding process is very powerful if

we keep it going and if even at current

kind of levels we will end up with

somewhere in the range of uh $30

trillion uh by

2047 so the secret is to keep it going

absolutely therefore I always get very

concerned about people getting fuss

about 8% GDP growth rate this year some

no no no no this is about compounding

without slipping

up and so it requires lots of continuous

supply side reforms whether it's from

the government side whether is the

getting ease of doing business building

the infrastructure we need the private

sector to come and invest so all of

those things need to be there and this

is the next part you have to sustain

this without macroeconomic instability

do remember what happened to the Asian

tigers of the 1990s they too for some

years managed to keep very high growth

rates and then their financial system

blew up and various other bad things

happened in the Asian crisis and

Thailand Malaysia Indonesia all these

countries never came back I mean they're

still growing but they never just don't

have that energy ever again so the point

is never ever endanger macroeconomic

stability whether it's a fiscal side

your financial side your external

account and you have to keep investing

in the supply side of the system and of

course for social stability also have to

make sure the very poorest get direct

support to keep the absolute poverty is

taken care of so this compounding

process is key in some Years it'll be a

little higher so last year we got lucky

we got 8.2% am I going to struggle and

push somehow to get it to 8% No it

should come within the natural flow of

things so if I'm going to expend fiscal

energy to keep it at 8% no so if you see

our forecast we are okay with it coming

down to 7. . 2% why because under the

current Global situation we can't export

in the way China was

exporting you know in the decade of the

2000s uh if I can't export at that speed

and I forced the economy to grow at 8%

plus and and then at some point my

current account will begin to

bleed so you see I have to therefore be

okay given the Circ you see you have to

drive the car as fast as you can but

according to this condition the so the

important part of what you said and this

is absolutely correct whether it's for

an individual investing their personal

money or there for a country the longer

you can grow at a certain rate the

longer you can keep on doing it the more

prosperous you're going to end up

absolutely and if you don't then you

then the examples of Brazil and some of

the Asian countries and all there you

hit a middle-income trap all sorts of

horrible things end up happening why did

China achieve what it did it was because

it was able to grow at those Maybe even

higher rates for so you know good times

will also come the world economy goes

through Cycles at the time when the

world economy suddenly begins growing

for whatever reason we will hit those 9%

growth rates but don't try and do it

when the world is not growing but the

but the good news here in this from an

Indian point of view is that if you look

at since economic reforms okay you had a

long period where India wasn't growing

at the rates it show but from the 91

time till now it's been what nearly 30

years 32 years we have grown at 5 % 6%

7% and that fairly consistent absolutely

what that also means is that if you can

keep on doing that when your economy

it's a $4 trillion economy the amount of

extra uh product that is been created

the amount of extra uh economy that is

being added to your economy becomes

larger with every passing year you're

adding $300 billion every single year

and that starts to no no now at some

stage by the end of the decade we'll be

hitting a trillion dollars or almost a

trillion has been the into the early 30s

you see now we're hitting a trillion

dollars in 26 months the next run will

be 18 months and so on so you know it

just compounds out very fast people

don't realize how powerful and

importantly our population has stopped

growing it's growing at you know 4% or

thereabouts and even that is not because

of birth but because we are living

longer so population not really growing

economy growing at this compounding Pace

that's how China managed to get get from

a per capita income which was very

similar to ours in 1990 to where it got

here it's

compounding right um when you when

you're looking at the factors behind

that two three things happen if you are

adding a trillion dollars to your

economy even $500 billion doar to your

economy you will have the money to do

things like infrastructure yes you will

also have the money then to take care of

the people below the poverty line

because that is obviously important you

need to be able

have that's what I was about to come to

too now so some of the stuff will happen

you'll have the money where you going to

find the money for what call freebies

unkindly it's actually support sometimes

to people well it depends what it is

sometimes if it is directed and targeted

it is support if it is a generic thing

uh which is why I'm not a big fan of uh

Universal basic income because you know

you spray bulleting uh resources um then

it is a

freeb what exactly is a different

Universal basic income yes applies to

everybody but India is giving support to

a very large number of people when it

comes to free food grain for when it's

when it's something at the really bottom

where people really need that cushion

then it's a fair enough I mean if I am

giving nul sayal let's say I mean people

need drinking water but it's not clear

to me that you spray bullet every any

and everything I mean uh free bus travel

to people of one segment of population I

mean not clear to me that that's a great

use of resources s point that we've been

hearing from many of the experts is that

look try and keep taxation low and

stable don't increase it too much you

don't really need to do something crazy

to go out and raise lots of money

because as you yourself said you don't

to be particularly fiscally adventurous

to start with so you need but it

requires a certain amount of restraint

so for example you saw Co right during

Co you will remember huge amount of

pressure on the Indian authorities uh

and me person personally in the Press

from you know Nobel laate economists and

so on saying that you must spend more go

out there do whatever you need to do on

the monetary fiscal side and we were

much more restrained and yet we kept the

system going we by using much more

supply side oriented uh sort of uh um

policies I mean we guaranteed the

payments in the system so we like

everybody else here in the UK as well

were concerned that the payments in the

system will jam up the cash flow in the

system that's really the fear of and

then once the cas cash flow jams up

everything blows up so other countries

gave out these huge amounts of stimulus

checks to keep the cash flow going we we

what we did we went to the msmes and 80%

of their payment of their uh payments

were guaranteed by us it turned out

because we guaranteed the system nobody

actually went bus so for a very little

amount of money we managed to keep the

cash flow flowing during the co period

so with a much simpler cheaper process

we kept cash flows going and then

because we had we had been restrained in

our fiscal effort when the system opened

up we had resources to pump into things

like infrastructure and that is how we

refl the economy so it is policies

matter that's the point I'm making and

restrained particularly in the face of

difficulty matters now coming to your

point do we have fiscal resources yes we

do but that doesn't mean that we go out

there and sort of squander it number one

two as surjit also mentioned we need

need to do tax reforms Direct Tax

reforms other kinds of tax reforms as

well we need to simplify our system and

as more and more people come into the

tax uh system more people pay taxes

ironically it becomes radically easier

for us to simplify it because now tax

paying personal income tax becomes the

default in society so all the exemptions

exceptions all the complicated rules

that were really created to try and

force people in don't have to be done

because this is now generally the

default and you can do radical

simplifications and and a lot of data is

there as well uh you know we've just had

the elections and the result that was

thrown up if you went went around and

you spoke to a lot of people how are the

economic policies of the government

affecting the people two clear messages

came out one the welfare schemes are

clearly having an impact and are

resonating and people like them that's

that's the good news bad news is that a

lot of people are concerned about

unemployment unemployment is an issue

and if the strength of India is going to

be the potential demographic dividend

that we could get from a very large

number of people in the working

population if you do not continue to

have enough jobs for people that becomes

potentially a negative factor also could

be have a major political price as we as

we are seeing what are you going to do

about that unemployment so unemployment

first of all um the necessary condition

for creating jobs has got to be the same

point growth so do not get uh distracted

from anything that you know interferes

with rapid growth because there is no

example in history of large numbers of

jobs being sustainably created without

growth okay so do not interfere with the

growth machine that's the first thing

secondly so in other words just having

more government jobs and you know giving

that's not going to have an impact on

the economy it's probably going to be

negative you're sucking out resources we

could have used to build better

infrastructure or more hospitals or

something like that so anyway those

resources were going to be used you know

when instead of creating government jobs

I build a bridge I'm still creating jobs

so the point is therefore don't not to

get swayed by this secondly there are

parts of the government that do need to

be uh expanded I agree with that but

they're also parts of the government

that need to be shrunk so that that's a

that's something every government should

do all the time anyway my point is

this very often this whole debate then

first of all ignores the growth part

then goes into a long conversation about

something called labor intensive uh

Industries and very quickly spirals into

usually some Lite

idea why does this happen because there

is some it's basically like saying that

India has lots of people so therefore we

should only play team

sports no we should play the entire

array Services we should also do

manufacturing because remember many of

the people who make these kinds of cases

then say no no no we should shouldn't do

manufacturing we should focus on

Services because supposedly it creates

more jobs no we have to be in the whole

range we're a large country with all

kinds of skill levels in the system we

have to grow the system as fast as we

can you could have additional focus on

some individual sectors that are both

good for growth and potentially also

know employment generating tourism is

the obvious example yes absolutely but

that should be done in its own right

what I'm trying to say is do not get

caught in these outdated l sort of ideas

that oh no this sector generates more

jobs many kinds of totally Cutting Edge

stuff creates jobs tourism whether it's

Cutting Edge or not we can have a debate

but you know there are all kinds of

sectors that create jobs and there are

all kinds of people with all kinds of

skills now in this context let me say I

have a somewhat different view I have

long argued that there are no such thing

as poor people there are only poor

places let me explain what I mean by

this let's say there are two brothers

they grew up in muradabad

okay one chap stays back in muradabad

one chap goes to Dubai after 3 four

years with the same scale everything

same background the Dubai person begins

to earn a lot more than the person who's

left behind him so why does this happen

there's nothing different about them it

has got to do with getting places to

grow again and in India we need to get

certain parts of the country to grow

again and lot is talked about North

South divide and all that actually they

all irrelevant the real divide ID in

India is east

west yeah I come from the eastern part

of the country we have not seen the kind

of growth the Western half of the

country has done whether the northern

Northwest or South West does not matter

to me I need to get Eastern up Bihar uh

jarand West Bengal in particular going

and what is needed we need to have

better infrastructure put in there we

need to have Dynamic leadership some of

those States urisa was one of the

poorest states in the country and look

look at where it's come I mean how well

it's done so good investment sensible

policies matter right one one last

question I think we have time for we we

were just hearing Dr bhala saying this

also that the obvious next major set of

reform measures that have to be ruled up

it's not that the government's not been

doing it it's been working in that

direction but that's a logical way to

get the economy functioning employment

moving up getting animal spirits in the

private sector do more and more of these

ease of doing business reforms right

removes old old laws clean up the entire

enforcement of contracts enforcement of

contracts don't have cases that Linger

on for two decades or three decades we

heard it from Chris Rogers why would a

company come to India if you feel that

if I get into a problems in a in some C

court case it's going to last for 20

years this should be the obvious next

Focus absolutely so from 1991 to now it

was about getting the Indian State out

of things it should not do now it has

got to be going forward to get the

Indian state to deliver on things it

should do therefore we've got to do

stuff on judicial reforms and that of

course the government have to Judiciary

most of it has to be done by the

Judiciary itself we need to reform the

government could take back lot of half

more 50% of the cases well actually the

number is not so large and I can debate

that with you but yes government is a

significant litigant administrative

reforms yes we need to get serious about

Municipal delivery of services yes uh

right so in you know large part of the

administration if you look the junior

most segments do the things that are

things like the the district magistrate

one of the most Junior people in the in

the bureaucracy and yet they are on the

ground the most powerful yet in the

scale of things of the of the of the

administration they are the Juniors most

people only 5 six years into the service

we've got to actually flip it the other

way the senior most people should be

actually Municipal uh uh Commissioners

uh as reasonably senior person should be

district magistrate and so on so there

is a lot of things we need to do in

rejigging the way we think of

administration our Administration system

it is oriented towards control it is not

oriented oriented towards Service

delivery okay presumably you're not

going to tell us what exactly is coming

in the 100 day plan but we hope to hear

a lot of this in the 100 day plan well

it take more than 100 days but there are

many things that should be there yes all

right sanjiv sanal thank you so much for

joining us thank you very much