Raghuram Rajan On Propelling India’s Economy Forward

Brut India

The former governor of RBI talks about the economic impact of the pandemic and trends like cryptocurrencies that India should focus on.  Thanks to Indiapodcasts for the footage!

Transcript

00:00The extent of the lockdown in India was very severe.

00:11And as a result, activity fell to lows that haven't been seen historically in India, but

00:17also elsewhere in the world, which means that once you let go, there will be a sharp recovery

00:26for some time.

00:27I mean, I've seen numbers, for example, retail car sales went down to zero.

00:32Well, obviously, once you open up, you're going to get car sales picking up.

00:37The question is, how far up does it go?

00:40And that depends on two or three things.

00:43One, of course, it depends on the pace of opening up.

00:45Are you opening up all parts of the country quickly?

00:48Are you opening up every business?

00:50Because if people don't have jobs, people aren't working, people aren't getting salaries,

00:55they don't have the ability to consume.

00:57So opening up is one important factor.

01:02Second is whether the factories that open up can produce because their supply chains

01:08may be in places that aren't exporting to them, they may be in parts of the country

01:12that haven't opened up.

01:14So you need as much as the demand side, you need the supply side to come back up also.

01:19And the third factor is consumer behaviour.

01:22Are people sort of so shell-shocked by this, that they change their behaviour and don't

01:28want to spend because they fear that it may come back, it may come back in a bigger way,

01:33or something else may happen?

01:35We should not be fooled by the pent-up demand that we see in the short run.

01:41Yes, agricultural demand is there.

01:42Yes, there's pent-up demand.

01:44Some factories are very happy in the short run.

01:47The question is, once that pent-up demand goes, is there going to be something behind it?

01:53And that's the big worry.

01:59Certainly our young population gives us the scope to do a lot of things quite differently.

02:05And the pandemic has highlighted different ways of working.

02:08Some of India's capabilities can be augmented through distance learning done more effectively.

02:13The university I'm associated with, Kriya University, has gone online over the last

02:18quarter, and next year will largely be online till we get the virus sort of fixed.

02:25So given that, I mean, that opens up a huge set of opportunities, right?

02:30Why can't we teach not just in India, but elsewhere in the world?

02:33Let's first start teaching in India effectively.

02:37Can we teach a lot of kids who are left out of the sort of elite system with good material

02:45and with good teachers?

02:46But also, can we expand that outside?

02:49Telemedicine, can we start offering medical services across the globe?

02:53I mean, a lot of people can't actually get to see a doctor, but a lot of consultation

02:58now has moved online, initial consultation, where some machine takes BP and takes, you

03:05know, the stethoscope, but the doctor gets the reading and then asks you your various

03:09symptoms and diagnoses you.

03:11So can we do more of that?

03:12Now, in all these, you know, we have certainly strong resources, but our country also needs

03:18a lot more of it.

03:19We need a lot more doctors to attend to Indian problems.

03:22So can we do telemedicine in India?

03:24Can doctors in Mumbai treat today patients in Bihar, which is having an outbreak of the

03:31virus?

03:32So can we learn from this?

03:35If we can create a market for our services globally, we can leapfrog the manufacturing

03:40stage, which we haven't really picked up so much on.

03:43We still do need manufacturing to create the jobs for many people.

03:47But can we add high quality services across the world?

03:54Contained experimentation has always been my view, which is why when cryptos came out

04:00initially, and there was more of a wave in favor of them, the RBI in my time basically

04:08said be careful, but didn't ban the cryptos at that point.

04:12And I think that, you know, going forward, what we see today is the Chinese Central Bank

04:17is going to come out with this Chinese digital currency.

04:22And if other countries are coming up, India will have to explore this going forward.

04:27The possibility of a rupee digital currency.

04:31Now there are lots of problems with a digital currency also that they're not, I mean, including

04:36the technology, the possibility of hacking the, you know, the question of information.

04:44The central bank gets all the data on what transactions you make.

04:48On the one hand, that's good for the tax authorities.

04:50On the other hand, it's bad for, you know, privacy.

04:53So what kinds of structures over and above the technology do we put in place?

05:00And should it be the central bank which issues the digital currency, or should you have a

05:05variety of private digital currencies, or can you have both, a hybrid model?

05:10Certainly, I would say this is a good time for us to start thinking about how we move

05:17into this area.

05:18What is interesting is, of course, the reduction in transaction costs, but also the ability

05:24to use data effectively.

05:25I mean, if you can use data for inclusion, for enhancing credit growth to sectors of

05:33the economy that are excluded right now, because you can monitor their transactions better,

05:38that's a good use of the data.

05:40And so there are possibilities created by cryptocurrencies, including central bank digital

05:45currencies.

05:46Not all of them should have the same structure as Bitcoin.

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