‘We don’t need to be self-sufficient’

Ex-RBI governor Raghuram Rajan co-authours— Breaking The Mould— that is written for non-academcians and provides insight into how India can move forward. Pic/Rane Ashish; (right) Economist Rohit Lamba explained that the rankings of ease of doing business are deceptive and do not give the real economic picture

When the ex-RBI governor and economist's six-feet-and-one-inch frame bends slightly while entering the room, you brace yourself for something at least bordering on intimidating…but Raghuram Rajan's soft hand-shake and genteel smile disarm you.

The man known to speak his mind on economic policies he doesn't agree with, like demonetisation and increasing manufacturing hubs, has been busy since his departure from the RBI in 2016, guiding students at the University of Chicago's Booth School of Business. He has also written a book with his friend and colleague, Rohit Lamba an economist at Pennsylvania University, titled Breaking The Mould.

Rajan is a bit under the weather but he soldiers on. What's his panacea, we ask. "Cooking," he replies, adding with a shy chuckle, "but my wife complains when I declare my cooking skills superlative. I am good at south Indian dishes. We don't have a cook, and I make my own since I have a little different dietary requirement than my wife…" "He's vegetarian," chimes in Lamba helpfully, who worked with Rajan at the office of the Chief Economic Advisor during the former's stint in the RBI.

Rajan and Lamba are both squash enthusiasts, and often play together whenever the former comes to Chicago for his lectures ,and carves out time to visit him in Pennsylvania"I go for a jog, exercise," adds Rajan. But how does he find the time? "You have to make the time!" And just like that, a flash of that signature Rajan aggression and candour that was witnessed during his press conferences and public events during his tenure as the governor jumps out of the brown leather couch on the sixth floor of the LaLiT Hotel in Bandra.

This, between India and its economic future, and why the book has been written keeping the layman in mind.

Edited excerpts from the interview.

What can we do in order to improve India's manufacturing abilities and make us self-sufficient?
Rajan: We don't need to be self-sufficient in everything. The trick is to be really good at a few things and export them so that you can pay for other things. The mistake is saying "We are importing such and such thing; let's stop that and start manufacturing within the country". For example: The decision to license imported laptops and computers, which has been put on pause. We should focus on the fact that we make software for many of these things, and must enhance this capability instead of licensing things that don't need to be.

How conscious was the decision to write the book in a way that everyone understands it?
Rajan: Very consciously, because we hope to put out the message [that] through this book that anyone can be a part of the world India's economic growth and what India should do to make that happen. The foundation is investing in building our human capital which will create a fundamental value; and corporations, domestic or international, will come looking for talent and to manning their global capability centres. This is already happening organically… a minister in Tamil Nadu told me that 10,000 people are hired per month from his state. If done with intention, you can imagine the effects.

India had been one of the countries whose world rankings for the ease of doing business was consistently climbing. What do you think about rankings on parameters such as these?
Lamba: While it is important, image management and changing things here and there is not going to create an environment that actually helps the ease of doing business. In the book, we mention that when China was developing at breakneck speed from the late 70's itself, but its Ease of business ranking always hovered in the 90s. China had what we call competitive cronyism, where mayors of cities were bending rules to make their city more business friendly. To lure, say General Motors to open shop in Mumbai and not Delhi. While we don't advocate the same methods, what we mean is Ease of Business is related to government policy and infrastructure that enable economic growth, like stable power supply, skilled workers, roads, tax policies, which reflect in the economic growth of a city.

What do you think about the brain-drain that has intensified in recent years?
Rajan: It's an issue, but as someone said, another way to think about it is as an investment. That's the diaspora we have that other countries don't, and we are not making use of that. These people go and become extremely skilled; now it is your job to attract them back. Today, we have top quality engineers and scientists in the best universities and firms in the world... Sundar Pichai and so many more who can be attracted back. This can help give a big push to the industries
back home.

You were one of the few Indians named in Time Magazine 100 influencers…
Rajan: I don't even know how this is decided… We want to influence thinking, and beyond that, we want to influence action. With this book, we are saying what we strongly believe: That we are getting too complacent with the accolades such as [being called] fastest [growing] economy. All that is fine, but there is anxiety amongst people that is not captured in public policies.

If you purely look at the numbers, we fall short of where we want to go. If we grow at six per cent GDP every year for the next 24 years, we only hit the 10,000 dollars mark. That's not rich; that is where China is today. So, let's think about what it takes to get rich. The Prime Minister says 2047 will be Amrit Kaal… For which country? Not at six per cent GDP.