BR Shenoy Memorial Lecture 2020 | Dr Bibek Debroy

BR Shenoy Memorial Lecture 2020 | Dr Bibek Debroy

Source: https://www.youtube.com/watch?v=LEs-HOHKGjE Duration: 3635.1s

Speaker 1 (00:00): Welcome friends to the Biya Shunoy Memorial Lecture 2020 given by Dr. Bibik Devaroy, Chairman, Economic Advisory Council to the Prime Minister. This memorial lecture is titled, The Roots of Reform, Professor Biya Shunoy and the Economic Ideas that Changed India. My name is Kumar Anand and I will be your host this evening. The lecture will be followed by a question answer session.

Speaker 2 (00:24): We will have about 15 to 20 minutes towards the end, and I hope to present to our speaker as many of your questions as possible.

Speaker 1 (00:31): Please enter your questions and queries in the chat window to the bottom of your screen. The memorial lecture is organized together by the Center for Civil Society, New Delhi,

Speaker 2 (00:40): and the Economic Research Center Trust, Mangalore. It is a great pleasure for me to thank our speaker for accepting our invitation on behalf of CCS President, Dr. Parjesh Shah, ERC Trust Chairman, Sri Giridhar Prabhu, and my fellow

Speaker 1 (00:53): board members of the ERC trust three MN pi and professors to both are shinoy the economic policy ideas of professional beashinoy will be

Speaker 2 (01:02): discussed by our speaker but those who know about the life and work of profession I would know him a deeply patriotic a jail freedom fighter who saw

Speaker 1 (01:11): Indian independence as part of a larger social uplift such as in the equal education of women profession I believe that national progress would only come from a market economy liberal democracy social mobility and equality of all under the law for him economic growth only had meaning if it involved the

Speaker 2 (01:32): betterment of RK elections common man he often referred to the Gandhian

Speaker 3 (01:36): talisman of for policy making that of seeing the face of the poorest when making policy decisions our speaker this evening is of course well-known in India and abroad dr. big de bro is presenting the prime minister’s economic advisor he

Speaker 2 (01:51): He has done early research work in economics at Cambridge University, and he has taught at Presidency College, Maya Mahmouda Gokhale Institute of Politics and Economics, the Indian Institute of Foreign Trade, and at the National Council of Applied Economic Research. Among other things, Dr. Debrouy has been a member of NITI Ayo, has chaired a committee to restructure Indian railways, and has served as director of a legal reforms commission shared by the Finance Ministry and the UNDP.

Speaker 3 (02:18): Remarkably, Dr. Debroy has also been able to move gracefully between the ephemeral and present world of editing financial newspapers and the lasting and the ancient world of translating the Mahabharata. He is also the recipient of 2015 Padma Shri Award. We are all very delighted and honored to have him with us today. I would now like to invite Dr. Bebek Debroy to give the Biashinoy Memorial Lecture 2020. Dr. Debroy, please. Thank you Kumar for that very kind introduction. Let me thank the Economic Research Trust and the Center for Civil Society for having invited me to deliver this particular B.R. Shinoy Memorial Lecture.

Speaker 1 (03:16): My association with Pat Shah and therefore with Center for Civil Society goes back more than 20 years.

Speaker 4 (03:32): And let me say that Center for Civil Society and PART have done a lot to propagate the cause of market oriented reforms.

Speaker 3 (03:50): And I have also popularized what Dr. Shinoy did and what Dr. Shinoy wrote. This particular talk, the Dr. Shinoy Memorial Lecture also has a subtitle, Economic Ideas that Changed India. Yes of course the economic India is that changed India but changed when and changed in what direction. A lot of people know about Dr. Biatchinoi now. Unfortunately, they don’t know enough about Dr. Biatchanoy and the superficial impression that floats around about Dr. Biatchanoy is something like this. Here was the second five-year plan document. Here was a second 5 year plan document which was based on a Feldman Mahalan Abish model with an emphasis on the public sector, with an emphasis on capital intensive industrialization, with an emphasis on state defined as government or understood as government, with the state occupying the commanding heights. And Dr. Srinog wrote a minute of descent. I wrote a minute of descent to this particular model of the second five-year plan and in retrospect he has been proved right. He has been proved right because the consequences of state intervention led to India losing out on several development decades. So in a thumbnail, this is the superficial impression. At a certain level that superficial impression is indeed correct. But what happened was much deeper. What happened was much deeper. What happened involved action on Dr. Sinoj’s part which was much, much more courageous than we can even pretend to understand today. So in the first little bit of my talk, I will explain what exactly happened in India before 1947, what happened in India post 1950, 1950 because that was when the constitution was

Speaker 5 (07:36): enacted and what was the climate like, what was the intellectual climate like, what was

Speaker 3 (07:44): the discourse like, what was the economic philosophy like in the early 1950s. That will be the backdrop to understand why what Dr. Shenoy said was so courageous. At a certain level, whenever I use the word state, I am not using the word state as in the sense of the 29 states, not in the sense of provinces but state as economists say, as economists use the word to stand for government.

Speaker 5 (08:27): At the heart of it all is a question about what should the state do?

Speaker 1 (08:40): What should the state do? In what form should the state do it? the state actually produce something or is the state’s role one of regulation? What

Speaker 3 (08:51): is the extent of state intervention? And at one level, as long as the word ideological is not misunderstood, this is an ideological position about what the state should do. And To me, the beginnings of that debate originate in 1931. To me, the beginnings of that debate originate in 1931.

Speaker 5 (09:27): What happened in 1931?

Speaker 3 (09:31): In 1931 there was the Karachi Resolution of the Indian National Congress. In 1931 there was the Karachi Resolution of the Indian National Congress and that Karachi Resolution talked about free and compulsory primary education which is fine I guess. It not only talked about free and compulsory primary education, it also talked about protection against foreign competition. So protection against foreign competition was already getting built in and this was

Speaker 1 (10:23): formed up in 1937. This was formed up in 1937 because the Congress working

Speaker 3 (10:35): committee meeting in Wagdha in 1937 recommended that a National Planning Committee should be set up. And that National Planning Committee was indeed It set up in the year 1938, it had several meetings, it never led to any reports. But cast your minds back. At that time, immediately before 1947, there were several people who formulated plans. In other words, it was more or less accepted that India would have to be a planned economy. There were several people who formulated plans. The only one which did not really talk about state intervention that much was a book written by Vishesh Sharia in 1934. But it wasn’t quite a plan. It was more like perspective planning, where should India be several years down the line that book by Vishesh Sharia written called Planned Economy for India. But if you look at all the other plans, whether it was the Bombay plan of 1944 and 1945, whether Whether it was the people plan of 1944, whether it was even the Gandhian plan of 1944, cutting across all of these plans, certain propositions were taken as adgeomatic. A industrialized would have to be driven by public investments.

Speaker 1 (12:31): B there would have to be extensive state intervention in the economy.

Speaker 3 (12:36): And C external trade was very fair. So these three tenets that I mentioned were accepted as adgeomatic across whoever was interested in development in India. After this, we had the industrial policy resolution of 1948. And if I read the Industrial Policy Resolution of 1948, what stands out? And remember this was the Industrial Policy Resolution of 1948, not that of 1956. In the industrial policy resolution of 1948, certain principles were clearly articulated. A. There would be a national planning commission. B. There would be state monopoly in some sectors. D, there would be possible nationalization of private enterprises. D, in cases where there was foreign capital involved, there would be majority Indian equity. No one contested these principles. They were accepted as given. And consequently in 1951, one of my pet peeves has been that economics talk about economic policies quite often they neglect the laws that were enacted to implement those policies. But I am not here to talk about my pet peeves. In 1951 we had the Industries Development and Regulation Act of 1951. And that Industries Development and Regulation Act of 1951 set out a court schedule of items where the state could control and regulate. And over a period of time, more and more items kept getting added to that first schedule. So the heavy-handed state intervention that we were going to witness later came about largely courtesy, the Industries Development and Regulation Act of 1951. What else happened? I said earlier that the Constitution was enacted in 1950. When the Constitution was enacted in 1950, in In the course of the Constituent Assembly debates, Dr. Ambedkar regarded as one of the architects of the Indian constitution and mind you the constitution provides the framework for all laws that are passed in India. In the course of the Constituent Assembly debates on 15th of November 1948, Dr. Ambedkar

Speaker 6 (16:20): said the word socialist should not be there in the constitution.

Speaker 3 (16:30): Why should the word socialist not be there in the constitution? We know it is there in the peamble now but why should it not be there in the constitution? Because Dr. Ambedkar said that socialism means a certain kind of economic ideology and since this constitution is going to last. Why should we presume today what the citizens of the

Speaker 5 (16:54): future will want the nature of the constitution and the nature of the polity to be like in

Speaker 3 (17:01): terms of state intervention that socialism is equated with. The constitution was passed. It had several elements that could be interpreted as socialism But at least in that day and age, the word socialism was not explicitly used in the Constitution. That happened later. Meanwhile, through a cabinet resolution on 15th of March 1950, the Planning Commission was established. And as I said earlier almost everyone agreed there should be a planning commission and we had a first five year plan. Today or even earlier when economists talk about the first five year plan they say ah The first five year plan had a Harrod-Dohmer model. What does the Harrod-Dohmer model say?

Speaker 5 (18:16): The Harrod-Dohmer model says here is the savings rate for the economy which for all practical purposes closed economy can be taken at the investment rate. Here is the savings rate for the economy divided by the capital output ratio and whatever is the result will be the rate of growth.

Speaker 3 (18:34): So if you want to increase the growth rate, typically you will have to increase the savings rate, oblique investment rate, alternatively you will have to reduce the capital output

Speaker (18:44): ratio.

Speaker 3 (18:45): So what is the prevailing wisdom as depicted in Indian economic history textbooks? As depicted in Indian economic history textbooks, the prevailing wisdom is here is the first

Speaker 6 (19:02): five year plan based on the Harrod-Dohman model and in this business.

Speaker 1 (19:10): If you go back and look at the history, you will find that the first five year plan did

Speaker 3 (19:16): no such thing. At that time, the Colombo plan was being set up.

Speaker 5 (19:24): As a result of the Colombo plan being set up as part of the Commonwealth Consultative

Speaker 3 (19:31): Committee India had to formulate a 6-year program. And essentially the first 5-year plan was a repetition of what India did for that 6-year

Speaker 5 (19:46): program for the Commonwealth Consultative Committee. Was there mention of any model? No, there was no mention of any model. They obviously love models but the era of models into planning came only towards the

Speaker 3 (19:59): end of the 60s, not before that. So the planning commission in the first five year plan had no particular model.

Speaker 5 (20:08): It was only later on when Brahmanand wrote a paper in 1955, when K. Andrade wrote a paper

Speaker 4 (20:15): in 1961 trying to explain what the first five year plan of 51 to 56 was doing that they

Speaker 3 (20:22): thought of a model. Let me now seemingly go up on a tangent. And there are several things to note. The first thing to note is in 1955 Milton Friedman visited India.

Speaker 4 (20:48): In 1955 Milton Friedman visited India.

Speaker 3 (20:54): He was an advisor to the debt then finance minister C.D. Deshmukh. 55 mind you. All of these trends that I am now about to describe are trends that happened when the

Speaker 6 (21:10): first five year plan was already underway and preparations were being made for the second five year plan.

Speaker 3 (21:18): In the midst of this in 55 and the second five year plan would be for the period 56 to 61. In 1955 Milton Friedman visited India. And he wrote a devastating critique which surfaced much later and this devastating critique pointed out the distortions in resource allocation that were being caused and the distortions

Speaker 4 (21:50): in the capital-labor ratio that were being caused by the policies that the government of India was following.

Speaker 5 (22:02): So this was the first thing to note that in 1955, Milton Friedman wrote this devastating

Speaker 3 (22:09): critique. Meanwhile, before Mahalanubish joined the planning commission, mind you, before Mahalanubish joined the planning commission, he joined the planning commission in 1955, January 1955. Before he joined the planning commission in Sankhya he enunciated a two sector model in the year 1953. Often referred to as the Feldman Mahalanabesh model and Feldman formulated a similar kind of model in Russian in 1928.

Speaker 4 (22:58): I do not think it has yet been proved whether Mahalan Abish knew of the existence of the Feldman model at that time or not because the Feldman model became available in English

Speaker 3 (23:10): much later but that is neither here nor there. So Mahalan Abish produced this two sector model in 53, followed up by a four sector model in 55, both published in Sankhya. sophisticated model and to repeat economics textbooks will routinely say this was the

Speaker 1 (23:34): model adopted in the second five year plan perhaps.

Speaker 3 (23:38): But the second five year plan model had no mention of a plan of a model at all. There was no mention of a plan of a model in any of the documents associated with the The third strand is Jahalal Meheru’s remarks at the third meeting of the National Developmental Council, the NDC in November 54. So here is the NTC meeting in 1954. The then Prime Minister Jaya Al Nehru is making his remark and he says India should have a socialist pattern of society. The second five-year plan to which Dr. Shinoy would react is often projected as discontinuity because of the model. I don’t think it was discontinuity because of the model. The first five-year plan did not mention the expression socialism or socialist pattern of society anywhere. The second five year plan document mentioned socialism. The first five year plan document only talked about the directive principles of state policy. It did not mention socialism or the socialist pattern of society. The second five year plan started with the socialist pattern of society. That was the discontinuity. A question can rightly be asked about the relevance of the Planning Commission.

Speaker 5 (25:46): The historical Planning Commission only became relevant when it was in sync with what the political masters wanted.

Speaker 3 (25:57): the second five year plan was completely in sync with what the political leadership wanted, namely the socialist pattern of society. Mind you, no one objected. No one objected. I mentioned the NDC meeting. The minutes of the NDC meeting has been published. Did anyone object to the socialist plan of society? The answer is no. In 1955, John Kenneth Galbraith turned up in India. He turned up in India as an advisor to ISI, the Indian Statistical Institute. He would return as an ambassador to India in 1961. And when he was being examined as a possible ambassador to India, he coined the expression Post Office Socialism for what was happening in India. But at that time, after his ISI visit, in July 1958, he wrote an article in Foreign Affairs. Without using the expression Post Office Socialism, as I explained that expression Post Office Socialism came later, But he wrote an article in Foreign Affairs, an essay in Foreign Affairs, criticising what India was doing. I am not aware of any other instance anywhere in the world where Milton Friedman and John Kenneth Golbreath

Speaker 4 (28:00): of differing ideological persuasions agreed that what India was doing was wrong.

Speaker 3 (28:10): Milton Friedman and John Kenneth Galbraith both agreed what was happening was wrong. There is a book I recommend that everyone should read. Technically it is banned in India. It is a very patronizing book written by a foreign journalist. It is very, very patronizing. It’s a very patronizing book known as Heart of India written by a foreign journalist named Alexander Campbell in 1958. It’s still banned in India, which means imports are banned. But in this day and age, imports and printing is banned. But in this day and age, you will find that art of darkness floating around on the net. It’s a very condescending book. It’s a very patronizing book. But it’s a hilarious book about what was being planned in the then planning commission. Particularly the sections which report a conversation that Alexander Campbell had with a senior official of the planning commission known as Vaidya Charma. They’re hilarious. By the way, at that time the statistical system was not what it is today. It was just beginning to be set up. It was imperfect. However, we come back to the title, Economic Ideas That Changed India. What was the economic idea that changed India? that economic idea that changed India then was socialism and heavy handed state intervention. That was the economic idea that changed India. An economic idea that continued in terms of legal changes and policy changes towards the and certainly the first half of the 1970s, leading to India losing valuable development decades when other countries were following policies that were different. And mind you, to reiterate what I said, there was consensus then that this was desired. There was consensus that this needed to be done. First five-year plan. Ostensibly, without there being any model, very, very successful. There’s a growth rate of about 3.6%, real growth of about 3.6%, not that bad. On an average the savings rate was 6% and remember these figures on an average the savings rate was 6%. The planning commission felt, aha, if the savings rate is 6% towards the beginning of the 60s we should be able to push up that savings rate to 11%. And by the end of the 70s we should be able to push up that savings rate to 20%. The capital output ratio in the course of the first 5 year plan was 1.8, let’s say 2. Which means that if I can push up the savings rate to 11% I have a 5.5% real rate of growth. I have a double. I can push it up to 20% and I have a 10% real rate of growth. Mind you, for the external world, at that time, India was regarded as a model economy. Here was an economy that was setting about the task of modernization, industrialization,

Speaker 5 (32:49): early 60s, late 50s, with the exception of people like Milton Friedman, John Kenneth

Speaker 3 (32:57): Galbraith, outsiders, internally there was absolute consensus. It is against the background of this that there was a memorandum prepared by a panel of economists in April 1955 to which Dr. Chenoy submitted the minute of dissent. The minute of dissent that everyone knows about. By the way, he expanded on that minute of descent in a book that he wrote in 1958 called Problems of Indian Economic Development. And essentially in this minute of descent, remember when was the minute of descent? The minute of descent was in 1955. In that minute of descent, Dr. Shinoy made three points, out of which in hindsight the third one was the most important. A. The size of the plan was too optimistic. B. It was impossible for the saving rate to become so high. It was impossible for the savings rate to cross anything more than 8% not possible. In that sense the size of the plan was too large. To look B, you should not be resorting to deficit financing. And C, given the context, C is the most important but given the context, C was not spelled out that much.

Speaker 5 (34:51): He called it policy and institutional measures which meant opposition to nationalization,

Speaker 3 (35:02): which meant opposition to the continuation of controls and which also meant particularly

Speaker 6 (35:08): important in the given context the price support given to agriculture.

Speaker 3 (35:16): So today when we talk about the influence left by Dr. Chenoy and we talk about an economic idea that should have changed India then, it is less about the size of the plan, it is less about deficit financing and it is more about the policy and institutional measures. In hindsight, many of the things Dr. Chenoy said came true. The worst acceptance of death-free financing were witnessed in the second half of the 70s. Although it is statistically difficult to control and the wars and droughts that India the old phase, by the time of the third five year plan, the plan had collapsed. So much so that from 66 to 69 we had planned holidays. Of course there were people like Bhagavati and Desai who wrote a very influential book.

Speaker 1 (36:32): meaning it was read, it did not impact policy much in 1970 called planning for industrialization.

Speaker 3 (36:46): Government policies change when there are internal arguments, internal committees which

Speaker 4 (36:56): drive that impetus for change.

Speaker 3 (37:00): We might tend to think that the reliance on markets depending on your perspective began in 1991, depending on your perspective began earlier. I think the importance of the points that Dr. Chenoy made in terms of policy and institutional

Speaker 4 (37:18): measures can be dated to a government committee appointed in 1978, the Dagli Committee on

Speaker 3 (37:32): Controls and Subsidies. Whatever documents surfaced after 1991 were really reaffirming the arguments of the Dagli committee using slightly different jargon.

Speaker 4 (37:48): If I am not wrong, 1978 was the year when Dr. Chenoy died. So in some perverse kind of sense, the year he died, destiny ensured that his ideas in

Speaker 3 (38:06): a way first came to be accepted.

Speaker 4 (38:14): How important was Dr. Chenoy?

Speaker 1 (38:18): Dr. Chenoy was important in terms of his ideas, having been original, having been against

Speaker 3 (38:29): the grain of what was regarded as popular wisdom then. I hope I am not misunderstood when I say that if we try to evaluate Dr. Chenoy in terms Because of what impact his arguments, his propositions had while he was alive, I don’t think he had much of an impact. The essay that Peter Bauer wrote on Dr. Chenoy says that. They say that Mahesh Bhatt wrote on Dr. Chenoy in that book edited by Fatshah for Center for Civil Society called Profiles in Courage. Says Dr. Chenoy was extremely influential in terms of the influence he had on students, in terms of the papers he wrote amongst other places in Quarterly Journal of Economics. And I remind you, unlike academics, academics in the West have somewhat been different certainly in the US, but unlike academics, Dr. Shinoy at that time wrote a lot in public newspapers,

Speaker 6 (39:56): public articles in newspapers. Indian academics do not typically do that, whether it is Sarajya, Hindu, Times of India,

Speaker 3 (40:03): Far Eastern Economic Review. If you look at all of these writings and this comes across very clearly in the compilation that R. K. Amin and Park Shah edited for Centre of Civil Society called Economic Prophecies. If you look at that particularly at the section where those articles are grouped under policy and institutions, you will find that he progressively amplified his initial apprehension about state intervention even more and more.

Speaker 5 (40:46): His critique of the state intervention became sharper and sharper as the state intervention intensified over a period of time.

Speaker 3 (40:55): So his subsequent critique presented a much more coherent critique than the initial minute of descent. That’s all perfectly natural. I have come to the end of what I wanted to say.

Speaker 4 (41:12): I think it is now time for someone to write a biography of Dr. Chenoy,

Speaker 3 (41:23): not merely a compilation of articles because what Dr. Chenoy stood for

Speaker 4 (41:32): is part of our history, it’s part of our legacy, it should be preserved for posterity not only in terms of his writings but in terms of who he was, what he stood for And one of the principles in everything that he did was he stood for dharma the way he interpreted it and saw it.

Speaker 3 (41:56): Thank you once again for having invited me.

Speaker 2 (41:59): Thank you very much, Dr. DeRoy, for that wonderful kind of glimpse into the history of Indian planning and how certain policies came to be adopted, fortunately and unfortunately. Unfortunately, in the beginning, not the right ones being adopted and later probably we are correcting slowly and gradually correcting on those errors.

Speaker 3 (42:31): We have a few questions. The first question comes from, I’m not sure about the name here.

Speaker 1 (42:38): The question is, looking at the ongoing farmer protests, we can see how difficult it is to

Speaker 2 (42:43): sell free market ideas to Indians. How can our policies practically incorporate Shinoids ideas while ensuring that they don’t lead to massive protests?

Speaker 4 (42:56): I think I will keep my response simple because I am delivering a Shenoy Memorial Lecture, not stating what the chairman of the Economic Advisory Council feels.

Speaker 3 (43:11): So my response would be, please read Dr. Shenoy’s arguments, including on intervention for agriculture and propagate those. That’s part of the message that I am trying to convey. It’s not just the minute of dissent. It’s all the other stuff that he wrote, including on state intervention in agriculture. So what everyone listening in should be doing is reading what Dr. Shanae had to say and disseminating that argument.

Speaker 2 (43:49): Okay. Just for our listeners, let me, I mean, for those who do not know, the two books have been edited by Patshah and R.K. Amin. Are titled Economic Prophecies and Theoretical Vision. And the PDF copies of both of them are available on CSA’s website. They are a collection of fantastic cases. And I think the typical, the title of the book was particularly per se and vence. It’s called Economic Prophecies. So any chapter you pick, almost anything Professor Shinoy has said or advocated or criticized, I mean, more often than not, they have come true.

Speaker 3 (44:26): Another question comes from one of our listeners here, Akshay Akkad. He says, sir, why are we going backward on industrialization? If I understand the question correctly, that’s what it is. I don’t exactly understand what that question means. The question should actually be about Dr. Shanoi and the talk. But let me interpret that question. The share of industry in GDP. People usually use the word industry when they actually mean manufacturing. There are non-manufacturing components to industry also. The share of manufacturing in GDP has been lower than what it should be. It’s been flat for a large number of years. For people who are fond of blaming the present government, let me point out that the share

Speaker 4 (45:43): of manufacturing in GDP has been flat for at least 40 years now.

Speaker 3 (45:52): Sure it should be higher. Sure it should be higher as has been the case in many other countries, East Asia, China. Lest people again, less people accuse me of trying to be the chairman of the economic advisory council which I said I wasn’t going to do at this particular forum. In the year 2004, the then government set up a national manufacturing competitiveness Council and the NMCC in the year 2005 brought out a report which if I recall correctly was

Speaker 4 (46:40): called a National Manufacturing Plan something like that. It will be there on the website. In that you will have a whole list of reasons as to why manufacturing in India is not doing

Speaker 3 (46:56): that well and what should be done to increase the absolute rate of growth as well as perhaps its share in GDP although the share in GDP you must remember also is a function of what’s happening to agriculture and is a function of what’s happening to services. The next question comes from Vatsal Mehrotra and he asks how can we ensure that the policy

Speaker 1 (47:22): corrections being carried out don’t give rise to another form of extreme situation.

Speaker 3 (47:28): He is meaning crony capitalism.

Speaker 4 (47:34): I think people are excessively fond of the expression crony capitalism without recognizing that there is crony socialism also. And since we are talking about a period of the second five-year plan, soon after the

Speaker 3 (47:57): second five-year plan, in the 1960s there were committees, the Dutt Committee, the Hazari

Speaker 6 (48:07): Committee and the findings of the Dutt Committee and the Hazari Committee not only established the existence of crony capitalism, but also existed,

Speaker 3 (48:19): they exist also documented the existence of crony socialism. Because essentially, the policies of socialism led to shortages. If there were shortages, things would have to be licensed. If things were have, if things had to be licensed, then there would be rent seeking for these.

Speaker 4 (48:41): In other words, crony socialism leads to crony capitalism.

Speaker 3 (48:50): Thank you.

Speaker 2 (48:52): The next question is from the ERC trust chairman, Gether Prabhu. He asks, can you, Professor Chinoy proposed a gold bank of India as an answer to gold smuggling now.

Speaker 3 (49:04): Even now gold is being smuggled. A lot of things have changed since then. The trouble with gold in India is that yes, figures are not very reliable, but such figures exist on stock of gold suggest that most of gold is in the form of gold jewelry.

Speaker 4 (49:40): It is not in the form of gold biscuits and coins which means that there is a serious

Speaker 3 (49:49): valuation issue and the gold that I possess in the form of jewelry may not be worth as much as I think it is. So far as the smuggling part of it is concerned as with several other

Speaker 4 (50:09): things I think that the best antidote to smuggling is to reduce the import duties. The smuggling also happens because of some other reasons but the main reason in my view it happens because of misalignments and exchange rates. Sometimes it can be linked to drug trafficking, human trafficking, but substantively it happens

Speaker 3 (50:33): because of high import duties. So A, I think import duties should be reduced and B, there is an issue of monetization of gold. The monetization of gold is not the same as setting up a gold bank or not in the sense we understand the word gold bank because there is an issue of testing valuation essaying and effectively I would use the expression not gold bank but multiple gold banks where I can come and transact in gold.

Speaker 6 (51:18): I can go value my gold jewelry, decide this is the amount of gold which is lying unutilized

Speaker 4 (51:26): today. It’s capital that has no productive value today. I can release it into the system so that tomorrow the jeweler who wants that gold can go to that bank, not the gold bank but several such banks can go to the bank and purchase the

Speaker 3 (51:43): requisite quantity of gold now to do this a whole lot of formalization has to happen and a prerequisite to that is the essay the testing thank you the next question is from ashito spottet and he asked how dr. shinoy respond to the recent rbi proposal of allowing large corporate houses to open banks How Dr. Shinoy respond? I have absolutely no idea because offhand I can’t think of anything that Dr. Shinoy has written then at that time on corporate houses setting up banks. So I don’t know. Okay. Okay, the question is if Dr. Chinoy, next question is from Mr. Rajesh Jai. He says, if Dr. Chinoy were alive today, which policies would he be happy with and which would disappoint him? I think these questions are masquerading a little bit. They are ostensibly directed towards Dr. Chinoy, but are actually directed towards me.

Speaker 4 (53:03): So Dr. Chinoy, what he wrote, we know what he wrote. If you read what Dr. Shinoy wrote, you will find your own answers as to what Dr. Shinoy

Speaker 3 (53:14): might have decided.

Speaker 7 (53:18): Right.

Speaker 3 (53:19): Okay. Next question is from Mr. Paul Thomas.

Speaker 2 (53:24): He says, do you think monopolies like Reliance or any firm which receives special support from the government is a threat to free market competition? But then I think the next part is more clearer and is more generic.

Speaker 3 (53:34): Where he says, are we seeing a rise of monopolies in Indian market, at least in some sectors? The world is one of not monopolies, but perfect competition does not exist anywhere in the world. everywhere the perfect competition defined as what economists preach as the model of perfect competition free entry free exit infinite number of buyers infinite number of sellers

Speaker 4 (54:15): No transaction costs, everyone is a price taker.

Speaker 3 (54:22): This is just a convenient general equilibrium model for establishing the two theorems of welfare economics that does not exist anywhere in the world. Therefore, one needs regulation of some form to ensure that barriers are not created to entry through unfair business practices, through restrictive business practices and perhaps even with a question mark about the structure of the market because the question is not to ask whether X company has Y percent share in that segment.

Speaker 6 (55:13): That is not the question to ask.

Speaker 5 (55:17): The question to ask is the forces of competition would have whittled down that Y percent share.

Speaker 3 (55:25): And why percent share only exists either because there are unfair trade practices or restrictive

Speaker 5 (55:31): business practices or the restrictive barriers because of intellectual property rights, high fixed cost of entry, various other things.

Speaker 3 (55:41): So per se the share, I think, is a very misleading indicator.

Speaker 2 (55:48): Next question from one hour, I don’t have the name is what does the future of planning look like in India and what would you be the right way to go?

Speaker 3 (56:01): I think this pertains to our to your talk today and what Mr. Shunai wrote all through his life.

Speaker 6 (56:08): What is the what does the word planning mean?

Speaker 3 (56:12): The word planning means multiple things to multiple people.

Speaker 4 (56:21): Interpreted as a five-year plan which try to allocate resources, that idea is dead.

Speaker 3 (56:34): Increasingly in a system where decisions are made on the basis of private choices, not

Speaker 4 (56:43): public ones.

Speaker 3 (56:45): But there is a certain notion in which the word planning existed in the former planning commission in terms of the perspective plan division.

Speaker 6 (56:55): Remember I mentioned Dr. Visheshwaraya’s book earlier. That kind of perspective planning continues to be necessary because after all to take

Speaker 3 (57:06): one particular example there are the sustainable development goals with targets and indicators. So there needs to be a plan in that sense of perspective planning of this is where I

Speaker 4 (57:24): I want India to be 20 years from now, 30 years from now, 10 years from now. This is not the same as equating it to the old five year plans.

Speaker 3 (57:35): So I think the answer depends entirely on what we mean by plan. And I think Dr. Shinoy, I don’t think he wrote about this, but I think Dr. Shinoy would have been perfectly happy with Dr. Visheshwarai’s book, not with the other plans. Yeah. Okay. So this is the last question we’ll take because we also have a very hard stop

Speaker 2 (57:59): at 630. Vamsi asks, is there any scope for India to move towards a future with less government intervention with India’s majority population looking at the government as a major provider

Speaker 3 (58:10): and what we as the future of India can do to move in that direction? Let me answer this question a little bit differently. I have said all kinds of things against socialism. In a country like ours, with an indirect democracy, our voices are reflected in terms of what political parties do. After the amendment to the preamble to the constitution in the mid 1970s, the representation

Speaker 4 (58:52): of the People’s Act of 51-52 was amended so that every political party in India has to be registered as a socialist party. Let the import of that sink in. Every political party in India has to be registered as a socialist political party.

Speaker 3 (59:15): Shouldn’t we, before asking questions, ask ourselves, are we comfortable with that?

Speaker 4 (59:23): If you are not, are we raising our voices?

Speaker 3 (59:27): If you aren’t raising our voices, we should be prepared to accept that all political parties in India will be socialist. And therefore, all policies in India will be socialist. So the buck actually stops with us as citizens. Because it’s not just a cliche that citizens get the governments that they deserve. But in a sense, the governments reflect indirectly in a democracy like ours, the will of the people.

Speaker 2 (01:00:01): Okay. Thank you very much, Dr. Debroy. So once again, to close it up, on behalf of CISP President Parcha and ERC Trust Chairman Sri Grinder Prabhu and my fellow board members, of ERC Trust, Mr. Amant Pai and Professor Shubhod Arshanoy. Thank you very much, Dr. Bebek Tebroi for spending time and to deliver the 2020 BR Shanoi Memorial Lecture.

Speaker 3 (01:00:30): With this, we will close this up. Thank you very much. Thank you.