The India Dialog organized by Institute for Competitiveness and US-Asia Technology Management Center, Stanford University on February 23 and 24, 2023, drew a gamut of experts from various fields to take a look at Indian economic status and share their experiences.
One eminent speaker was Dr. Arvind Virmani, member, NITI Aayog, who has worked in the Government of India in various capacities over the last 50 years.
Virmani joined NITI Aayog as a full time Member on November 16, 2022. He earlier served as Chairman of the Foundation for Economic Growth and Welfare (EGROW) and President of the Forum for Strategic Initiatives (FSI, Delhi).
He was earlier Executive Director, IMF; Chief Economic Advisor, Ministry of Finance and Principal Advisor, the Planning Commission; Director & Chief Executive of Indian Council for Research on International Economic Relations; published 37 journal articles, 24 books & book chapters, around 70 other working papers and 50 policy papers in macroeconomics, growth, taxation & tariff reform, foreign exchange, international relations and national security strategy.
Dr. Virmani has been a key figure in Macroeconomics and Policy Reform. He was a mentor (Public Policy & Economics) in FICCI member, the Technical Advisory Committee on Monetary Policy, RBI, Executive Director, International Monetary Fund, Member, Evaluation Committee, Independent Evaluation Office, Chief Economic Advisor, Department of Economic Affairs, Ministry of Finance, Principal Advisor, Planning Commission and Member, Telecom Regulatory Authority of India (TRAI).
Virmani spoke to indica about the past and the future of India’s economy.
“Twenty years ago, India was a low-income country as defined by the World Bank. Since 2000, it has become a lower middle-income country. Since then, there is a lot of development and change including income levels, standard of living, and reduction in poverty. I would say the reason is obviously we are young India, skilled India, digital India,” said Virmani.
He said that in the 1990s, the country saw major reforms under governments led by Prime Minister PV Narsimha Rao and later Dr Manmohan Singh. “I was also a part of these governments,” he said. “I have worked under five prime ministers and five finance ministers. The policy liberalization, the change in the approach to economy and the use of markets, using economic development for social good rather than just redistributing… all that has produced results. It’s not just one government, different governments focused on different things. India has changed for the better.”
“It’s a question of overcoming vested interests,” he added. “Things that I could not talk about 20, 30 years ago have become gradually accepted. It’s been a process of convincing people of overcoming vested interests like those with a monopoly in an industry do not want to give up monopoly. If you have bureaucrats who control all the decisions, they don’t want to give it up. That’s what we call vested interest.”
“The people who resist, they have the power, they are in government or influential business persons who were favored in the 60s, 70s, 80s, people have forgotten that. This is something I have dealt with for 50 years. They are the vested business interests, and they have bureaucratic interests. But the reforms proved their misapprehensions all wrong. Development is a process and it’s been happening over the last 20 years.”
On unemployment concerns in India, he said, “There is a misreading or partial understanding of the situation. In a developing country where there is a large informal sector there is something called unemployment and under employment. The unemployment rate has not gone up. The issue is of under-employment and the quality of employment. That’s a serious, long-term issue. We have identified certain things and taken some steps but still a lot remains to be done. We are doing these things systematically, it takes time.”
Is India learning lessons from China? Virmani replied, “We learn lessons from everybody. I mean, my first paper on China was in 2006 and it was titled, ‘Lessons of China for Democratic Countries’. That means there is not everything we can learn from China. Now, if you are a democracy, there are things you cannot learn. I mean, don’t apply policies off the cuff. One of them is labor. I mean, they just change the labor laws in one day, we can’t. Even after passing the law, it’s now 18 months. We have to follow the process. That’s how a democracy works.”
He said he is optimistic about India’s growth. “India is going to become the third largest economy in any case. I had made projections about this in 2004-5. I was running a think tank when I made these projections. They can now be found on government websites.”