1 00:00:10,600 --> 00:00:13,680 Speaker 1: Hello, and welcome to another episode of The Odd Lots podcast. 2 00:00:13,760 --> 00:00:18,279 Speaker 1: Time show wasn't And I'm Tracy Allaway. Tracy, Remember, I 3 00:00:18,320 --> 00:00:22,320 Speaker 1: think it was just last week's episode, and I was saying, 4 00:00:22,440 --> 00:00:26,560 Speaker 1: for however much we talk about it, I really feel 5 00:00:26,600 --> 00:00:28,639 Speaker 1: like I have no understanding of what's going on in 6 00:00:28,680 --> 00:00:33,120 Speaker 1: the Chinese economy. Um, yes, it was just last week's episode. 7 00:00:33,159 --> 00:00:36,280 Speaker 1: And I think you're not alone in that sentiment. I 8 00:00:36,320 --> 00:00:39,320 Speaker 1: think a lot of people who are actually actively involved 9 00:00:39,360 --> 00:00:42,000 Speaker 1: in that market are probably just as confused as you are. 10 00:00:42,440 --> 00:00:44,519 Speaker 1: And I remained confused, although I did learn a bit 11 00:00:44,560 --> 00:00:49,480 Speaker 1: after last week's episode. Well, you know, there's another gigantic economy, 12 00:00:49,600 --> 00:00:53,800 Speaker 1: and after thinking about it this morning, it's also really huge, 13 00:00:54,160 --> 00:00:59,840 Speaker 1: and I probably even know less about this economy than China's. Wait, 14 00:01:00,160 --> 00:01:04,120 Speaker 1: uh an economy almost as big. You said, Yeah, well 15 00:01:04,120 --> 00:01:07,720 Speaker 1: it's not China, and it's obviously not the US. What's 16 00:01:07,760 --> 00:01:13,200 Speaker 1: another Really, it has to be India. Yeah, so right, 17 00:01:13,200 --> 00:01:16,240 Speaker 1: here's another country of the billion people, huge emerging market. 18 00:01:16,720 --> 00:01:19,640 Speaker 1: And when I think about it, I realized, wow, I 19 00:01:19,680 --> 00:01:22,280 Speaker 1: even know less about how the Indian economy functions. In 20 00:01:22,360 --> 00:01:25,280 Speaker 1: the state of the Indian economy right now, uh than 21 00:01:25,920 --> 00:01:30,360 Speaker 1: China's yeah, and obviously India is, Um. Well, it's a 22 00:01:30,360 --> 00:01:34,000 Speaker 1: big economy. It's also a fast growing economy relative to 23 00:01:34,200 --> 00:01:35,760 Speaker 1: a lot of others out there in the world. But 24 00:01:35,840 --> 00:01:39,360 Speaker 1: it's also kind of unique in many ways. And whenever 25 00:01:39,400 --> 00:01:41,200 Speaker 1: I think about India, one of the things that always 26 00:01:41,200 --> 00:01:44,800 Speaker 1: springs to mind is the uniqueness of its market, Like 27 00:01:44,840 --> 00:01:48,360 Speaker 1: it's still a very closed off market in many many ways. 28 00:01:48,720 --> 00:01:52,720 Speaker 1: Do you mean do you mean financial markets specifically financial markets? Yes, 29 00:01:52,760 --> 00:01:54,960 Speaker 1: I should be clear, right, So I think not a 30 00:01:55,000 --> 00:01:56,760 Speaker 1: lot of people talk about it, and not a lot 31 00:01:56,760 --> 00:01:59,280 Speaker 1: of people discuss it. Certainly it doesn't get as much 32 00:01:59,280 --> 00:02:02,640 Speaker 1: attention in China, and perhaps for good reason, but I 33 00:02:02,680 --> 00:02:05,400 Speaker 1: think it's an important time to be talking about it more. 34 00:02:05,440 --> 00:02:09,280 Speaker 1: As you mentioned, uh, it's growing rapidly. There's also an 35 00:02:09,360 --> 00:02:13,640 Speaker 1: election coming up this year, so I think it's uh, 36 00:02:13,800 --> 00:02:17,760 Speaker 1: it's time that we had a an India episode. I'm excited. 37 00:02:17,800 --> 00:02:22,240 Speaker 1: I'm actually really really interested in the upcoming India elections. Um, 38 00:02:22,280 --> 00:02:25,200 Speaker 1: they haven't the dates haven't actually been announced yet, but 39 00:02:25,200 --> 00:02:29,280 Speaker 1: they could be announced basically any day after we published 40 00:02:29,320 --> 00:02:33,480 Speaker 1: this episode, because we are recording the day before. India 41 00:02:33,880 --> 00:02:37,880 Speaker 1: is also due to release its latest government budget and 42 00:02:37,919 --> 00:02:42,839 Speaker 1: this is like the big set piece from the current administration, 43 00:02:43,000 --> 00:02:46,959 Speaker 1: the Modi government, um the Nationalist government, and it's gonna 44 00:02:46,960 --> 00:02:48,760 Speaker 1: be really interesting to see what they do and whether 45 00:02:48,800 --> 00:02:50,760 Speaker 1: they pull out all the stops to try to win 46 00:02:50,840 --> 00:02:54,480 Speaker 1: support ahead of the election. So in light of all 47 00:02:54,520 --> 00:02:57,200 Speaker 1: of this news that's about to happen, I think we 48 00:02:57,200 --> 00:03:00,480 Speaker 1: should get started today. We have two guests, two very 49 00:03:00,520 --> 00:03:03,679 Speaker 1: smart commenters on all things macro and they know a 50 00:03:03,680 --> 00:03:07,320 Speaker 1: lot about India, my own sex Saria of Macro Risk 51 00:03:07,440 --> 00:03:11,880 Speaker 1: Advisors and Serenavas tra Vedanta of the Jerome Levy Forecasting Center, 52 00:03:12,280 --> 00:03:15,320 Speaker 1: both of them joining us here in studio to talk 53 00:03:15,320 --> 00:03:19,079 Speaker 1: about the election and the economy and the markets. And 54 00:03:19,760 --> 00:03:22,200 Speaker 1: thank you both for coming in. Thank you, thank you 55 00:03:22,240 --> 00:03:27,640 Speaker 1: crazy thanks guys. So, uh, let's get started first. Let's 56 00:03:27,639 --> 00:03:30,760 Speaker 1: talk about the election it's coming up with. As Tracy mentioned, 57 00:03:30,840 --> 00:03:34,200 Speaker 1: we don't know the exact dates, but uh, both of 58 00:03:34,240 --> 00:03:36,320 Speaker 1: you and Snavas, you could start first. What are you 59 00:03:36,360 --> 00:03:39,360 Speaker 1: going to be watching for in this election? Well, you know, 60 00:03:39,600 --> 00:03:42,360 Speaker 1: I mean it all comes down to the economy. As 61 00:03:42,440 --> 00:03:46,880 Speaker 1: James Scottville famously said, it's the economy stupid. And you know, curiously, 62 00:03:47,200 --> 00:03:50,520 Speaker 1: all the discussion in India is not much about the economy. 63 00:03:50,640 --> 00:03:54,280 Speaker 1: It's all about you know, combinations, cast politics and all 64 00:03:54,320 --> 00:03:57,960 Speaker 1: that stuff. You know, it's it rarely is about the economy. 65 00:03:58,000 --> 00:04:00,680 Speaker 1: But I actually look back in to the history of 66 00:04:00,680 --> 00:04:04,440 Speaker 1: the last eleven elections and I looked at you've just 67 00:04:04,560 --> 00:04:07,920 Speaker 1: simple prediction using a simple model of how GDP has 68 00:04:07,960 --> 00:04:11,080 Speaker 1: done during the term of the incumbent government compared to 69 00:04:11,120 --> 00:04:14,160 Speaker 1: the previous five years, and that has predicted nine over 70 00:04:14,280 --> 00:04:17,520 Speaker 1: the eleven directions. It is the economy stupid, and I 71 00:04:17,520 --> 00:04:21,360 Speaker 1: think Indian electorate is not given enough credit. They They 72 00:04:21,400 --> 00:04:24,560 Speaker 1: are actually pretty savvy in that regard. I think that's 73 00:04:24,560 --> 00:04:29,080 Speaker 1: exactly right. The participation rate and in the for elections 74 00:04:29,240 --> 00:04:34,000 Speaker 1: is in the sixties, much higher than say most drop markets, 75 00:04:34,480 --> 00:04:39,039 Speaker 1: and that is trended higher over time. And the sort 76 00:04:39,080 --> 00:04:43,840 Speaker 1: of incumbency anti incumbency that Samas mentioned has become more 77 00:04:43,920 --> 00:04:52,839 Speaker 1: correlated with economic outcomes than social or religious related outcomes 78 00:04:53,040 --> 00:04:54,880 Speaker 1: than it used to be in the past. So in 79 00:04:54,960 --> 00:04:57,880 Speaker 1: many ways, I sort of see this as a maturation 80 00:04:58,480 --> 00:05:01,279 Speaker 1: of the Indian electorate. It's very easy to forget sometimes 81 00:05:01,600 --> 00:05:05,560 Speaker 1: that the country is not even seventy years old. Basically 82 00:05:05,600 --> 00:05:09,560 Speaker 1: starting seven so it's a very very young country, and 83 00:05:09,760 --> 00:05:13,120 Speaker 1: I sometimes think about it as a parallel to the 84 00:05:13,200 --> 00:05:15,720 Speaker 1: US maybe a hundred years ago, where you have a 85 00:05:15,720 --> 00:05:19,839 Speaker 1: sort of state laboratory style model, where you can have 86 00:05:19,960 --> 00:05:24,200 Speaker 1: massive variation between what's happening in one state. Was another 87 00:05:25,040 --> 00:05:27,359 Speaker 1: myke on that point. Could we maybe back up for 88 00:05:27,360 --> 00:05:30,200 Speaker 1: a second and could you perhaps walk us through how 89 00:05:30,279 --> 00:05:34,040 Speaker 1: we got to the current point because Moody, you know, 90 00:05:34,160 --> 00:05:37,920 Speaker 1: Moody won his current position. He sort of ran on 91 00:05:37,960 --> 00:05:42,239 Speaker 1: a big, big economic platform. Walk us through what he's 92 00:05:42,279 --> 00:05:46,919 Speaker 1: been promising the Indian electorate and how the governmental system 93 00:05:47,120 --> 00:05:50,400 Speaker 1: actually works, because as Joe alluded to, like it's quite 94 00:05:50,480 --> 00:05:52,960 Speaker 1: different to what we see in other places like the US. 95 00:05:53,920 --> 00:05:57,719 Speaker 1: So at the very high level, the political system or 96 00:05:57,720 --> 00:06:01,600 Speaker 1: the government system in India is a parliamentary system. It's 97 00:06:01,880 --> 00:06:05,480 Speaker 1: sort of a variant of the British system. The voters 98 00:06:05,520 --> 00:06:07,800 Speaker 1: don't vote for a person like in the US, to 99 00:06:07,880 --> 00:06:11,440 Speaker 1: become the head of the state. They vote for local 100 00:06:11,480 --> 00:06:14,920 Speaker 1: elections sort of like essentially, if you imagined, uh, you 101 00:06:15,080 --> 00:06:17,279 Speaker 1: voted for everybody in Congress, and then Congress came together 102 00:06:17,320 --> 00:06:20,719 Speaker 1: and picked based on whoever had the votes in a 103 00:06:20,760 --> 00:06:24,160 Speaker 1: party sense, who's going to lead the government. The other 104 00:06:24,200 --> 00:06:26,760 Speaker 1: differences that it's not a two party system like in 105 00:06:26,800 --> 00:06:30,520 Speaker 1: the US, it's some multi party system similar to say, uh, 106 00:06:30,600 --> 00:06:33,039 Speaker 1: closer to something which people might be more aware of, 107 00:06:33,120 --> 00:06:35,680 Speaker 1: like Germany where you have a number of parties come 108 00:06:35,720 --> 00:06:37,520 Speaker 1: together and then they formed the government and then they 109 00:06:37,560 --> 00:06:41,640 Speaker 1: picked someone based on electoral math to to be the leader. 110 00:06:42,360 --> 00:06:47,320 Speaker 1: More specifically to the current government. So since nine seven 111 00:06:47,640 --> 00:06:49,760 Speaker 1: and Streams might have a more specific answer on this, 112 00:06:50,320 --> 00:06:54,000 Speaker 1: I would say more than eight percenter. Time the government 113 00:06:54,040 --> 00:06:55,960 Speaker 1: has been run by one party, which is the Congress 114 00:06:56,000 --> 00:07:00,320 Speaker 1: Party UM and only since the late nineties has the 115 00:07:00,360 --> 00:07:05,479 Speaker 1: b JP become a national level party of any comport um. 116 00:07:05,600 --> 00:07:10,920 Speaker 1: And they had power from thousand and four previously, and 117 00:07:11,800 --> 00:07:15,520 Speaker 1: two thousand and fourteen was when Moody won. And obviously 118 00:07:16,040 --> 00:07:18,480 Speaker 1: there's a lot of different things that people will promise, 119 00:07:19,040 --> 00:07:21,640 Speaker 1: but really I think it boils down to two things. 120 00:07:22,320 --> 00:07:24,480 Speaker 1: One thing between us already mentioned it was a very 121 00:07:24,560 --> 00:07:28,920 Speaker 1: poor five year run for the economy from two thousand 122 00:07:28,960 --> 00:07:32,000 Speaker 1: and nine to fourteen, And on top of it, there's 123 00:07:32,080 --> 00:07:38,120 Speaker 1: a there's extremely negative sentiment environment for the current government 124 00:07:38,120 --> 00:07:42,120 Speaker 1: of the time, centered on corruption. So Moody came in 125 00:07:42,320 --> 00:07:45,920 Speaker 1: and sort of made himself the centerpiece of this idea 126 00:07:46,000 --> 00:07:48,680 Speaker 1: that he's going to give you good governance which is 127 00:07:48,960 --> 00:07:53,800 Speaker 1: essentially anti corruption and economic outcomes that are better. And 128 00:07:53,880 --> 00:07:57,320 Speaker 1: has Moody delivered on that, both the anti corruption and 129 00:07:57,480 --> 00:08:00,280 Speaker 1: the good governance, you know, I mean, I'm not prevy 130 00:08:00,320 --> 00:08:02,800 Speaker 1: to all the corruption things. This is always hard to improve. 131 00:08:02,960 --> 00:08:05,600 Speaker 1: But from what I have heard, the high level corruption 132 00:08:05,920 --> 00:08:09,360 Speaker 1: is down for sure. And one of the signs that 133 00:08:09,400 --> 00:08:11,120 Speaker 1: corruption is down is also that if you look at 134 00:08:11,160 --> 00:08:14,560 Speaker 1: real estate deals, um, they are down, and real estate 135 00:08:14,560 --> 00:08:17,280 Speaker 1: prices are down because you can't use mostly real estate 136 00:08:17,280 --> 00:08:19,920 Speaker 1: deals are none heavily on cash and there's not enough 137 00:08:19,920 --> 00:08:23,920 Speaker 1: cash in circulation. So in that sense, corruption is down. Yes, 138 00:08:24,400 --> 00:08:27,400 Speaker 1: And you mentioned and just on this sort of delivery 139 00:08:27,400 --> 00:08:30,160 Speaker 1: of economic growth, you talked about the strong relationship between 140 00:08:30,440 --> 00:08:34,400 Speaker 1: electoral results and growth. Has the growth been strong enough 141 00:08:34,440 --> 00:08:38,080 Speaker 1: over the last five years that Moody is likely the favorite. No, 142 00:08:38,280 --> 00:08:40,160 Speaker 1: it is touch and go. I would say it's a 143 00:08:40,160 --> 00:08:43,199 Speaker 1: toss up. The growth has not real growth has been occaish, 144 00:08:43,280 --> 00:08:45,400 Speaker 1: but not strong enough to make it a slam dunk. 145 00:08:45,600 --> 00:08:47,800 Speaker 1: So it's a touch and go. And part of the 146 00:08:47,800 --> 00:08:51,320 Speaker 1: reason why it has not been is the government actually 147 00:08:51,360 --> 00:08:55,400 Speaker 1: has been on an austerity osterity bench much opposed to 148 00:08:55,400 --> 00:08:59,320 Speaker 1: my advice which I've been consistently writic about. Um, they 149 00:08:59,760 --> 00:09:02,600 Speaker 1: see coming into two thousand four, when when this government 150 00:09:02,640 --> 00:09:06,960 Speaker 1: was taking the office, Uh, the India was facing a 151 00:09:07,000 --> 00:09:09,520 Speaker 1: corporate sector deal everaging those huge amount of corps sets 152 00:09:09,679 --> 00:09:12,720 Speaker 1: to debt and banks were struggling with non performing loans, 153 00:09:12,840 --> 00:09:16,520 Speaker 1: huge amounts of nonperforming loans. So basically credit system was shot. 154 00:09:17,200 --> 00:09:20,000 Speaker 1: So in that environment, the government has has to do 155 00:09:20,040 --> 00:09:22,240 Speaker 1: the lifting. If you're going to listen to advice that 156 00:09:22,240 --> 00:09:25,000 Speaker 1: the government has to consolidate its physical house, which the 157 00:09:25,040 --> 00:09:28,640 Speaker 1: moding government started doing. On top of that, they took 158 00:09:28,679 --> 00:09:33,080 Speaker 1: two major very disruptive reforms. One was demonetization and the 159 00:09:33,120 --> 00:09:37,599 Speaker 1: other was GST, the Generalized Sales Tax. So it's a 160 00:09:37,720 --> 00:09:42,840 Speaker 1: national national VAT kind of thing, replacing a huge mess 161 00:09:42,880 --> 00:09:47,320 Speaker 1: of a labyrinthine taxes around the country. So you're doing 162 00:09:47,360 --> 00:09:50,640 Speaker 1: those kind of reforms at the same time you're tightening belt. Uh, 163 00:09:51,080 --> 00:09:53,320 Speaker 1: It's it's not good for growth. I mean, obviously it's 164 00:09:53,320 --> 00:09:56,920 Speaker 1: remarkable that growth has still been reasonably good given this 165 00:09:57,040 --> 00:10:00,840 Speaker 1: kind of policy. So I im mentioned in the intro 166 00:10:01,000 --> 00:10:04,000 Speaker 1: that we have the budget UM coming up. It's supposed 167 00:10:04,000 --> 00:10:08,360 Speaker 1: to be released on a Friday, February second, and it does. 168 00:10:08,480 --> 00:10:12,880 Speaker 1: It does feel like both sides UM are are basically 169 00:10:12,880 --> 00:10:16,720 Speaker 1: sort of ramping up or trying to ramp up their spending. Now, 170 00:10:16,840 --> 00:10:19,920 Speaker 1: Like I think the opposition party recently was pledging a 171 00:10:19,960 --> 00:10:25,800 Speaker 1: minimum income guarantee for farmers. So how how serious are 172 00:10:25,920 --> 00:10:29,280 Speaker 1: people about I guess you'd call it sort of competitive 173 00:10:29,440 --> 00:10:33,160 Speaker 1: populist economic policies. Are they actually going to start spending 174 00:10:33,200 --> 00:10:38,160 Speaker 1: in significant amounts now? Well, you know, I think the 175 00:10:38,200 --> 00:10:41,840 Speaker 1: populist tide in Indian economy has turned. It was no 176 00:10:41,920 --> 00:10:44,760 Speaker 1: longer as populist, even though they make these statements, and 177 00:10:44,800 --> 00:10:47,839 Speaker 1: surely the opposition is far more populist. And I don't 178 00:10:47,880 --> 00:10:50,760 Speaker 1: think Moody is as competitive populist. You know. One of 179 00:10:50,840 --> 00:10:53,280 Speaker 1: his things is he just doesn't give into this kind 180 00:10:53,320 --> 00:10:56,080 Speaker 1: of a populist blackmail. That's been his gig all the time. 181 00:10:56,240 --> 00:10:59,120 Speaker 1: You know, that's why all that people have been talking 182 00:10:59,160 --> 00:11:02,400 Speaker 1: about him, uh stimulating the economy for two or three 183 00:11:02,440 --> 00:11:04,360 Speaker 1: years now, he has not been doing it because that's 184 00:11:04,400 --> 00:11:06,600 Speaker 1: not what he believes and he doesn't believe in giving 185 00:11:06,640 --> 00:11:10,160 Speaker 1: people buying people's vote through Phoebe's He says, look, you 186 00:11:10,240 --> 00:11:14,520 Speaker 1: trust my my policies and it's going to work. And um, 187 00:11:14,720 --> 00:11:17,760 Speaker 1: so maybe he will do something in tomorrow's budget, but 188 00:11:17,920 --> 00:11:20,280 Speaker 1: that would be very much against his instinct. If you 189 00:11:20,360 --> 00:11:22,439 Speaker 1: go back to him when he was chief minister in 190 00:11:22,720 --> 00:11:25,400 Speaker 1: gudarrad Um, he one of the things that he did 191 00:11:25,520 --> 00:11:27,400 Speaker 1: was he took away free power. You know, one of 192 00:11:27,440 --> 00:11:29,360 Speaker 1: the things that all governments give is free power to 193 00:11:29,400 --> 00:11:32,720 Speaker 1: the to farmers. But effectively, what good is free power 194 00:11:32,720 --> 00:11:35,280 Speaker 1: if you don't actually get the power? Right, So he said, look, 195 00:11:35,480 --> 00:11:37,839 Speaker 1: I won't give you free power, but I will ensure 196 00:11:37,880 --> 00:11:40,080 Speaker 1: that you will get power at a reasonable rate, but 197 00:11:40,120 --> 00:11:42,160 Speaker 1: it will be reliable and will be supplied all the time. 198 00:11:43,120 --> 00:11:46,240 Speaker 1: And he'll eventually won on that platform. So you know, 199 00:11:46,360 --> 00:11:50,040 Speaker 1: I mean, I think I don't think he will compete 200 00:11:50,040 --> 00:11:53,000 Speaker 1: on populacy. Well, so on these sort of I guess 201 00:11:53,000 --> 00:11:55,720 Speaker 1: you could call him supply cide reforms or structure reforms 202 00:11:55,720 --> 00:11:59,439 Speaker 1: to the economy, whether it's the nationwide tax system to 203 00:11:59,679 --> 00:12:03,560 Speaker 1: unit by the patchwork, whether it's on just making sure 204 00:12:03,600 --> 00:12:06,240 Speaker 1: the power systems run. Has he, in your view, been 205 00:12:06,280 --> 00:12:10,000 Speaker 1: successful on those things? Does he get the structure reforms 206 00:12:10,080 --> 00:12:13,240 Speaker 1: done that he claims he can do. He has done 207 00:12:13,320 --> 00:12:15,360 Speaker 1: quite a bit, but there's still a lot to be 208 00:12:15,400 --> 00:12:17,080 Speaker 1: done if you look at it from a purely macro 209 00:12:17,200 --> 00:12:19,920 Speaker 1: point of view, you know, with labor and everything. But 210 00:12:20,320 --> 00:12:24,880 Speaker 1: I think his major plank is delivering the stuff that 211 00:12:25,000 --> 00:12:27,559 Speaker 1: most most of us take for granted and developed countries, 212 00:12:28,320 --> 00:12:33,040 Speaker 1: stuff like you know, toilets and electricity. You know, India's 213 00:12:33,080 --> 00:12:35,720 Speaker 1: not even even now fully electrified. You cannot believe this, 214 00:12:35,800 --> 00:12:39,679 Speaker 1: but it's still not fully electrified. So delivering electricity, delivering toilets, 215 00:12:40,200 --> 00:12:44,839 Speaker 1: clean water, you know, those kind of things. Um immunization helped, 216 00:12:44,920 --> 00:12:47,960 Speaker 1: you know, those kind of things, very basic, grass tech stuff. 217 00:12:49,080 --> 00:12:51,680 Speaker 1: I think that's what his his plank is going to be, 218 00:12:51,880 --> 00:12:54,320 Speaker 1: is that. Look, I have given you guys this and 219 00:12:54,400 --> 00:12:59,040 Speaker 1: that's his populous message. So a few points here. One 220 00:12:59,280 --> 00:13:03,079 Speaker 1: I think where I disagree with Novas because I want 221 00:13:03,080 --> 00:13:05,000 Speaker 1: to make sure that this podcast is not everybody agreeing 222 00:13:05,000 --> 00:13:11,640 Speaker 1: on everything. Is that coming into uh there wasn't in 223 00:13:11,679 --> 00:13:13,240 Speaker 1: my view, much of a choice in terms of what 224 00:13:13,280 --> 00:13:16,480 Speaker 1: the government had to do. If you remember at that time, 225 00:13:17,280 --> 00:13:20,560 Speaker 1: uh Morgan Stanley had coined this popular phrase fragile five 226 00:13:20,640 --> 00:13:23,800 Speaker 1: and India is one of them, and nobody talks about 227 00:13:23,840 --> 00:13:26,400 Speaker 1: it that way anymore. And a large part of that 228 00:13:26,400 --> 00:13:28,400 Speaker 1: has to do with what the Central Bank did with 229 00:13:28,600 --> 00:13:32,120 Speaker 1: Rajan at the head at that time and in the 230 00:13:32,160 --> 00:13:37,000 Speaker 1: central government in adjusting one the oil subsidy policy, and 231 00:13:37,120 --> 00:13:40,600 Speaker 1: essentially they disentangle the negative feedback loop from higher oil 232 00:13:40,679 --> 00:13:44,280 Speaker 1: prices to both a bigger deficits of the government and 233 00:13:44,400 --> 00:13:49,280 Speaker 1: the external sector and generally sort of changing the trajectory 234 00:13:49,600 --> 00:13:54,480 Speaker 1: of the fiscal of the fiscal side. Now it is 235 00:13:54,520 --> 00:13:57,360 Speaker 1: fair to maybe say that, Okay, at what point do 236 00:13:57,400 --> 00:14:00,240 Speaker 1: you turn that around and you stopped doing that and 237 00:14:00,679 --> 00:14:03,680 Speaker 1: add sort of government resources that are going to be 238 00:14:03,800 --> 00:14:06,079 Speaker 1: sort of deaf expansionary, but maybe you can handle it now. 239 00:14:06,679 --> 00:14:08,960 Speaker 1: That is a fair point of debate. But I don't 240 00:14:09,000 --> 00:14:15,080 Speaker 1: think that the overall action was entirely unjustified given what 241 00:14:15,320 --> 00:14:17,040 Speaker 1: the situation on the ground. But this is a difference 242 00:14:17,040 --> 00:14:19,160 Speaker 1: between an e M and a t M not being 243 00:14:19,200 --> 00:14:22,800 Speaker 1: able to do countersecut policy when you want to. If 244 00:14:22,840 --> 00:14:25,440 Speaker 1: if if India could do counter cecultical policy when they 245 00:14:25,440 --> 00:14:27,280 Speaker 1: wanted to, they would be the US, but they aren't. 246 00:14:28,240 --> 00:14:32,480 Speaker 1: The other point would be in terms of what are 247 00:14:32,520 --> 00:14:34,720 Speaker 1: they likely to do? I do think that they will 248 00:14:35,000 --> 00:14:40,240 Speaker 1: engage in competitive populism. Maybe there will definitely be a 249 00:14:40,280 --> 00:14:44,440 Speaker 1: gap between what the opposition is promising and what the 250 00:14:45,040 --> 00:14:47,920 Speaker 1: the current party is going to promise. But I am 251 00:14:48,200 --> 00:14:51,200 Speaker 1: while I understand the point that that is not as instinct. 252 00:14:51,920 --> 00:14:54,120 Speaker 1: The instincts get over ridden when the election is three 253 00:14:54,120 --> 00:15:13,200 Speaker 1: months away. I'd be curious to get both your thoughts 254 00:15:13,240 --> 00:15:16,880 Speaker 1: on the structural reforms that have already been mentioned. The 255 00:15:16,960 --> 00:15:22,240 Speaker 1: demonetization move was, I guess is now widely considered a 256 00:15:22,240 --> 00:15:27,720 Speaker 1: pretty unpopular one within India, but typically foreign investors love 257 00:15:27,920 --> 00:15:31,120 Speaker 1: this kind of thing, right, Like everyone talks about em 258 00:15:31,120 --> 00:15:33,520 Speaker 1: and the need for structural reform in India is actually 259 00:15:33,560 --> 00:15:36,440 Speaker 1: doing some of it with some degree of success or 260 00:15:36,480 --> 00:15:39,520 Speaker 1: at least conviction. So how is that playing out both 261 00:15:39,560 --> 00:15:44,640 Speaker 1: domestically and on the international scene. So here's what's happening 262 00:15:44,640 --> 00:15:48,440 Speaker 1: with It happened with demonetization. Whatever the original logic for 263 00:15:48,520 --> 00:15:51,280 Speaker 1: it was. I don't know whether that has ranned out, 264 00:15:51,760 --> 00:15:54,880 Speaker 1: But here's what. What are three good things that have 265 00:15:54,960 --> 00:15:57,920 Speaker 1: come out of it. First of all, the the decline 266 00:15:57,920 --> 00:16:01,360 Speaker 1: in growth that came from demonetization was pretty temporary. Um 267 00:16:01,400 --> 00:16:04,040 Speaker 1: In fact, World Bank has a paper on this based 268 00:16:04,080 --> 00:16:09,680 Speaker 1: on using satellite imagery of electricity electricity intensity. Um So, 269 00:16:09,800 --> 00:16:13,920 Speaker 1: it was a sharp decline but quickly reversed. The benefits 270 00:16:13,960 --> 00:16:17,640 Speaker 1: are one, tax buoyancy and tax collections in the tax 271 00:16:17,640 --> 00:16:20,920 Speaker 1: base has increased. Even FD had an articles tax buoyancy. 272 00:16:21,000 --> 00:16:22,920 Speaker 1: I saw you use that Termainent tweet the other day. 273 00:16:22,960 --> 00:16:25,880 Speaker 1: Tax boyancy is how fast your revenues grow relative to GDP. 274 00:16:25,960 --> 00:16:29,000 Speaker 1: So GDP goes okay, so, um so that has improved 275 00:16:29,080 --> 00:16:31,720 Speaker 1: number one. Number two, the tax collection and the tax 276 00:16:31,720 --> 00:16:35,480 Speaker 1: base have improved. Followed up with g ST. The tax 277 00:16:35,480 --> 00:16:38,960 Speaker 1: base is widened by okay, so that's one. That's a 278 00:16:39,000 --> 00:16:42,400 Speaker 1: major thing. Um so in future. As Mink just pointed out, 279 00:16:42,440 --> 00:16:44,280 Speaker 1: India is not the US, and one of the reasons 280 00:16:44,320 --> 00:16:45,840 Speaker 1: India is not the U S or any e M 281 00:16:45,920 --> 00:16:48,120 Speaker 1: is not a developed market is because it doesn't have 282 00:16:48,120 --> 00:16:51,000 Speaker 1: the physical capacity or the tax base to be able 283 00:16:51,000 --> 00:16:56,240 Speaker 1: to sustain large programs. Well before we uh go further 284 00:16:56,280 --> 00:17:01,080 Speaker 1: down this line, what do you say to my exclaim that, look, 285 00:17:01,160 --> 00:17:04,919 Speaker 1: even if it wasn't the time for austerity due to 286 00:17:05,200 --> 00:17:08,760 Speaker 1: the external situation, India just didn't have the capacity from 287 00:17:09,640 --> 00:17:12,080 Speaker 1: too now to do much more on the fiscal front. No, no, 288 00:17:12,200 --> 00:17:14,160 Speaker 1: I I do. I disagree with that. I think there 289 00:17:14,240 --> 00:17:17,000 Speaker 1: was more capacity than It doesn't mean that they should 290 00:17:17,040 --> 00:17:19,320 Speaker 1: have they should be doing five six pers in like 291 00:17:19,400 --> 00:17:21,560 Speaker 1: China does you know nothing, nothing of the stock, but 292 00:17:21,880 --> 00:17:24,560 Speaker 1: significantly more than what they did. So I think it's 293 00:17:24,560 --> 00:17:26,920 Speaker 1: one of degree. I think I think he probably would 294 00:17:26,920 --> 00:17:30,760 Speaker 1: agree with that. Yeah, I think maybe two years ago 295 00:17:30,840 --> 00:17:33,720 Speaker 1: they could have turned things around once it became clear 296 00:17:33,720 --> 00:17:37,560 Speaker 1: that the currency was sort of generally stabilized, because I 297 00:17:37,600 --> 00:17:41,920 Speaker 1: don't think foreign investors honestly are looking at, oh my god, 298 00:17:42,119 --> 00:17:45,600 Speaker 1: the GDP, that the GDP is like thirty business points hire, 299 00:17:45,600 --> 00:17:46,840 Speaker 1: So I'm not going to take all their money out. 300 00:17:47,560 --> 00:17:49,879 Speaker 1: The other thing related to that is to trace these 301 00:17:49,960 --> 00:17:53,480 Speaker 1: questions around how are foreign investors, you know, sort of 302 00:17:53,520 --> 00:17:56,320 Speaker 1: generally involved in this market. I think initially she made 303 00:17:56,320 --> 00:17:58,720 Speaker 1: the point that it's sort of a you know, low 304 00:17:59,640 --> 00:18:02,040 Speaker 1: connect tipt market foreigners. I don't think actually that's right. 305 00:18:02,440 --> 00:18:05,560 Speaker 1: On the equity side, it's a forty plus percide ownership 306 00:18:06,040 --> 00:18:08,960 Speaker 1: by foreigners, so but on the that side it's in 307 00:18:09,000 --> 00:18:12,560 Speaker 1: the single digits. So the so the difference is compared 308 00:18:12,600 --> 00:18:16,480 Speaker 1: to most other em it's the equity ownership that tends 309 00:18:16,520 --> 00:18:19,960 Speaker 1: to be the capital counter risk as opposed to the 310 00:18:20,000 --> 00:18:23,400 Speaker 1: dead ownership, and it has very little compared to most 311 00:18:23,400 --> 00:18:26,200 Speaker 1: countries dollar debt, So it's it's a very low dollarization 312 00:18:26,200 --> 00:18:28,840 Speaker 1: economy and therefore it can sort of sustain a lot 313 00:18:28,840 --> 00:18:32,080 Speaker 1: of these other problems. Uh that that happened in this 314 00:18:32,520 --> 00:18:35,919 Speaker 1: place like Indonesia or Mexico where foreigners on a lot 315 00:18:35,960 --> 00:18:38,000 Speaker 1: of bonds, they on a lot of dollar debt. Well, 316 00:18:38,040 --> 00:18:40,760 Speaker 1: I was just gonna ask, I mean this, uh, summer 317 00:18:40,800 --> 00:18:46,920 Speaker 1: of eighteen, we saw various countries get in trouble, Turkey, Argentina, 318 00:18:47,440 --> 00:18:51,520 Speaker 1: coinciding with a pretty sharp jump in um oil prices, 319 00:18:51,800 --> 00:18:56,200 Speaker 1: and so that really exacerbated some of their external tensions. 320 00:18:56,320 --> 00:18:59,400 Speaker 1: And I think I think in both of those cases 321 00:18:59,520 --> 00:19:03,600 Speaker 1: pretty levels of dollarrization in the economy. India also had 322 00:19:03,680 --> 00:19:07,119 Speaker 1: doesn't produce any oil, has a lot of oil import bills, 323 00:19:07,160 --> 00:19:10,359 Speaker 1: but that but they didn't struggles much. Well, the rupee 324 00:19:10,359 --> 00:19:12,920 Speaker 1: did come under pressure, but they didn't struggle as much 325 00:19:12,920 --> 00:19:15,880 Speaker 1: because the results were high and you know, the situation 326 00:19:15,920 --> 00:19:18,840 Speaker 1: was much better as compared to two. But on the 327 00:19:18,920 --> 00:19:22,119 Speaker 1: point on equity ownership, you know what has happened is 328 00:19:22,200 --> 00:19:25,520 Speaker 1: here the one of the consequences of demonetization is what 329 00:19:25,640 --> 00:19:28,760 Speaker 1: you've done is you push people out of the cash economy, right, 330 00:19:28,800 --> 00:19:31,719 Speaker 1: So a lot of people who had black money, what 331 00:19:31,760 --> 00:19:34,680 Speaker 1: they would typically do is either keep it in gold 332 00:19:34,840 --> 00:19:37,840 Speaker 1: or by real estate, right, so those were the two 333 00:19:37,960 --> 00:19:42,800 Speaker 1: favored destinations. By pushing people away to more formal sector, 334 00:19:43,400 --> 00:19:47,000 Speaker 1: you are actually financializing the economy. So the financial participation 335 00:19:47,240 --> 00:19:50,959 Speaker 1: in equity markets has increased leaps and bounds since two 336 00:19:51,000 --> 00:19:54,760 Speaker 1: thou sixteen, when after demonetization there's a big break in 337 00:19:54,920 --> 00:19:59,880 Speaker 1: mutual fund influence, steady influence steadily increasing. So domestic PARTI 338 00:20:00,040 --> 00:20:04,120 Speaker 1: patient has actually been a buffer against foreign this year 339 00:20:04,240 --> 00:20:07,880 Speaker 1: foreign last year. Foreign institutional investors have been actually taking 340 00:20:07,880 --> 00:20:10,920 Speaker 1: money out of Indian equity, but it was buffered by 341 00:20:11,880 --> 00:20:15,120 Speaker 1: by the domestic investors bringing in money. So that's been 342 00:20:15,160 --> 00:20:18,600 Speaker 1: one of the impact of you know, eventually stabilization of 343 00:20:18,600 --> 00:20:21,840 Speaker 1: the economy and more formalization of the economy. One thing 344 00:20:21,880 --> 00:20:24,560 Speaker 1: that's helped on that front, also from the policy side, 345 00:20:25,119 --> 00:20:29,679 Speaker 1: is that the government pushed for significant increase in simply 346 00:20:30,240 --> 00:20:33,320 Speaker 1: linking people to bank accounts. So then thea say five 347 00:20:33,400 --> 00:20:36,760 Speaker 1: years ago, it was probably in the teens in terms 348 00:20:36,760 --> 00:20:38,639 Speaker 1: of percentage of people who even had a bank account, 349 00:20:38,680 --> 00:20:41,360 Speaker 1: let alone people who had credit um and that has 350 00:20:41,440 --> 00:20:45,159 Speaker 1: jumped massively. So now you have people who are linked 351 00:20:45,240 --> 00:20:48,280 Speaker 1: into some sort of system and as are maybe shouldn't 352 00:20:48,280 --> 00:20:50,040 Speaker 1: ask talk about a little bit more is a sort 353 00:20:50,040 --> 00:20:53,440 Speaker 1: of social security number type system that was Also, this 354 00:20:53,520 --> 00:20:56,480 Speaker 1: is not a current government thing. This has been existing 355 00:20:56,920 --> 00:20:59,800 Speaker 1: and been pushed for the last ten plus years, but 356 00:21:00,080 --> 00:21:02,800 Speaker 1: it has sort of gone exponential in terms of coverage. 357 00:21:03,040 --> 00:21:07,639 Speaker 1: So you have a lot of simply formalization of the 358 00:21:07,640 --> 00:21:10,439 Speaker 1: economy that is taking place, which is not very sexy. 359 00:21:10,560 --> 00:21:13,480 Speaker 1: It's not a creative to GDP in the moment, it 360 00:21:13,560 --> 00:21:15,199 Speaker 1: might not even be a creative to GDP in five 361 00:21:15,280 --> 00:21:18,120 Speaker 1: years time. But what it is doing it's it's building 362 00:21:18,240 --> 00:21:22,119 Speaker 1: institutional or state capacity to use a sort of more 363 00:21:22,200 --> 00:21:25,280 Speaker 1: formal term, that is that sort of board well for 364 00:21:25,320 --> 00:21:28,840 Speaker 1: putting a floor on growth over time. The on on 365 00:21:28,960 --> 00:21:34,520 Speaker 1: oil to the earlier point, I make two comments. One, actually, 366 00:21:34,600 --> 00:21:37,920 Speaker 1: oddly enough, India has become a pretty significant exporter of 367 00:21:38,520 --> 00:21:41,240 Speaker 1: oil from a product site because there's a big oil 368 00:21:41,280 --> 00:21:45,280 Speaker 1: industry and actually the biggest company in India's is Reliance, 369 00:21:45,680 --> 00:21:49,200 Speaker 1: which is an oil producer. So oil is a bit complicated. 370 00:21:49,600 --> 00:21:51,800 Speaker 1: But also and this, you know, going back to the 371 00:21:51,840 --> 00:21:55,160 Speaker 1: fiscal sort of contraction point. The one of the ways 372 00:21:55,160 --> 00:21:57,359 Speaker 1: that the fiscal is to expand when oil prices went 373 00:21:57,440 --> 00:21:59,760 Speaker 1: up was because the government essentially would step in and 374 00:22:00,040 --> 00:22:02,800 Speaker 1: protect the consumer completely, so the consumer would not see 375 00:22:02,800 --> 00:22:05,280 Speaker 1: any price increases, so you would have garn account increase 376 00:22:06,080 --> 00:22:08,600 Speaker 1: into more deficit and the fiscal increase dollar for dollar. 377 00:22:09,119 --> 00:22:12,199 Speaker 1: They essentially broke that linkage, and that's part of the 378 00:22:12,200 --> 00:22:15,119 Speaker 1: reason why when you had this big problem in Turkey, 379 00:22:15,520 --> 00:22:18,440 Speaker 1: you did not have that in India because that the 380 00:22:18,480 --> 00:22:21,280 Speaker 1: fiscal reform had taken place. And you know, this is 381 00:22:21,320 --> 00:22:23,800 Speaker 1: part of the small disagreement the Trense and are having here. 382 00:22:23,840 --> 00:22:25,320 Speaker 1: I think that was the right thing to do, because 383 00:22:25,520 --> 00:22:27,080 Speaker 1: would it have been better if that spend a little 384 00:22:27,080 --> 00:22:30,160 Speaker 1: bit more money versus so the currency getting smashed ten 385 00:22:30,240 --> 00:22:33,160 Speaker 1: percent further, it's not obvious to me that the tradeoff 386 00:22:33,560 --> 00:22:37,000 Speaker 1: was wrong. But this was my point about structural reforms 387 00:22:37,080 --> 00:22:41,400 Speaker 1: and attracting foreign investors versus how the domestic population might 388 00:22:41,440 --> 00:22:45,080 Speaker 1: feel about these reforms. At what point does you know, 389 00:22:45,359 --> 00:22:50,240 Speaker 1: strengthening institutions in various ways, introducing these supply side reforms, 390 00:22:50,560 --> 00:22:53,639 Speaker 1: at what point does that actually feed into the economy 391 00:22:53,760 --> 00:22:57,719 Speaker 1: and make everyone feel much better about their own place 392 00:22:57,880 --> 00:23:00,760 Speaker 1: in the world, because I imagine at some point people 393 00:23:00,800 --> 00:23:03,439 Speaker 1: start to run out of patients and that's when you 394 00:23:03,520 --> 00:23:06,480 Speaker 1: come to sort of a crunch point for the government. 395 00:23:06,560 --> 00:23:09,640 Speaker 1: And at that point, that's when they might start introducing 396 00:23:09,680 --> 00:23:13,159 Speaker 1: these sort of competitive populist fiscal policies like we were 397 00:23:13,200 --> 00:23:16,320 Speaker 1: talking about earlier. These things, you know, they are they 398 00:23:16,320 --> 00:23:19,400 Speaker 1: are complicated because they what they are doing is they're 399 00:23:19,400 --> 00:23:21,879 Speaker 1: setting the scene. Doesn't mean that I think growth is 400 00:23:21,920 --> 00:23:24,400 Speaker 1: going to take off, right, uh. And if you look 401 00:23:24,440 --> 00:23:27,200 Speaker 1: through India's history, a lot of things have happened by serendipity, 402 00:23:28,200 --> 00:23:31,400 Speaker 1: but because the structure was in place, they were able 403 00:23:31,400 --> 00:23:34,000 Speaker 1: to take advantage of it. Fall into the software boom, right, 404 00:23:34,640 --> 00:23:38,680 Speaker 1: the the investments in software boom, whether it was in 405 00:23:39,000 --> 00:23:42,760 Speaker 1: the technical education infrastructure, or whether it was in the 406 00:23:42,840 --> 00:23:47,520 Speaker 1: domestic software industry which had been developing since the nineties, sixties, seventies, 407 00:23:47,880 --> 00:23:50,960 Speaker 1: all those things, they were like nobody even cared about 408 00:23:51,000 --> 00:23:53,359 Speaker 1: those things. And certainly when there was a software boom, oh, 409 00:23:53,440 --> 00:23:55,600 Speaker 1: certainly all those things became a strength. Right. So it 410 00:23:55,640 --> 00:23:57,760 Speaker 1: doesn't but that's a long time. We don't know when 411 00:23:57,760 --> 00:24:00,040 Speaker 1: these things are going to benefit and how long it 412 00:24:00,160 --> 00:24:03,520 Speaker 1: will take. And your point is absolutely right. In the meantime, people, 413 00:24:03,560 --> 00:24:07,960 Speaker 1: the electorate gets angry and and frustrated and and clearly 414 00:24:08,119 --> 00:24:10,760 Speaker 1: there are huge aspirations in a young country like India, 415 00:24:10,800 --> 00:24:14,040 Speaker 1: where the youth population is huge. They just don't want 416 00:24:14,240 --> 00:24:17,159 Speaker 1: simple things like free vs. You know, they want jobs, 417 00:24:17,160 --> 00:24:21,040 Speaker 1: They want better prospects and that comes from growth. And yeah, sure, 418 00:24:21,080 --> 00:24:23,000 Speaker 1: I mean I think that those those pressures are there 419 00:24:23,000 --> 00:24:27,320 Speaker 1: in democracy, and um, they will spill over. Yes, This 420 00:24:27,400 --> 00:24:29,359 Speaker 1: is where I would go back to a point that 421 00:24:29,400 --> 00:24:31,760 Speaker 1: I made earlier about sort of uh, sort of a 422 00:24:31,840 --> 00:24:35,600 Speaker 1: state laboratory type set up a perfect example of the 423 00:24:35,680 --> 00:24:39,560 Speaker 1: question that Tracy had already happened. So, Rajasthan is a 424 00:24:39,600 --> 00:24:43,600 Speaker 1: state on the west course of India, and there you 425 00:24:43,720 --> 00:24:45,960 Speaker 1: had a sort of state government which is also a 426 00:24:46,000 --> 00:24:48,879 Speaker 1: b JP one, but a much more aggressive one in 427 00:24:48,960 --> 00:24:50,679 Speaker 1: terms of the reforms that they were trying to pursue, 428 00:24:51,240 --> 00:24:53,119 Speaker 1: including on the labor side, which is one of the 429 00:24:53,200 --> 00:24:56,720 Speaker 1: sort of biggest problems in India. And they pushed them through, 430 00:24:57,320 --> 00:25:01,560 Speaker 1: but it came with a cost in terms of for 431 00:25:01,600 --> 00:25:05,200 Speaker 1: a while depressing growth relative to the rest of the country. 432 00:25:05,280 --> 00:25:08,360 Speaker 1: And they were thrown out of power, So you are 433 00:25:08,400 --> 00:25:11,560 Speaker 1: always sort of dealing with the situation where if you 434 00:25:11,600 --> 00:25:14,560 Speaker 1: push things too far at the cost of growth in 435 00:25:14,600 --> 00:25:18,680 Speaker 1: the moment, are you then taking yourself out of doing 436 00:25:18,720 --> 00:25:21,359 Speaker 1: better forms in the future. So it's it's really an 437 00:25:21,359 --> 00:25:24,280 Speaker 1: optimization problem that I don't think there's any right answer. 438 00:25:24,359 --> 00:25:27,960 Speaker 1: But yeah, it's interesting talking about that sequence because it 439 00:25:28,000 --> 00:25:30,080 Speaker 1: now strikes me listening to this is kind of the 440 00:25:30,080 --> 00:25:33,400 Speaker 1: opposite of China, which we were talking about last week, 441 00:25:33,600 --> 00:25:36,080 Speaker 1: which has just been sort of pedal to the floor 442 00:25:36,119 --> 00:25:38,879 Speaker 1: growth all around the country for a long time and 443 00:25:38,960 --> 00:25:41,240 Speaker 1: now is sort of having to deal with these things. 444 00:25:41,280 --> 00:25:42,960 Speaker 1: I was like, well, what if that model isn't working, 445 00:25:43,000 --> 00:25:46,360 Speaker 1: we actually have to deal with restructuring and restructure where 446 00:25:46,480 --> 00:25:50,600 Speaker 1: the demand came from. It sounds like India is kind 447 00:25:50,600 --> 00:25:54,080 Speaker 1: of doing the opposite, uh, not going pedal to the 448 00:25:54,080 --> 00:25:56,919 Speaker 1: metal with growth, but actually trying to address some of 449 00:25:56,920 --> 00:26:02,320 Speaker 1: these things preemptively too hopefully have a brighter, brighter point 450 00:26:02,320 --> 00:26:05,240 Speaker 1: in the future. Right. But India also faces, as opposed 451 00:26:05,240 --> 00:26:10,359 Speaker 1: to China, more balance of payments um constraints compared to China, Right. 452 00:26:10,400 --> 00:26:12,480 Speaker 1: And the other thing is India goes through these faces 453 00:26:12,520 --> 00:26:14,399 Speaker 1: all the time right. I mean it has these pedal 454 00:26:14,440 --> 00:26:16,760 Speaker 1: to the mental growth phase which it had from two 455 00:26:16,800 --> 00:26:20,679 Speaker 1: thousand four, but then it became unsustainable. It showed up 456 00:26:20,680 --> 00:26:24,920 Speaker 1: in inflation and then eventually balance of payment problems, and 457 00:26:24,960 --> 00:26:27,119 Speaker 1: then the government got voted out because people don't like 458 00:26:27,160 --> 00:26:29,280 Speaker 1: inflation either. That's one of the beauties of democracy. You 459 00:26:29,280 --> 00:26:32,520 Speaker 1: get instant feedback, right and so um so then you 460 00:26:32,560 --> 00:26:35,199 Speaker 1: get through this period of consolidation. But most of the 461 00:26:35,200 --> 00:26:38,200 Speaker 1: time what happens is the government that consolidates does not 462 00:26:38,440 --> 00:26:41,720 Speaker 1: reap the benefits of the consolidation. The same thing happened 463 00:26:41,760 --> 00:26:45,560 Speaker 1: from the government got vooted up and the next government 464 00:26:45,600 --> 00:26:47,560 Speaker 1: enjoyed the benefits of the boom that came. You know. 465 00:26:47,600 --> 00:26:52,080 Speaker 1: That's that's sadly part of democracy. The other sort of 466 00:26:52,119 --> 00:26:54,520 Speaker 1: the comparison to China is really interesting and I you know, 467 00:26:54,560 --> 00:26:57,720 Speaker 1: people make that all the time, a sort of clarification 468 00:26:57,800 --> 00:27:00,920 Speaker 1: thing that or something that really puts the under stock contrast. 469 00:27:01,359 --> 00:27:03,720 Speaker 1: Think about where India is in the credit cyclip versus China. 470 00:27:04,080 --> 00:27:06,880 Speaker 1: Real credit growth over the last seven years has been 471 00:27:06,960 --> 00:27:10,399 Speaker 1: near zero in India, so it and there's been a 472 00:27:10,440 --> 00:27:14,200 Speaker 1: lot of dead consolidation. Even three years ago post TFC 473 00:27:14,760 --> 00:27:17,679 Speaker 1: in dollar terms, the more npls that recognize in India 474 00:27:17,760 --> 00:27:20,280 Speaker 1: than China, and you think about these two countries are 475 00:27:20,359 --> 00:27:23,320 Speaker 1: not actually similar in terms of what their sizes and 476 00:27:23,359 --> 00:27:25,320 Speaker 1: in terms of definitely not similar in terms of what 477 00:27:25,320 --> 00:27:29,280 Speaker 1: the credit in the system is. So uh, a lot 478 00:27:29,280 --> 00:27:31,280 Speaker 1: of this is not by design. I must say that 479 00:27:31,280 --> 00:27:33,160 Speaker 1: this is not as if there's some set of people 480 00:27:33,160 --> 00:27:34,360 Speaker 1: are trying to say, Okay, this is how you want 481 00:27:34,359 --> 00:27:36,280 Speaker 1: to do it. A lot of things happened in India. 482 00:27:36,480 --> 00:27:39,720 Speaker 1: I like Tuniversa's word surrendipity. It just sort of happens. 483 00:27:40,119 --> 00:27:42,800 Speaker 1: Maybe it's because of the democratic structure. Maybe it's because 484 00:27:42,800 --> 00:27:45,399 Speaker 1: of the sort of you know, EU style. They're like 485 00:27:45,440 --> 00:27:47,840 Speaker 1: fift you know, I don't know how many states even anymore. 486 00:27:47,840 --> 00:27:51,320 Speaker 1: They keep changing all the time. Uh, it's very very varied. 487 00:27:51,880 --> 00:27:55,040 Speaker 1: And it what it does is it reduces the chances 488 00:27:55,119 --> 00:27:58,320 Speaker 1: of I think, making bad mistakes. It doesn't have the 489 00:27:58,440 --> 00:28:01,440 Speaker 1: ramp like China US, but it does also it sort 490 00:28:01,440 --> 00:28:03,639 Speaker 1: of puts the floor in some ways in terms of 491 00:28:03,640 --> 00:28:06,640 Speaker 1: how badly things can get screwed up. All Right, So 492 00:28:06,760 --> 00:28:10,560 Speaker 1: we started this podcast by saying it's the economy stupid. 493 00:28:11,000 --> 00:28:14,480 Speaker 1: So if the upcoming elections are all about the economy, 494 00:28:14,480 --> 00:28:16,440 Speaker 1: and then I have to ask who do you think 495 00:28:16,520 --> 00:28:19,880 Speaker 1: is gonna win? As it's a toss up. I think 496 00:28:20,080 --> 00:28:22,199 Speaker 1: at this point it's it's a toss up. It's going 497 00:28:22,240 --> 00:28:24,960 Speaker 1: to be really close, and it's going to come to 498 00:28:25,080 --> 00:28:30,280 Speaker 1: the managing the local coalitions. It's no party is going 499 00:28:30,320 --> 00:28:33,760 Speaker 1: to get enough to form a government on its own, like, 500 00:28:35,040 --> 00:28:37,480 Speaker 1: so you are going to be I think back to 501 00:28:38,520 --> 00:28:41,480 Speaker 1: what in India people called coalition politics, which is you 502 00:28:41,640 --> 00:28:45,920 Speaker 1: sort of cobbled together seemingly people with not lined up 503 00:28:45,920 --> 00:28:50,080 Speaker 1: ideologies and trying to run a government for five years. Uh, 504 00:28:50,120 --> 00:28:52,280 Speaker 1: that is the period where when things don't tend to 505 00:28:52,320 --> 00:28:56,960 Speaker 1: happen quickly enough and people get very frustrated. And I think, uh, 506 00:28:57,080 --> 00:28:59,760 Speaker 1: the risk of that is higher now then it has 507 00:28:59,800 --> 00:29:03,000 Speaker 1: been in in the earlier part of the decade. Well, 508 00:29:03,240 --> 00:29:06,080 Speaker 1: will you both come on for a after the election 509 00:29:06,200 --> 00:29:08,400 Speaker 1: rap and then we sort of analyze what happened and 510 00:29:08,440 --> 00:29:11,840 Speaker 1: then talk about what's next. Sounds good, so we'll plan 511 00:29:11,920 --> 00:29:14,520 Speaker 1: a follow up screen of oz tour of a Dante 512 00:29:14,640 --> 00:29:17,080 Speaker 1: and my aunt Sex. Sorry, thank you very much for 513 00:29:17,160 --> 00:29:19,640 Speaker 1: joining us. I feel like my knowledge is still just 514 00:29:19,720 --> 00:29:21,880 Speaker 1: like scratching the service. But that's more than it was 515 00:29:22,240 --> 00:29:38,920 Speaker 1: this morning. Thanks guys, Thank you Tracy. Well, like I 516 00:29:38,960 --> 00:29:41,680 Speaker 1: said there, I still feel like I probably know nothing, 517 00:29:41,720 --> 00:29:45,360 Speaker 1: but maybe a little bit more than I did before. 518 00:29:45,720 --> 00:29:48,120 Speaker 1: But I did think, I mean, I did learn quite 519 00:29:48,160 --> 00:29:51,720 Speaker 1: a bit and thinking about all these different structural reforms. 520 00:29:52,000 --> 00:29:55,840 Speaker 1: You know, so often you hear that term structural reform 521 00:29:55,880 --> 00:29:58,440 Speaker 1: and it's kind of just some nonsense term that gets 522 00:29:58,440 --> 00:30:01,200 Speaker 1: thrown around by someone trying to sound smart, or it's 523 00:30:01,240 --> 00:30:06,000 Speaker 1: just code word for cutting spending or cutting pensions. But 524 00:30:06,080 --> 00:30:09,520 Speaker 1: it actually seems like the story in India is sort 525 00:30:09,560 --> 00:30:12,920 Speaker 1: of far more nuanced and complicated than a lot of 526 00:30:12,920 --> 00:30:17,040 Speaker 1: discussions about so called structural reform. Yeah, I totally agree, 527 00:30:17,160 --> 00:30:20,080 Speaker 1: and I feel I feel a little well, I feel 528 00:30:20,080 --> 00:30:22,040 Speaker 1: like you. I feel like I should know more about India, 529 00:30:22,120 --> 00:30:25,120 Speaker 1: but sadly, I think most of my knowledge comes from 530 00:30:25,120 --> 00:30:29,440 Speaker 1: Bollywood movies, which sadly don't have enough of political content 531 00:30:29,560 --> 00:30:32,360 Speaker 1: to satisfy a discussion like this. Although I did know 532 00:30:32,800 --> 00:30:35,960 Speaker 1: that many villages in India do not yet have electricity 533 00:30:36,000 --> 00:30:38,520 Speaker 1: because I watched that Shower Khan movie where he goes 534 00:30:38,560 --> 00:30:42,640 Speaker 1: back to his home village and works on electrifying it. Anyway, Sorry, 535 00:30:42,640 --> 00:30:45,120 Speaker 1: I'm gonna go off on a Bollywood tangent um. It 536 00:30:45,240 --> 00:30:50,080 Speaker 1: is really interesting. The last bit of the discussion where 537 00:30:50,120 --> 00:30:53,240 Speaker 1: we were talking about the possibility of a coalition government 538 00:30:53,320 --> 00:30:56,800 Speaker 1: posts the elections. That'll be an interesting one because if 539 00:30:56,880 --> 00:31:00,840 Speaker 1: we think that people aren't satisfied right now under you know, 540 00:31:00,880 --> 00:31:03,840 Speaker 1: a Modi government that has actually been able to get 541 00:31:03,920 --> 00:31:05,880 Speaker 1: quite a few things done, it's going to be really 542 00:31:05,880 --> 00:31:08,080 Speaker 1: really interesting to see how they react to a coalition 543 00:31:08,120 --> 00:31:11,200 Speaker 1: government where there's a lot of uncertainty and maybe the 544 00:31:11,240 --> 00:31:15,480 Speaker 1: possibility that the agenda sort of gets fought over and 545 00:31:16,040 --> 00:31:18,560 Speaker 1: not much gets accomplished. Yeah, it'll be interesting to watch. 546 00:31:18,640 --> 00:31:21,880 Speaker 1: And I really liked a Serinavaz's point about how, for 547 00:31:21,960 --> 00:31:25,720 Speaker 1: better or worse in a democracy, Uh, the government that 548 00:31:25,840 --> 00:31:29,040 Speaker 1: maybe does the difficult stuff of the structural reforms that 549 00:31:29,080 --> 00:31:32,280 Speaker 1: aren't short term growth often doesn't get to reap the reward. 550 00:31:32,600 --> 00:31:35,080 Speaker 1: I mean, I think there's probably you could certainly point 551 00:31:35,120 --> 00:31:38,680 Speaker 1: to several examples in the US where the president, uh, 552 00:31:38,960 --> 00:31:41,760 Speaker 1: just who gets credit for the booming economy just happens 553 00:31:41,760 --> 00:31:43,680 Speaker 1: to be the one who came in after the last 554 00:31:43,720 --> 00:31:46,240 Speaker 1: one got booted out for a recession that maybe was 555 00:31:46,280 --> 00:31:49,200 Speaker 1: caused by something their predecessor did. So Yeah, that's just 556 00:31:49,240 --> 00:31:51,960 Speaker 1: how it goes. But I'm now feel a little bit 557 00:31:52,240 --> 00:31:56,040 Speaker 1: prepared at least to watch the election, and I have 558 00:31:56,200 --> 00:31:59,240 Speaker 1: some knowledge of what people are voting on. It's gonna 559 00:31:59,280 --> 00:32:01,640 Speaker 1: be great and all. So I know we're recording this 560 00:32:01,800 --> 00:32:05,200 Speaker 1: before the budget announcement, but to the earlier conversation about 561 00:32:05,200 --> 00:32:07,120 Speaker 1: whether or not Moody is going to go full on 562 00:32:07,440 --> 00:32:12,440 Speaker 1: populist economic policy Friday, February second will have revealed a 563 00:32:12,440 --> 00:32:17,040 Speaker 1: lot of clues by the time we actually release this podcast. Okay, 564 00:32:17,040 --> 00:32:19,520 Speaker 1: so when you're listening, go read the articles about what 565 00:32:19,560 --> 00:32:21,960 Speaker 1: happened a couple of days before. And on that note, 566 00:32:22,800 --> 00:32:26,000 Speaker 1: this has been another episode of the Odd Lots podcast. 567 00:32:26,360 --> 00:32:29,120 Speaker 1: I'm Joe Wisenthal. You can follow me on Twitter at 568 00:32:29,160 --> 00:32:32,480 Speaker 1: the Stalwart and I'm Tracy Alloway. I'm on Twitter at 569 00:32:32,520 --> 00:32:35,760 Speaker 1: Tracy Alloway. And you should follow both of our guests 570 00:32:35,800 --> 00:32:37,760 Speaker 1: because there are also two of my favorite people to 571 00:32:37,880 --> 00:32:42,160 Speaker 1: follow on Twitter for all things India and macro and 572 00:32:42,360 --> 00:32:45,240 Speaker 1: politics and just a bunch of other stuff. Uh Serena 573 00:32:45,280 --> 00:32:48,960 Speaker 1: vostra Vedanta he's at T three on Twitter, and my 574 00:32:49,040 --> 00:32:52,320 Speaker 1: own Sex Saria He's at my own Sex Saria, so 575 00:32:53,000 --> 00:32:56,160 Speaker 1: definitely you should follow them, and you should definitely follow 576 00:32:56,200 --> 00:32:59,720 Speaker 1: our producer Topur Foreheads. He's at for his tea on 577 00:33:00,120 --> 00:33:03,440 Speaker 1: her as well as the Bloomberg head of podcast Francesco 578 00:33:03,520 --> 00:33:06,680 Speaker 1: Leave at Francesca Today. Thanks for listening.