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Speaker 1: Welcome to CIT, a podcast series on markets and economies

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Speaker 1: from Devious Group Research. I'm Timurbei, chief economist, welcoming you

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Speaker 1: to our 164th episode. I'm very pleased today to, hi, Irvin. Um,

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Speaker 1: I'm about to give a little intro to you. Uh, very,

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Speaker 1: very happy to have back Irvin Subramani into the podcast.

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Speaker 1: Irvin is a senior fellow at the Peterson Institute of

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Speaker 1: International for International Economics. He served as the chief economic

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Speaker 1: advisor to the government of India between 2014 and 2018.

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Speaker 1: I personally had the pleasure of knowing Irvin back in

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Speaker 1: Washington DC as a colleague in the IMF where his

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Speaker 1: last position was the assistant director of the Research Department.

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Speaker 1: Arvind Suvayam, a warm welcome back to COVID time.

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Speaker 2: Uh, thanks for having me, Timur. Great to be back.

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Speaker 1: It's great to have you, Irvin. Uh, these days, you're

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Speaker 1: busy talking about a book, but we will shelf it,

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Speaker 1: to so to speak, for the time being. Uh, I

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Speaker 1: want to talk to you, if I may have your intelligence,

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Speaker 1: on a recent article that you published on Project Syndicate,

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Speaker 1: jointly with Shomitrap Chatterjee. It's titled The New China Shock

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Speaker 1: Is Hitting the Poor Countries the Hardest.

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Speaker 1: So Arvin, I'd like to go over it with you

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Speaker 1: and ask some clarificatory questions. But perhaps if you could

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Speaker 1: help us uh sort of define the first channel shock,

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Speaker 1: and then talk a bit about the new channel shock.

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Speaker 2: Yeah, uh, as we all know, the first China shock

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Speaker 2: uh owes to the work of uh David Otter uh

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Speaker 2: and Gordon Hansen and, and others who uh basically said

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Speaker 2: that between uh say the late 90s and 20, 2008, 2010,

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Speaker 2: um uh imports from China into the United States uh

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Speaker 2: had a very adverse effect on uh employment, dislocation.

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Speaker 2: Uh, and these were kind of concentrated in, uh, certain

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Speaker 2: geographies as it were, concentrated in geographies, which kind of

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Speaker 2: magnified their political salience. And, and I, I think it's not, uh,

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Speaker 2: too much to say that.

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Speaker 2: That academic paper and findings really actually has transformed the

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Speaker 2: debate on how the West, especially the US has viewed

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Speaker 2: the rise of China. Basically, uh, uh, you know, assigning

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Speaker 2: to China, kind of some of the deindustrialization that happened, uh,

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Speaker 2: and a lot of the Trump rhetoric, uh, including Trump's, uh,

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Speaker 2: you know, more cogent intellectual spokesman, uh, I think they,

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Speaker 2: they basically channel, uh, Otto, Dan and Hansen.

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Speaker 2: So that's the first China shock. Um, now, the second

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Speaker 2: China shock, of course, is now

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Speaker 1: that just, just to stay with the first channel. So

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Speaker 1: one more second, uh, you don't fully subscribe to the

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Speaker 1: assigning of the entire driver of American deindustrialization to the

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Speaker 1: China shock.

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Speaker 2: Well, uh, just two things I would say is that.

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Speaker 2: One,

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Speaker 2: You know, the whole question of whether the employment decline

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Speaker 2: in manufacturing, how much was due to a secular, you know,

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Speaker 2: a decline in manufacturing because of technology, as opposed to

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Speaker 2: the China shock, uh, I, I think is open for debate.

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Speaker 2: I think the second thing, I think some of the

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Speaker 2: more recent research is saying that, look, the, that is

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Speaker 2: somewhat of a partial view of the China shock.

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Speaker 2: Uh, because there were also other aspects about the China

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Speaker 2: shock that may have been quite favorable, not just the,

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Speaker 2: you know, the lower prices, but also what it may

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Speaker 2: have done to other industries in the services sector and

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Speaker 2: so on. But that's going to be contested, but the

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Speaker 2: truth is that that paper had an enormous effect and

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Speaker 2: still continues to have an enormous intellectual, you know, influence on,

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Speaker 2: on the way the world has viewed the rise of China, uh,

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Speaker 2: at least between, you know, the 90s and early 2000s.

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Speaker 2: Now, fast forward, I, I think that we're now in

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Speaker 2: the 2nd China shock, uh, reflected in the fact that,

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Speaker 2: as you know, Chinese exports are rising, have been rising, uh, again.

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Speaker 2: China's current account surplus has been rising again.

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Speaker 2: And of course, many people have, including Brad Setzer has

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Speaker 2: shown that if you measure the current account surplus in

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Speaker 2: terms of the GDP of the rest of the world,

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Speaker 2: it's even greater than it was, you know, under the

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Speaker 2: first China shock. If you remember, under the first China shock,

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Speaker 2: China's current account surplus as a share of its own

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Speaker 2: GDP peaked at about 10%, uh, in 2007, I, I believe,

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Speaker 2: or 20607.

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Speaker 2: So once again, with, you know, uh, uh, China, uh, rising,

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Speaker 2: making strides, especially in these new sectors, you know, EVs,

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Speaker 2: bat solar batteries, and so on, um, uh, uh, people

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Speaker 2: in the West are talking about the second China shock,

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Speaker 2: and of course this is hitting Germany in particular, uh, uh,

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Speaker 2: very significantly. But I think what, uh, we, Sumitro and

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Speaker 2: I say in this paper.

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Speaker 2: Is that just in terms of magnitudes, this second China

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Speaker 2: shock is not that big for uh the West. The

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Speaker 2: reason being, uh, Temer, it's an important point to note,

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Speaker 2: especially for those who have, uh, who try and understand trade,

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Speaker 2: is that partly because of the China shock and partly

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Speaker 2: because of technology.

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Speaker 2: Uh, the West no longer competes in the sectors that

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Speaker 2: China still continues to export, uh, like labor intensive manufacturing, right? So, so,

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Speaker 2: you know, you're, they're out of, they've diversified out of

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Speaker 2: those things, and, and so if you take that out

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Speaker 2: of the equation, then, you know, uh, China's imports of China.

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Speaker 2: China's current account surplus is a much smaller share of,

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Speaker 2: of activity in the West. It's now much more concentrated

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Speaker 2: in particular sectors and particular technologies. So the new China

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Speaker 2: shock from the point of view of the West is

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Speaker 2: not the old China shock quantitatively. It's much more sectoral and, and, and,

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Speaker 2: and of technology and it.

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Speaker 2: Kind of competing for technological rivalry, as it were. However,

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Speaker 2: the new China shock is quantitatively very significant for other

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Speaker 2: developing countries. And that's kind of the main point of,

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Speaker 2: of this article to kind of quantify and show how

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Speaker 2: big this is for other developing countries.

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Speaker 2: Um, and, and if you want, I can elaborate on

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Speaker 2: the magnitudes, but let's, yeah, so, so, just as one

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Speaker 2: should not take into account Chinese labor-intensive manufacturing, to, to

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Speaker 2: think about the China shock for the West, in some ways,

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Speaker 2: you should look only at labor-intensive manufacturing of China to

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Speaker 2: see the impact on other developing countries.

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Speaker 2: And then, of course, the, the two or three statistics

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Speaker 2: which are very striking. Let me tell you, one, of course,

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Speaker 2: is that if you look at just, uh, imports of

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Speaker 2: labor-intensive goods, low-skill intensive goods into, uh, you know, uh,

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Speaker 2: developing countries, low and middle-income countries, it's, it's, it's, you know,

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Speaker 2: much larger than what it was for at a comparable

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Speaker 2: point for the China shock one, for the West, it's

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Speaker 2: like 4 or 5% of GDP. But much more, I think,

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Speaker 2: significant is we have this new statistic, China, uh, showmitra

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Speaker 2: and I show.

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Speaker 2: That although Chinese, uh, China's global export market share in

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Speaker 2: labor-intensive goods has kind of come down a little bit

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Speaker 2: from uh 55 to say, you know, 48 or 49.

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Speaker 2: So there's, there's been some vacating of export space, as

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Speaker 2: we call it. However, for us,

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Speaker 2: Again, looking at it in slightly trade terms, you should

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Speaker 2: be looking at that compared to China's share of the

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Speaker 2: global labor force, because roughly, the intuition is that if

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Speaker 2: you have low skilled labor, that should be represented in,

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Speaker 2: you know, how much you export. And on that measure,

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Speaker 2: if anything, the gap has widened even since the peak.

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Speaker 2: Uh, that the wedge between China's global export market share

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Speaker 2: in labor intensive goods and China's market share of labor,

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Speaker 2: global labor, uh, you know, uh, that has in fact widened,

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Speaker 2: and it's now something like 17 20% points, which is huge.

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Speaker 2: So which is to say that China is not vacating

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Speaker 2: export market share, uh, which is in fact affecting all

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Speaker 2: these other developing countries.

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Speaker 1: It's absolutely fascinating. I mean, what I'll do is I'll

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Speaker 1: put a link to the project syndicate article because the

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Speaker 1: statistic that you just described is actually visualized in that

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Speaker 1: article that the chart that we have. It is very,

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Speaker 1: very compelling, and I believe right in conjunction with the chart,

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Speaker 1: you point out that apparel sector is a good case

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Speaker 1: study that China's labor costs have gone up substantially 4

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Speaker 1: times more than it is in India, 5 times more

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Speaker 1: than others, and so China maintains a fairly large share

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Speaker 1: in the apparel industry. Uh, Irvin, I just want to

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Speaker 1: Contest that a little bit if I may, and I

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Speaker 1: want to hear your view. So, it seems to me

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Speaker 1: that China's share of global clothing exports is declining. Still substantial,

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Speaker 1: absolutely 40% or so, but it's usually 50% plus. So,

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Speaker 1: over the last decade and a half, it has come

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Speaker 1: down a bit. And to your point that it is costly,

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Speaker 1: it is showing up in the profitability statistics. I just

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Speaker 1: read about this from a big garment sales that China

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Speaker 1: hosts 19% of global apparel companies, but their profit share

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Speaker 1: in the garment sector is barely 10%.

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Speaker 1: So, how do you sort of square these issues that A,

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Speaker 1: the Chinese are not that dominant and they're definitely not

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Speaker 1: that profitable. So maybe it's a matter of time before

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Speaker 1: they see some of that to the Bangladeshis and Indias

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Speaker 1: of the World.

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Speaker 2: So, um, uh, Temmon, that's a good point. See, one

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Speaker 2: thing which we didn't go into which, but which I've, uh,

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Speaker 2: which maybe you have the evidence for, which is consistent

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Speaker 2: with what you're saying.

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Speaker 2: Is that essentially, if you look at this, remember, we've

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Speaker 2: looked at it all in kind of uh uh kind

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Speaker 2: of value terms, export terms, right? Apparently, you know, terms

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Speaker 2: of trade, uh, you know, Chinese export prices have declined

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Speaker 2: in order to, you know, kind of maintain a global

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Speaker 2: market share, and that's what's getting affected probably in your profit.

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Speaker 2: Margins as well. But, but if that is true, then

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Speaker 2: in kind of some quantity terms, China's actually shared is

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Speaker 2: even greater than the value share indicates, uh, uh, and

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Speaker 2: China is holding on, see, because, uh, uh, uh, and,

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Speaker 2: and of course, the other factors that, uh, as we said,

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Speaker 2: wages are not only much higher than in, uh, comparable countries.

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Speaker 2: They've also risen very rapidly, uh, in, in Chinese manufacturing,

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Speaker 2: you know, it's not today, the numbers we have Chinese

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Speaker 2: wages in Chinese labor intensive manner, $10,000 a year, which is,

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Speaker 2: you know, uh, in market exchange rate terms, which is,

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Speaker 2: you know, you, you would think that at those rates

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Speaker 2: you're going to be not very competitive, uh, compared to

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Speaker 2: other countries, you know, compared to Bangladesh, Vietnam, India, so on.

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Speaker 2: So the fact that.

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Speaker 2: Uh, they are maintaining share. The fact that probably in

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Speaker 2: quantity terms, the share is even greater than the value

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Speaker 2: terms indicate, and that part of it is being achieved by,

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Speaker 2: you know, reducing export prices, which is then showing up

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Speaker 2: in your reduced profit margins as well. Um, now, how

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Speaker 2: long China can do it, of course, is, uh, up

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Speaker 2: for grabs, but of course, this brings us to,

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Speaker 2: Uh, the, the question of how is China sustaining it

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Speaker 2: even in the first place. Maybe the price is one

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Speaker 2: of it, and I think there are, uh, what Sumitra

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Speaker 2: and I think is that there are two reasons that

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Speaker 2: one can probably assign to this. One is the robots,

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Speaker 2: the use of robots. I think that, uh, uh, you know,

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Speaker 2: they're maintaining, uh, their competitive competitiveness in the face of

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Speaker 2: rising wages by just substituting, uh, robots and maintaining efficiency.

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Speaker 2: And then the other question is, which, you know, we

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Speaker 2: have only more uh maybe the, the IMF uh data

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Speaker 2: now maybe sheds more light on this, is how much

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Speaker 2: is happening due to kind of distortions of various sorts.

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Speaker 2: You know, whether it's the exchange rate, whether it's subsidy,

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Speaker 2: whether it's excess capacity and dumping, all of these things.

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Speaker 2: Uh, that's, I, I think a big part, and, uh,

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Speaker 2: you know, we don't have a good sense of what

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Speaker 2: the balance is between those two, but, which I think is, uh,

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Speaker 2: important to understand, both in a normative sense and in

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Speaker 2: the kind of the geopolitics of, you know, the rise

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Speaker 2: of China and where it's kind of positioning itself, uh,

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Speaker 2: in the wake of the Trump shock.

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Speaker 1: Arun, what I really like about the article that it's,

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Speaker 1: it's very pithy. I mean, it's not Project Syndicate doesn't

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Speaker 1: let you spend thousands of words, but you covered some

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Speaker 1: really important grounds. First, that we just touched upon. But

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Speaker 1: there's several sentences there that really resonated with me. So

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Speaker 1: you sort of harken back to the previous experience of

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Speaker 1: hegemonic powers and how they sort of treated the rest

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Speaker 1: of the world, accommodating some of their rights. So I

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Speaker 1: would quote the sentence.

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Speaker 1: Uh, paraphrasing a little bit, US's willingness to absorb imports

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Speaker 1: and allow others to grow was an essential part of

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Speaker 1: his global leadership. Would you like to elaborate that a

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Speaker 1: little bit?

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Speaker 2: Yeah, you know, I, I, I think, um, today in,

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Speaker 2: in the, in the world of uh Donald Trump and

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Speaker 2: all that has been done to the global economic system.

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Speaker 2: I think one shouldn't forget, uh, what, uh, uh, the

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Speaker 2: United States did offer by way of hegemonic leadership, you know, post,

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Speaker 2: post World War II. You know, uh, uh, uh, you know,

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Speaker 2: we can spend hours, especially on what the US did

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Speaker 2: on the political side, and, you know, on in terms

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Speaker 2: of toppling governments, etc. etc. But I think, like, you know,

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Speaker 2: Charlie Kindleberger said that a hegemon should provide three global

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Speaker 2: public goods, right? Uh, one is, uh, emergency.

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Speaker 2: Financing, and that's why I think over the years, the

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Speaker 2: IMF and the Fed have fulfilled that role, uh, you know,

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Speaker 2: to a, to a, to a, to a large extent, uh,

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Speaker 2: then long run resources for development. And, and thirdly, providing

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Speaker 2: open markets. And you know, if you look at uh

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Speaker 2: one of the charts in the presentation, I mean, the

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Speaker 2: fact that the US, especially after the 70s and 80s,

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Speaker 2: has consistently maintained these large current account deficits, has meant

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Speaker 2: that they've had kept their markets open.

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Speaker 2: One of the chief beneficiaries being China, and, you know, and,

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Speaker 2: and Europe first and then China and all these other countries. So,

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Speaker 2: so in that sense, uh, the US by remaining open

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Speaker 2: did facilitate the rise of those poorer than itself, than it,

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Speaker 2: than it was, and, and.

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Speaker 2: So the question is, is China doing the same, if

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Speaker 2: it has pretensions to, you know, global leadership, you know, uh,

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Speaker 2: you can't be a mercantilist and, you know, especially vis

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Speaker 2: a vis those poorer than you, and then hope to

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Speaker 2: have global leadership in terms of providing this, you know,

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Speaker 2: openness to trade as it were.

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Speaker 1: Absolutely. And one more quote from that, I think, sort

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Speaker 1: of reinforces what you just said, which is the new

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Speaker 1: China shock is not just about economic consequences. It is

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Speaker 1: also a test of whether China can serve as a

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Speaker 1: fair steward of global prosperity. Uh, shall we crystal ball

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Speaker 1: gaze a little bit and ponder whether China is in

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Speaker 1: a position to do that?

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Speaker 2: I

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Speaker 2: My, my own view is that this whole mercantilism and

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Speaker 2: the emphasis on production, uh, the emphasis on, you know, uh,

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Speaker 2: China first, uh, you know, having economic leadership and so on, um, I,

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Speaker 2: I think that's the Chinese DNA, right? Now,

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Speaker 2: One could argue that that is still consistent with China being, uh,

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Speaker 2: you know, uh, facilitating the rise of countries poorer than itself,

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Speaker 2: because after all, you could say, yes, it's mercantilist, yes,

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Speaker 2: it's production oriented.

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Speaker 2: But then there's no reason why it should not view

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Speaker 2: that in a dynamic sense and say, look, we were

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Speaker 2: like that on labor intensive goods until recently, now, you know,

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Speaker 2: wages have risen, technology, you know, we're becoming major producers

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Speaker 2: of technology, so we should ourself, while not losing that production.

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Speaker 2: Mercantilist bias and, you know, obsession, we can have that

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Speaker 2: in the new sectors, the high tech sectors, and so on,

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Speaker 2: and vacate space, uh, you know, in the, in the

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Speaker 2: low skilled sectors. So in principle, it's not incompatible, but

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Speaker 2: in practice, whether it'll end up doing that, because the

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Speaker 2: transitional costs are going to be huge, right? I mean, uh,

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Speaker 2: you have, you know, rising youth unemployment, uh, you have

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Speaker 2: the fear that AI will lead to loss of jobs,

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Speaker 2: and so whether it'll be willing to really abandon.

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Speaker 2: Uh, uh, you know, these, or rather see the space, uh,

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Speaker 2: in these labor intensive sectors for poorer countries, I, I

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Speaker 2: think is kind of open to question. Theoretically not inconsistent,

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Speaker 2: but practically, I, I still have my doubts.

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Speaker 1: Irvin, at the beginning of this conversation, you wanted to

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Speaker 1: sort of separate the low value added uh labor intensive.

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Speaker 1: Part of the debate with the high value added part.

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Speaker 1: If I may take the privilege of trying to combine

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Speaker 1: them a bit. Uh, I look at, uh, Australian Policy

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Speaker 1: strategy Institutes, Critical Tech Tracker. I look at World Intellectual

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Speaker 1: Property Organizations, patent database, and I'm sort of astonished by

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Speaker 1: China's climb up the value chain and the typical innovations

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Speaker 1: that are taking place in a wide range of technologies.

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Speaker 1: Now, that may be a source of competitive pressure for

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Speaker 1: industrialized economies, but it probably offers some degree of public

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Speaker 1: good aspect for the entire world economy. I'm thinking green transition,

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Speaker 1: buying a cheap solar cells from China or for that matter,

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Speaker 1: You know, the better AI that is cheaper and more

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Speaker 1: open source that is coming out of China than some

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Speaker 1: of the Western counterparts. So, wouldn't you say that that

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Speaker 1: is the tool that China potentially has to play a

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Speaker 1: provider of public good in those areas where it is

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Speaker 1: innovating rapidly?

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Speaker 2: So, so, uh, that's, uh, Stemma, that's a great point, OK. Uh, uh,

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Speaker 2: and it's something that I, I, I've, uh, uh, uh,

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Speaker 2: written about elsewhere that, um,

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Speaker 2: It, it is true. I mean, obviously, if you look

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Speaker 2: at solar panels, for example, I mean, the amount that

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Speaker 2: itself is the the biggest public goods that China has

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Speaker 2: provided the world, and you look at Pakistan, for example, now,

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Speaker 2: how it's transformed the Pakistan energy situation is just extraordinary.

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Speaker 2: It's happened.

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Speaker 2: In parts of Africa as well, just cheap solar panels,

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Speaker 2: you know, if you have no power, uh, you get

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Speaker 2: cheap solar panels, at least you get the power, you know,

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Speaker 2: when the sun is shining. It's a huge transformation. Now, uh,

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Speaker 2: and the same is true maybe for AI because remember

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Speaker 2: the whole debate about AI, you know, it's not important

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Speaker 2: for developing countries to.

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Speaker 2: Um, uh, produce this as long as, you know, it's, uh,

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Speaker 2: you know, it's cheaply available and they have the capability

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Speaker 2: to use and adapt it. So it is true that

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Speaker 2: China can be a provider of public goods, uh, and I,

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Speaker 2: I think, uh, maybe that's what it wants to do, but,

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Speaker 2: you know, but will it at the same time, uh,

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Speaker 2: you know,

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Speaker 2: You know, focus on this technology in the high value

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Speaker 2: added sector, and seed space in the other sectors. That's

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Speaker 2: the only issue where, uh, uh, you know, for me

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Speaker 2: that that matters, you know, um, and that's what I

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Speaker 2: think it should be looking at, you know, you know,

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Speaker 2: if it wants, it can even be a mercantilist and,

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Speaker 2: you know, be a production behemoth in all these.

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Speaker 2: High tech sectors, as it's already proving to be, you know,

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Speaker 2: do the innovation and etc. but, you know, while at

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Speaker 2: the same time, it should say, well, look, we don't

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Speaker 2: need to produce garments and clothing and footwear anymore, we're just,

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Speaker 2: it's just, we're far too uncompetitive in any case, and

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Speaker 2: I think it's that, I think that I want to

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Speaker 2: focus on, because, see, the reason Thermo is that look.

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Speaker 2: We know from the history of development that low-skill manufacturing

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Speaker 2: was the escalator out of underdevelopment for the successful cases.

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Speaker 2: Now, we also know that it cannot be the same

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Speaker 2: escalator for other developing countries, because, you know, the employment

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Speaker 2: bank for the manu for the low skilled manufacturing buck

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Speaker 2: is going to be much smaller going forward, uh, no, no, no, no,

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Speaker 2: no contest there at all. However, I still think, and

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Speaker 2: this is where I kind of a little bit disagree

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Speaker 2: with Danny, is that.

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Speaker 2: Uh, you know, for the poorer countries, it can still

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Speaker 2: be a, a, a kind of important escalator, if not

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Speaker 2: as critical as the past. So let me give you

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Speaker 2: just one example to highlight that one, number. Take India,

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Speaker 2: for example, right? Um, India's share of global apparel exports,

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Speaker 2: probably 3 or 4%. You know, China's, as you say,

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Speaker 2: now is 40%, at its peak, it was 50%.

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Speaker 2: India, uh, uh, so, so think of it, not even India,

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Speaker 2: think of this in this way, that 40% at some stage,

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Speaker 2: you know, China seeds and that 40% goes to poorer countries. Let's,

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Speaker 2: you know, just doing the thought experiment.

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Speaker 2: Let's say that produces half the employment that it produced

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Speaker 2: even for China, or even a third. It's still a

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Speaker 2: very big number for, you know, uh poorer countries. And

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Speaker 2: that's why I think that this is for me, um, uh, uh,

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Speaker 2: such an important policy issue, uh, for, uh, low, low

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Speaker 2: and middle-income countries.

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Speaker 1: Would that translate into policy advice for China in the

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Speaker 1: sense of more consumption incentives, which sort of creates an

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Speaker 1: economy that is more internally sustainable as opposed to dependent

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Speaker 1: on exports?

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Speaker 2: Certainly that's a big part of that, right, but this

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Speaker 2: is something that people have been drumming on for 150,

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Speaker 2: 20 years with, with very little, very little impact. Uh, so,

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Speaker 2: but I, I, I would say that, um, maybe I, I,

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Speaker 2: I would, uh, twist it or slightly nuance it the

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Speaker 2: following manner, you know.

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Speaker 2: China has consumption share of China has to become more

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Speaker 2: consuming rather than a producing economy, right? Fine, but

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Speaker 2: What I would urge upon the Chinese is that, you know,

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Speaker 2: this is a moment for global leadership for China in

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Speaker 2: the wake of, you know, the Trump shock and things. Uh,

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Speaker 2: you know, it, it has, uh, uh, some, uh, you know, uh,

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Speaker 2: you know, uh, space has been opened up for global

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Speaker 2: leadership by, by the actions of the Trump administration, and

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Speaker 2: they seem to be serious about wanting to, you know,

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Speaker 2: provide a rival model or a rival, uh, uh, you know,

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Speaker 2: hegemonic leadership, then,

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Speaker 2: Even if they are not as ambitious about, you know,

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Speaker 2: increasing consumption and becoming less mercantilist as a whole, at

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Speaker 2: least in the short run, focus on,

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Speaker 2: You know, getting out of it in, uh, or being

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Speaker 2: much more, much less mercantilist on these labor intensive sectors

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Speaker 2: that affect poorer countries. So that would be the kind

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Speaker 2: of small nuance in the pool if they became a

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Speaker 2: more consumption oriented economy, there would naturally be collateral benefits to, uh,

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Speaker 2: you know, uh, uh, you know, exports of.

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Speaker 2: These goods would come down, imports of these goods would

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Speaker 2: go up, it would benefit other developing countries, but I

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Speaker 2: think maybe, for example, if there are policy distortions that

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Speaker 2: favor labor intensive production in China, to act on those

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Speaker 2: quicker and earlier, then it may be able to act on,

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Speaker 2: you know, increasing consumption more broadly.

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Speaker 1: Irvin, I was uh smiling a bit because I was

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Speaker 1: having a distinct sense of deja vu. I may have

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Speaker 1: asked you a very similar question four years ago when

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Speaker 1: you were in this podcast, and you probably have given

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Speaker 1: a very similar answer. Uh, let me ask you this, however,

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Speaker 1: if to your point that China has a bit of

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Speaker 1: a mercantilist DNA, but it is beginning to see a

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Speaker 1: very large part of its market slowly closing, meaning the

422
00:23:43,650 --> 00:23:47,270
Speaker 1: US and therefore, it has to rely more on accessing

423
00:23:47,270 --> 00:23:50,349
Speaker 1: Africa and Middle East and South Asia, India included.

424
00:23:51,089 --> 00:23:54,649
Speaker 1: Doesn't that lead to China being almost being compelled to

425
00:23:54,650 --> 00:23:56,969
Speaker 1: be a nicer, gentler, clean counterpart?

426
00:23:58,790 --> 00:23:59,449
Speaker 2: Well

427
00:24:00,930 --> 00:24:03,770
Speaker 2: Uh, I, I thought, um, you know, see, I, I,

428
00:24:03,849 --> 00:24:06,649
Speaker 2: I've spoken to a few of the ASEAN policymakers in

429
00:24:06,650 --> 00:24:11,349
Speaker 2: the thing. They are actually extra worried because the Trump

430
00:24:12,089 --> 00:24:18,569
Speaker 2: shock is making China divert its goods towards other emerging

431
00:24:18,569 --> 00:24:20,430
Speaker 2: market countries, so the competitive.

432
00:24:21,939 --> 00:24:25,228
Speaker 2: Yeah, the, I mean, uh, uh some people attribute, you know,

433
00:24:25,310 --> 00:24:29,569
Speaker 2: the whole Indonesian riots to partly to failed structural transformation,

434
00:24:30,069 --> 00:24:33,130
Speaker 2: and you know, the loss of uh jobs in manufacturing,

435
00:24:33,630 --> 00:24:39,829
Speaker 2: but if anything, anxieties have heightened in East Asia, Southeast Asia.

436
00:24:40,390 --> 00:24:42,589
Speaker 2: About, you know, the whole, the new, they see the

437
00:24:42,589 --> 00:24:46,989
Speaker 2: new China shock as, you know, dumping diversion away from

438
00:24:46,989 --> 00:24:50,530
Speaker 2: the US, you know, into this, which actually, uh, uh,

439
00:24:50,550 --> 00:24:55,280
Speaker 2: you know, makes them more mercantilist towards Southeast Asia rather

440
00:24:55,280 --> 00:24:57,550
Speaker 2: than less. But to be fair, I think to the Chinese,

441
00:24:57,630 --> 00:25:00,140
Speaker 2: I think they see that they need to have better

442
00:25:00,140 --> 00:25:03,770
Speaker 2: trade relations with these countries. But again, in the short run,

443
00:25:04,069 --> 00:25:05,669
Speaker 2: that is not manifesting itself.

444
00:25:06,295 --> 00:25:11,094
Speaker 2: As less uh competitive pressure, less mercantilism, if anything, in

445
00:25:11,094 --> 00:25:15,454
Speaker 2: the short run, it's manifesting itself as more mercantilism, which

446
00:25:15,454 --> 00:25:18,494
Speaker 2: has made policymakers much more anxious. I mean, if you

447
00:25:18,494 --> 00:25:21,694
Speaker 2: look at, for example, the anti-dumping actions uh are taken

448
00:25:21,694 --> 00:25:25,525
Speaker 2: by developing countries, most of them are against China. So,

449
00:25:25,775 --> 00:25:29,655
Speaker 2: so that anxiety is, if anything, more, not less in

450
00:25:29,655 --> 00:25:31,343
Speaker 2: the wake of the Trump-China shock.

451
00:25:32,000 --> 00:25:33,810
Speaker 1: Uh, I mean, I also pick up that anxiety when

452
00:25:33,810 --> 00:25:36,589
Speaker 1: I talk to clients and counterparts in the region.

453
00:25:37,150 --> 00:25:38,639
Speaker 1: But I have to say that when I look at

454
00:25:38,640 --> 00:25:42,439
Speaker 1: the trade data for 2025 so far, it seems to

455
00:25:42,439 --> 00:25:46,000
Speaker 1: me that whether it is India or Vietnam, or even

456
00:25:46,000 --> 00:25:48,000
Speaker 1: for that matter, Taiwan, which is, you know, at a

457
00:25:48,000 --> 00:25:52,159
Speaker 1: very sensitive position wedged between China and the US, they're

458
00:25:52,160 --> 00:25:55,959
Speaker 1: all seeing their exports doing very well. India had an

459
00:25:55,959 --> 00:25:59,119
Speaker 1: export winter vis a vis China in 2023, 20204. This

460
00:25:59,119 --> 00:26:01,560
Speaker 1: year is going by over 20%. I see the same

461
00:26:01,560 --> 00:26:03,170
Speaker 1: from Singapore, I see the same for Taiwan.

462
00:26:03,520 --> 00:26:05,540
Speaker 1: Um, so, I sort of wanted to stay on with

463
00:26:05,540 --> 00:26:10,160
Speaker 1: that gentler, kinder China, not only in terms of its

464
00:26:10,160 --> 00:26:12,660
Speaker 1: terms of trade vis a vis its exports into developed

465
00:26:12,660 --> 00:26:17,310
Speaker 1: developing countries, but also developing countries' market access into China.

466
00:26:17,719 --> 00:26:20,510
Speaker 1: Have you seen any evidence of what I'm trying to suggest,

467
00:26:20,589 --> 00:26:22,280
Speaker 1: which is that exports are beginning to nudge up?

468
00:26:23,400 --> 00:26:25,599
Speaker 2: So, so, so, uh, you know, uh, uh, some data

469
00:26:25,599 --> 00:26:29,380
Speaker 2: that Shomitro and I did was to look at imports

470
00:26:29,400 --> 00:26:36,438
Speaker 2: into China of uh labor intensive goods, and you don't see, uh, that, uh, uh, rise.

471
00:26:36,520 --> 00:26:41,270
Speaker 2: So if anything, the import side in China is looking, uh,

472
00:26:41,310 --> 00:26:43,739
Speaker 2: and it's something that Brad Setzer has remarked as well,

473
00:26:44,000 --> 00:26:48,079
Speaker 2: it is looking less open, uh, than, uh, you know,

474
00:26:48,189 --> 00:26:51,859
Speaker 2: even a few years ago. So, so, uh, so remember.

475
00:26:52,719 --> 00:26:56,680
Speaker 2: There is a gentler uh China, or at least presentationally

476
00:26:56,680 --> 00:26:59,500
Speaker 2: a gentler China that has said, you know, we will

477
00:26:59,500 --> 00:27:03,300
Speaker 2: abandon our special and differential country status in the WTO.

478
00:27:03,560 --> 00:27:06,679
Speaker 2: That's right. The China has also said we will provide

479
00:27:06,680 --> 00:27:11,310
Speaker 2: duty-free access to many African countries into this, but at

480
00:27:11,310 --> 00:27:14,560
Speaker 2: least so far, at least whathomitra and I have analyzed,

481
00:27:14,880 --> 00:27:19,699
Speaker 2: imports into China of labor intensive goods from developing countries

482
00:27:19,880 --> 00:27:21,938
Speaker 2: is not showing any surge at all.

483
00:27:23,439 --> 00:27:26,839
Speaker 1: What should India's strategy be in this context, and I

484
00:27:26,839 --> 00:27:29,119
Speaker 1: ask that question with a license because I am talking

485
00:27:29,119 --> 00:27:30,718
Speaker 1: to the former economic advisor of India.

486
00:27:34,520 --> 00:27:35,879
Speaker 2: You know, I.

487
00:27:37,380 --> 00:27:40,899
Speaker 2: Uh, for one thing, I think we need to, uh, uh,

488
00:27:40,939 --> 00:27:44,978
Speaker 2: India needs to sort out the, the, the, the trade

489
00:27:44,979 --> 00:27:48,959
Speaker 2: deal with the United States. I think that's absolutely imperative. Um,

490
00:27:49,180 --> 00:27:50,859
Speaker 2: you know, I, I, I was, I was in India

491
00:27:50,859 --> 00:27:54,819
Speaker 2: recently talking to, uh, these, uh, apparel exporters.

492
00:27:55,560 --> 00:27:59,209
Speaker 2: Um, so, I, I was pretty, uh, struck by what

493
00:27:59,209 --> 00:28:03,849
Speaker 2: they said. So, you know, on apparel, uh, uh, US

494
00:28:03,849 --> 00:28:07,849
Speaker 2: tariffs are 50%, and they said they are bearing the

495
00:28:07,849 --> 00:28:11,229
Speaker 2: cost of 25% of that. So, you know, in terms

496
00:28:11,229 --> 00:28:14,689
Speaker 2: of who's bearing the cost of the tariffs, 50% is

497
00:28:14,689 --> 00:28:17,369
Speaker 2: being borne by the exporter in, in this instance, and then,

498
00:28:17,449 --> 00:28:22,329
Speaker 2: you know, uh, and therefore, um, uh, the, the kind

499
00:28:22,329 --> 00:28:23,030
Speaker 2: of hit.

500
00:28:23,400 --> 00:28:26,250
Speaker 2: Um, to bottom line to employment that can happen.

501
00:28:26,640 --> 00:28:29,930
Speaker 2: Um, uh, uh, you know, maybe they can sustain it

502
00:28:29,930 --> 00:28:33,688
Speaker 2: for some time like China is via smaller profit margins,

503
00:28:34,050 --> 00:28:37,790
Speaker 2: but at some point, and remember in the case of India,

504
00:28:38,530 --> 00:28:41,160
Speaker 2: these exporters are not big, as we know in India,

505
00:28:41,209 --> 00:28:44,890
Speaker 2: the problem is, you know, size, these are not Foxconn

506
00:28:44,890 --> 00:28:45,270
Speaker 2: type

507
00:28:45,760 --> 00:28:47,219
Speaker 1: exporters are low margin businesses,

508
00:28:48,010 --> 00:28:51,770
Speaker 2: exactly, very low margin businesses, and therefore, uh, the impacts

509
00:28:51,770 --> 00:28:53,489
Speaker 2: are being felt already, so.

510
00:28:53,564 --> 00:28:56,005
Speaker 2: That's a long-winded way of saying that, uh, you know,

511
00:28:56,125 --> 00:29:00,805
Speaker 2: a necessary condition for India to, you know, uh, take

512
00:29:00,805 --> 00:29:04,074
Speaker 2: advantage of the China plus one opportunity is to first

513
00:29:04,074 --> 00:29:06,484
Speaker 2: sort out the, you know, the, uh, the tariffs vis

514
00:29:06,484 --> 00:29:08,844
Speaker 2: a vis the US, and then, of course, then the, uh,

515
00:29:08,925 --> 00:29:11,435
Speaker 2: you know, and of course this, it should do regardless is,

516
00:29:11,635 --> 00:29:15,444
Speaker 2: you know, refocus on some of the domestic reforms that, uh, uh,

517
00:29:15,525 --> 00:29:18,604
Speaker 2: you know, many people have spoken about, uh, uh, and,

518
00:29:18,645 --> 00:29:20,484
Speaker 2: you know, we've also written a little book, but that.

519
00:29:21,099 --> 00:29:24,439
Speaker 2: That, that whole, because, you know, Temur, I, I, you know, I,

520
00:29:24,530 --> 00:29:28,609
Speaker 2: I advised some state governments in India, and I was

521
00:29:28,609 --> 00:29:31,930
Speaker 2: beginning to be actually be encouraged that, you know, states

522
00:29:31,930 --> 00:29:36,329
Speaker 2: like Tamil Nadu, Karnataka, Andhra Pradesh were in fact attracting

523
00:29:36,329 --> 00:29:39,609
Speaker 2: China plus one investment. I mean, famously, Apple and Foxconn,

524
00:29:39,810 --> 00:29:43,069
Speaker 2: you know, Apple has said, uh, that it's wants China

525
00:29:43,069 --> 00:29:45,439
Speaker 2: to India to be it's kind of long-term location for.

526
00:29:45,895 --> 00:29:48,025
Speaker 2: For, you know, many of these things. And the same

527
00:29:48,025 --> 00:29:50,505
Speaker 2: thing was happening in other sectors as well. So in

528
00:29:50,505 --> 00:29:55,025
Speaker 2: a sense, this Trump shock is not about current exports

529
00:29:55,025 --> 00:29:58,744
Speaker 2: being affected. It's about a whole development model that was

530
00:29:58,744 --> 00:30:02,824
Speaker 2: suddenly becoming possible once again, which has been kind of

531
00:30:02,824 --> 00:30:06,145
Speaker 2: threatened and eroded by this. So, we, I mean, a

532
00:30:06,145 --> 00:30:09,785
Speaker 2: trade deal is almost like a necessary condition for exploiting

533
00:30:09,785 --> 00:30:10,625
Speaker 2: this opportunity.

534
00:30:11,729 --> 00:30:15,719
Speaker 1: Arvind, I traveled through uh Seoul and Tokyo recently, uh,

535
00:30:15,920 --> 00:30:18,560
Speaker 1: during the time when our former IMF colleague Chen Yun-wei

536
00:30:18,560 --> 00:30:21,989
Speaker 1: at Bank of Korea was trying to explain how 2/3

537
00:30:21,989 --> 00:30:25,199
Speaker 1: of Korea's reserves would have to be, uh, earmarked for

538
00:30:25,199 --> 00:30:27,160
Speaker 1: investments in the US and so on. It seemed to

539
00:30:27,160 --> 00:30:30,680
Speaker 1: me that countries that have very strong trade relationship with

540
00:30:30,680 --> 00:30:33,680
Speaker 1: the US have a corporate sector that really wants.

541
00:30:33,920 --> 00:30:37,280
Speaker 1: Trade agreements with the US. But the public, whether it

542
00:30:37,280 --> 00:30:39,160
Speaker 1: is in Korea or Japan, I want to ask you

543
00:30:39,160 --> 00:30:41,430
Speaker 1: what the context of this is with respect to India.

544
00:30:41,920 --> 00:30:44,739
Speaker 1: The public there don't seem to be that enamored by,

545
00:30:45,199 --> 00:30:48,920
Speaker 1: you know, a deal at whatever cost, uh, scenario. And

546
00:30:48,920 --> 00:30:51,079
Speaker 1: my takeaway from my trip to Korea and Japan was

547
00:30:51,079 --> 00:30:54,119
Speaker 1: that while corporate Korea, corporate Japan are very keen because

548
00:30:54,119 --> 00:30:55,959
Speaker 1: very large part of their profits come from the US,

549
00:30:56,380 --> 00:30:59,869
Speaker 1: The public sentiment is one where US soft power has

550
00:30:59,869 --> 00:31:04,229
Speaker 1: been eroded substantially, and this government would struggle to go

551
00:31:04,229 --> 00:31:06,300
Speaker 1: with their corporate line that just do whatever it takes

552
00:31:06,300 --> 00:31:10,420
Speaker 1: to make Trump happy. Now, put that into the Indian

553
00:31:10,420 --> 00:31:12,750
Speaker 1: context and a trade deal with the US.

554
00:31:14,520 --> 00:31:17,140
Speaker 2: Yeah, uh, that's a a great question, Tamur. I, I mean,

555
00:31:17,219 --> 00:31:24,550
Speaker 2: of course, uh, uh, the whole Trump-India interaction has, you know,

556
00:31:24,750 --> 00:31:29,430
Speaker 2: really soured the Indian mood on the United States more broadly.

557
00:31:29,510 --> 00:31:32,030
Speaker 2: There's no question about that, you know, um.

558
00:31:33,930 --> 00:31:37,380
Speaker 2: But there's a kind of, uh, you know, uh, it

559
00:31:37,380 --> 00:31:39,780
Speaker 2: depends on how you look at it also, right? I,

560
00:31:39,859 --> 00:31:40,349
Speaker 2: I mean.

561
00:31:41,239 --> 00:31:47,079
Speaker 2: You have to wonder, um, how much of this uh

562
00:31:47,079 --> 00:31:48,260
Speaker 2: was a necessary.

563
00:31:48,920 --> 00:31:53,319
Speaker 2: Uh, pricking of the Indian bubble of, you know, we

564
00:31:53,319 --> 00:31:56,050
Speaker 2: are so powerful, we are so much, you know, we

565
00:31:56,050 --> 00:31:59,449
Speaker 2: call the shots, etc. etc. right? So, so some of that,

566
00:31:59,530 --> 00:32:03,609
Speaker 2: you know, uh, souring reflects this kind of deflating of

567
00:32:03,609 --> 00:32:06,209
Speaker 2: the bubble, but because it was a bubble, maybe some

568
00:32:06,209 --> 00:32:09,569
Speaker 2: of it needed deflating, and, and therefore, uh, you know,

569
00:32:09,729 --> 00:32:11,729
Speaker 2: maybe not such a bad thing, you know, look.

570
00:32:12,160 --> 00:32:14,959
Speaker 2: Let's be clear, uh, dealing with this Trump administration and

571
00:32:14,959 --> 00:32:19,238
Speaker 2: the kind of, uh, uh, it is fiendishly hard, you know, uh,

572
00:32:19,560 --> 00:32:22,040
Speaker 2: every country faced that, but it is what it is,

573
00:32:22,099 --> 00:32:25,319
Speaker 2: you have to take that for a given, uh, so the, but, but,

574
00:32:25,390 --> 00:32:29,079
Speaker 2: but then coming to your question, but it has surprised

575
00:32:29,079 --> 00:32:33,199
Speaker 2: me how much, even though India doesn't, you know, is

576
00:32:33,199 --> 00:32:35,939
Speaker 2: not a large exporting nation unlike Japan or Korea.

577
00:32:36,550 --> 00:32:41,920
Speaker 2: Despite that, uh, the, uh, uh, uh, the impact on

578
00:32:42,260 --> 00:32:46,219
Speaker 2: small and medium enterprises in India has, I think, uh, uh,

579
00:32:46,300 --> 00:32:49,579
Speaker 2: you know, uh, influenced policy sentiment and the, and the

580
00:32:49,579 --> 00:32:52,260
Speaker 2: perception of what needs to be done, uh, which is

581
00:32:52,260 --> 00:32:53,150
Speaker 2: the irony that it's,

582
00:32:53,209 --> 00:32:56,339
Speaker 1: it's the gems and jewelry sector comes to mind gems

583
00:32:56,339 --> 00:33:02,020
Speaker 2: and jewelry, textiles, fisheries, and, and because remember these are all, uh, again,

584
00:33:02,469 --> 00:33:04,099
Speaker 2: these are not big corporate titles.

585
00:33:04,375 --> 00:33:07,305
Speaker 2: But because of that, it probably resonates a lot with

586
00:33:07,305 --> 00:33:09,545
Speaker 2: the public mood at large, that, you know, you want

587
00:33:09,545 --> 00:33:12,925
Speaker 2: to uh uh not, you want to somehow rescue uh

588
00:33:12,935 --> 00:33:17,305
Speaker 2: uh these uh small and medium enterprises from the shock. and,

589
00:33:17,344 --> 00:33:20,344
Speaker 2: you know, that's why, although there's been no big fiscal

590
00:33:20,344 --> 00:33:23,064
Speaker 2: package as yet, uh, which has been, you know, made

591
00:33:23,064 --> 00:33:27,785
Speaker 2: available to these affected industries, but it has preyed on

592
00:33:27,785 --> 00:33:30,744
Speaker 2: the consciousness of, you know, the public at large and

593
00:33:30,744 --> 00:33:31,984
Speaker 2: policymakers as well.

594
00:33:32,959 --> 00:33:36,609
Speaker 1: Arvin, um, this is my understanding from some policymakers that

595
00:33:36,609 --> 00:33:38,930
Speaker 1: I've heard, you have far greater access. So correct me

596
00:33:38,930 --> 00:33:41,209
Speaker 1: if I'm wrong, but my understanding is that the contours

597
00:33:41,209 --> 00:33:43,689
Speaker 1: of a trade deal from the Indian side was more

598
00:33:43,689 --> 00:33:44,910
Speaker 1: or less set by

599
00:33:45,689 --> 00:33:48,640
Speaker 1: Middle of this year. Then a couple of things. I'll

600
00:33:48,640 --> 00:33:50,479
Speaker 1: put us said the India-Pakistan issue, and I want to

601
00:33:50,479 --> 00:33:52,469
Speaker 1: talk about the other one, which is the agriculture sector,

602
00:33:52,880 --> 00:33:55,469
Speaker 1: that the Indian line is that that is a no go,

603
00:33:55,719 --> 00:33:58,599
Speaker 1: whereas the agricultural lobby in the US is still pushing

604
00:33:58,599 --> 00:34:01,310
Speaker 1: Trump a lot to force India to open up a bit.

605
00:34:01,520 --> 00:34:03,890
Speaker 1: Is that aligned with your understanding?

606
00:34:04,699 --> 00:34:06,939
Speaker 2: Yeah, I, I, I, I think, but I've also heard

607
00:34:06,939 --> 00:34:09,850
Speaker 2: what you just said, that even many of these issues

608
00:34:09,850 --> 00:34:13,830
Speaker 2: had been broadly sorted out, even agriculture had been broadly

609
00:34:13,830 --> 00:34:16,620
Speaker 2: sorted out, and that was not the impediment to the

610
00:34:16,620 --> 00:34:20,139
Speaker 2: trade deal, uh, by any means. So, maybe a few things,

611
00:34:20,209 --> 00:34:23,560
Speaker 2: you know, uh, a few minor issues need to be resolved,

612
00:34:23,820 --> 00:34:26,879
Speaker 2: but by and large, that was not the obstruction of

613
00:34:26,879 --> 00:34:29,739
Speaker 2: what was holding back the trade deal, yeah. They had

614
00:34:29,739 --> 00:34:32,489
Speaker 2: managed to come to some kind of compromise or even

615
00:34:32,489 --> 00:34:33,300
Speaker 2: on agriculture.

616
00:34:33,949 --> 00:34:36,280
Speaker 1: OK. So, so that's good to know. So you, so

617
00:34:36,280 --> 00:34:38,520
Speaker 1: my understanding was that the India basically saying that's a

618
00:34:38,520 --> 00:34:41,639
Speaker 1: red line and the Americans did not necessarily want to

619
00:34:41,639 --> 00:34:43,520
Speaker 1: agree that that's a red line. So your view is

620
00:34:43,520 --> 00:34:45,360
Speaker 1: that the Americans are OK with that being a red line?

621
00:34:46,530 --> 00:34:49,489
Speaker 2: Well, uh, you see, I, I, I, obviously, there must

622
00:34:49,489 --> 00:34:52,330
Speaker 2: have been some give and take on that, right? I mean, uh,

623
00:34:52,449 --> 00:34:55,209
Speaker 2: but I, I, I don't think, you know, India could

624
00:34:55,209 --> 00:34:57,530
Speaker 2: say we will not open up at all, nor could

625
00:34:57,530 --> 00:35:00,479
Speaker 2: the USA open up your dairy sector entirely, you know,

626
00:35:00,689 --> 00:35:04,370
Speaker 2: so obviously they must have struck some compromise, uh, which

627
00:35:04,370 --> 00:35:06,009
Speaker 2: probably provides more.

628
00:35:06,145 --> 00:35:11,584
Speaker 2: Access in particular goods for up to, you know, particular amounts, magnitudes,

629
00:35:11,625 --> 00:35:14,694
Speaker 2: and so on, but, but, uh, you know, whatever it is,

630
00:35:14,745 --> 00:35:17,614
Speaker 2: it seems from what, you know, as you said, uh,

631
00:35:17,665 --> 00:35:22,435
Speaker 2: some understandings have been reached which are apparently mutually satisfactory.

632
00:35:22,705 --> 00:35:24,985
Speaker 2: But I, I don't know the details as, uh, uh like,

633
00:35:25,094 --> 00:35:25,844
Speaker 2: like you as well.

634
00:35:26,659 --> 00:35:29,219
Speaker 1: I want to uh sort of combine the new China

635
00:35:29,219 --> 00:35:32,229
Speaker 1: shock deliberation with the India context a little bit more.

636
00:35:32,860 --> 00:35:34,860
Speaker 1: So I'm just kind of think that, you know, does

637
00:35:34,860 --> 00:35:38,020
Speaker 1: it make sense for India to form a stronger alliance

638
00:35:38,020 --> 00:35:41,979
Speaker 1: with ASEAN nations with respect to supply chain globalization, and

639
00:35:41,979 --> 00:35:44,969
Speaker 1: then the China plus one narrative becomes even more persuasive

640
00:35:44,969 --> 00:35:46,500
Speaker 1: to foreign direct investors.

641
00:35:49,699 --> 00:35:52,300
Speaker 2: Uh, uh, so, uh, uh, on the face of it,

642
00:35:52,379 --> 00:35:57,840
Speaker 2: obviously the answer is, uh, obviously, unambiguously yes, but remember

643
00:35:57,979 --> 00:36:01,419
Speaker 2: that the, the elephant in the room here, of course,

644
00:36:01,540 --> 00:36:05,209
Speaker 2: is that, uh, you know, and that's part of the

645
00:36:05,209 --> 00:36:10,739
Speaker 2: reason why India didn't join our set, that India forging

646
00:36:10,739 --> 00:36:14,739
Speaker 2: closer links with East Asia means de facto India will

647
00:36:14,739 --> 00:36:17,100
Speaker 2: also have to open up to China in some way

648
00:36:17,100 --> 00:36:17,799
Speaker 2: or the other.

649
00:36:18,659 --> 00:36:23,189
Speaker 2: and uh, I, I think it's that India-China relationship that

650
00:36:23,189 --> 00:36:26,509
Speaker 2: needs to be sorted out, uh, for, you know, even the,

651
00:36:26,669 --> 00:36:29,149
Speaker 2: you know, so, so integrating more with East Asia is

652
00:36:29,149 --> 00:36:31,949
Speaker 2: kind of probably a no-brainer, and, and, you know, um, but,

653
00:36:32,030 --> 00:36:34,739
Speaker 2: but that's kind of, uh, uh, the first step, as

654
00:36:34,739 --> 00:36:38,429
Speaker 2: it were. The real integration has to happen, uh, vis

655
00:36:38,429 --> 00:36:41,409
Speaker 2: a vis, uh, you know, China, or rather more openness,

656
00:36:41,669 --> 00:36:44,219
Speaker 2: and there, as, you know, it's kind of, uh, uh,

657
00:36:44,229 --> 00:36:45,909
Speaker 2: influenced and contaminated by.

658
00:36:46,189 --> 00:36:49,979
Speaker 2: The broader geopolitical relationship as well. And, uh, you know,

659
00:36:50,040 --> 00:36:53,479
Speaker 2: uh in the last economic survey, the current chief economic

660
00:36:53,479 --> 00:36:56,919
Speaker 2: advisor has been in the camp of saying that we

661
00:36:56,919 --> 00:37:01,120
Speaker 2: should have closer economic links with China, uh, and we

662
00:37:01,120 --> 00:37:04,739
Speaker 2: should try and kind of separate the uh geopolitics from

663
00:37:04,739 --> 00:37:05,520
Speaker 2: the economics.

664
00:37:06,139 --> 00:37:09,449
Speaker 2: And uh and I think uh that's probably the sensible

665
00:37:09,449 --> 00:37:12,219
Speaker 2: way forward that we have to come up, uh, and

666
00:37:12,219 --> 00:37:15,750
Speaker 2: hopefully some of the, you know, towing of the India-China

667
00:37:15,750 --> 00:37:19,270
Speaker 2: China relationship will have the consequence that, you know, India

668
00:37:19,270 --> 00:37:23,179
Speaker 2: can maybe separate out the geopolitics of economics. and that, remember,

669
00:37:23,290 --> 00:37:26,459
Speaker 2: I think even on the economic side, uh, I think

670
00:37:26,459 --> 00:37:28,479
Speaker 2: there are ways of,

671
00:37:29,100 --> 00:37:35,080
Speaker 2: Uh, you know, using finer policy instruments, uh, to achieve, uh,

672
00:37:35,219 --> 00:37:39,179
Speaker 2: your goals while minimizing whatever are the perceived fears and anxieties,

673
00:37:39,379 --> 00:37:42,370
Speaker 2: you know, obviously, you know, if you're worried about technology,

674
00:37:42,419 --> 00:37:44,620
Speaker 2: you don't have to let in a Huawei, but why

675
00:37:44,620 --> 00:37:47,760
Speaker 2: not allow Chinese investments in, you know, you know, routine

676
00:37:47,760 --> 00:37:51,139
Speaker 2: supply chain for, you know, apparel or, you know, footwear.

677
00:37:51,215 --> 00:37:55,854
Speaker 2: Or, or all these, you know, whatever electronics, whatever. Uh, and, uh, so, so,

678
00:37:55,975 --> 00:37:59,475
Speaker 2: so there is a way of, I think, maybe straddling

679
00:37:59,475 --> 00:38:03,254
Speaker 2: uh the the uh the competing objectives, uh, given the

680
00:38:03,254 --> 00:38:04,875
Speaker 2: fraught India-China relationship.

681
00:38:05,415 --> 00:38:08,534
Speaker 1: Oh, absolutely. Uh, Irvin, I'm sure in your visits, you've

682
00:38:08,534 --> 00:38:12,645
Speaker 1: noticed there are MG cars all over India, Bangalore, Bombay, Delhi,

683
00:38:12,915 --> 00:38:15,214
Speaker 1: anywhere you go. I don't think people think of MG

684
00:38:15,215 --> 00:38:17,294
Speaker 1: cars that made in China cars, but they are a

685
00:38:17,294 --> 00:38:20,774
Speaker 1: joint venture with full tech Transport, GSW and Shanghai Auto.

686
00:38:21,149 --> 00:38:23,870
Speaker 1: I think, to me, at least, Irvin, that's the the

687
00:38:23,889 --> 00:38:27,469
Speaker 1: the roadmap going forward, insist to the Chinese what the

688
00:38:27,469 --> 00:38:29,389
Speaker 1: Chinese have insisted to the Western companies that, you know,

689
00:38:29,510 --> 00:38:32,500
Speaker 1: come to my country with joint venture and tech transfer,

690
00:38:32,550 --> 00:38:35,030
Speaker 1: and then my market is open for you. Um, Irvin,

691
00:38:35,110 --> 00:38:37,070
Speaker 1: you are, of course, privy to some of the discussions

692
00:38:37,070 --> 00:38:40,850
Speaker 1: during the RCEP days. My understanding is that there were

693
00:38:40,850 --> 00:38:44,509
Speaker 1: avenues for India to have a very graduated entry into

694
00:38:44,510 --> 00:38:46,590
Speaker 1: RSEP and RSEP members were willing to do that.

695
00:38:47,000 --> 00:38:49,069
Speaker 1: But it was at the end of the day, just

696
00:38:49,070 --> 00:38:51,939
Speaker 1: not going to happen, that even the China concern was

697
00:38:51,939 --> 00:38:55,189
Speaker 1: addressed to some extent by the RAF members. Is that

698
00:38:55,189 --> 00:38:56,169
Speaker 1: your recollection?

699
00:38:57,229 --> 00:38:59,489
Speaker 2: See, I, I, I, I was not part of these negotiations,

700
00:38:59,669 --> 00:39:04,250
Speaker 2: but remember, see, remember that just to get the history right,

701
00:39:05,070 --> 00:39:08,469
Speaker 2: I'm always, uh, you know, this happened towards the end

702
00:39:08,469 --> 00:39:11,388
Speaker 2: of my stint in government, and, you know, I didn't

703
00:39:11,389 --> 00:39:13,850
Speaker 2: have much of a, a, a role in this, but

704
00:39:14,389 --> 00:39:21,850
Speaker 2: India started turning protectionist once again around 2018. And, uh,

705
00:39:21,870 --> 00:39:24,649
Speaker 2: more broadly, not just, uh, you know, it was, um,

706
00:39:24,669 --> 00:39:26,489
Speaker 2: it was tariffs were raised.

707
00:39:26,860 --> 00:39:31,428
Speaker 2: Um, uh, you know, um, uh, India started reviewing all

708
00:39:31,429 --> 00:39:37,610
Speaker 2: these free trade agreements, so there was a broader ideological, uh,

709
00:39:38,070 --> 00:39:40,750
Speaker 2: turn away from openness.

710
00:39:41,370 --> 00:39:46,050
Speaker 2: And that, uh, you know, accentuated the AEP-China discussion, so

711
00:39:46,050 --> 00:39:48,729
Speaker 2: it was not just out of the blue. There was

712
00:39:48,729 --> 00:39:51,209
Speaker 2: a broader, and this was always, and, and I've written

713
00:39:51,209 --> 00:39:53,770
Speaker 2: about this recently, the, the, the, uh, and you know,

714
00:39:53,889 --> 00:39:57,649
Speaker 2: more recently, India has been imposing these absolutely protectionist.

715
00:39:57,939 --> 00:40:02,909
Speaker 2: Quality control orders. So that uh, you know, DNA in

716
00:40:02,909 --> 00:40:06,820
Speaker 2: India of, you know, never really embracing openness to do

717
00:40:06,820 --> 00:40:10,100
Speaker 2: it under duress or, you know, uh, for particular reasons

718
00:40:10,100 --> 00:40:14,850
Speaker 2: that happened in the 1990s, Alina, because of crises or whatever, that,

719
00:40:14,899 --> 00:40:18,739
Speaker 2: that the Indian DNA has never, and you know, including

720
00:40:18,739 --> 00:40:23,620
Speaker 2: this government, has never really been pro openness and markets

721
00:40:23,620 --> 00:40:24,399
Speaker 2: and so on.

722
00:40:24,959 --> 00:40:29,919
Speaker 2: Uh, it's now changing, partly again because India's under pressure, uh, and, and, and,

723
00:40:29,969 --> 00:40:32,330
Speaker 2: and that's happening, but it's not a, you know, it's

724
00:40:32,330 --> 00:40:35,489
Speaker 2: not a, a kind of, uh, atavistic sense that, uh,

725
00:40:35,530 --> 00:40:37,969
Speaker 2: visceral sense that, you know, this is good for us,

726
00:40:38,050 --> 00:40:40,049
Speaker 2: you know, we'll do it because we have to, not

727
00:40:40,050 --> 00:40:42,489
Speaker 2: because we think, and I've been very critical of the

728
00:40:42,489 --> 00:40:43,449
Speaker 2: quality control order.

729
00:40:43,715 --> 00:40:45,705
Speaker 2: that were issued in the last 2 or 3 years,

730
00:40:45,754 --> 00:40:51,425
Speaker 2: which were really horrendously awful protectionist instruments, uh, discretionary instruments,

731
00:40:51,475 --> 00:40:54,314
Speaker 2: and that was the DNA. So the REP should be

732
00:40:54,314 --> 00:40:57,145
Speaker 2: seen in that broader context. There was a China element,

733
00:40:57,195 --> 00:41:00,975
Speaker 2: but there was also a, a, a broader ideological uh U-turn,

734
00:41:00,985 --> 00:41:02,194
Speaker 2: as it were, that happened.

735
00:41:03,060 --> 00:41:05,699
Speaker 1: So liberalization tends to be associated with the popping of

736
00:41:05,699 --> 00:41:09,448
Speaker 1: a bubble, uh, OK, exchange rate bubble or an ego

737
00:41:09,449 --> 00:41:12,820
Speaker 1: political bubble, etc. Uh, that's a very, very well put.

738
00:41:14,100 --> 00:41:16,290
Speaker 2: Or, or Tina, there is no in '91, we did

739
00:41:16,290 --> 00:41:19,040
Speaker 2: it because there was no alternative, right? I mean, uh,

740
00:41:19,080 --> 00:41:22,260
Speaker 2: there was a crisis and, and, uh, um.

741
00:41:23,110 --> 00:41:23,969
Speaker 2: Yeah. Right.

742
00:41:24,070 --> 00:41:27,149
Speaker 1: Um, I, in the article earlier, I've forgotten to ask

743
00:41:27,149 --> 00:41:29,590
Speaker 1: you this issue, which is that, you know, in support

744
00:41:29,590 --> 00:41:32,908
Speaker 1: of the Martin Tor model, uh, you can pursue competitive

745
00:41:32,909 --> 00:41:36,030
Speaker 1: exchange rate by keeping an undervalued exchange and so on. Uh,

746
00:41:36,149 --> 00:41:38,020
Speaker 1: you worked on the China team in the IMF back

747
00:41:38,020 --> 00:41:40,449
Speaker 1: in the days, and I remember very clearly you had

748
00:41:40,709 --> 00:41:43,850
Speaker 1: strident views on this issue then. Uh, having looked at

749
00:41:43,850 --> 00:41:45,949
Speaker 1: China over the last 20 years, do you think the

750
00:41:45,949 --> 00:41:48,010
Speaker 1: Chinese are still maintaining an undervalued currency?

751
00:41:49,250 --> 00:41:51,600
Speaker 2: See, I, I don't follow China as closely as I

752
00:41:51,600 --> 00:41:55,129
Speaker 2: used to, but, you know, I, I, I follow Brad

753
00:41:55,129 --> 00:41:57,409
Speaker 2: Setzer very closely in what he's saying.

754
00:41:58,080 --> 00:42:00,090
Speaker 2: And, you know, because the whole thing has gotten more

755
00:42:00,090 --> 00:42:02,969
Speaker 2: murky as it were, right? The reserves no longer are

756
00:42:02,969 --> 00:42:05,229
Speaker 2: held by the central bank, they're held by, by the

757
00:42:05,330 --> 00:42:07,719
Speaker 2: commercial banks, so you don't know what the, whether they're

758
00:42:07,719 --> 00:42:11,250
Speaker 2: accumulating reserves and to the extent to which, and therefore,

759
00:42:11,409 --> 00:42:14,270
Speaker 2: you know, also who's doing the intervention on whose behalf

760
00:42:14,570 --> 00:42:18,679
Speaker 2: is also, uh, but I'm kind of persuaded a little

761
00:42:18,679 --> 00:42:22,439
Speaker 2: bit that, uh, you know, certainly in the last 34 years,

762
00:42:22,729 --> 00:42:25,449
Speaker 2: you see how the current account surplus has widened.

763
00:42:25,790 --> 00:42:27,949
Speaker 2: Uh, and Brad says, if you, if you look at

764
00:42:27,949 --> 00:42:32,379
Speaker 2: the Chinese real effective exchange rate, it has, uh, you know, uh, it,

765
00:42:32,439 --> 00:42:37,189
Speaker 2: it has, uh, been, uh, uh, over, overcompetitive as it were,

766
00:42:37,229 --> 00:42:40,229
Speaker 2: over this period. So, so, so although the exact, you know,

767
00:42:40,310 --> 00:42:43,270
Speaker 2: it's much more difficult, uh, to be precise, you know,

768
00:42:43,469 --> 00:42:46,820
Speaker 2: because unlike earlier where the intervention was obvious, the reserve

769
00:42:46,820 --> 00:42:51,090
Speaker 2: buildup was obvious, uh, yeah, uh, now it's less transparent.

770
00:42:51,524 --> 00:42:53,844
Speaker 2: But I, I, I do think that, you know, the

771
00:42:53,844 --> 00:42:59,604
Speaker 2: exchange rate, uh, subsidies, uh, a whole bunch of these policies, uh,

772
00:43:00,125 --> 00:43:04,784
Speaker 2: you know, you cannot have rising surpluses and a resurgence

773
00:43:04,784 --> 00:43:08,884
Speaker 2: of mercantilism without some policy assistance, right? It can't just

774
00:43:08,885 --> 00:43:12,844
Speaker 2: be that you're super competitive, uh, you know, and using

775
00:43:12,844 --> 00:43:16,485
Speaker 2: robots and things. There must be some policy, uh, help,

776
00:43:16,604 --> 00:43:17,284
Speaker 2: as it were.

777
00:43:18,060 --> 00:43:22,219
Speaker 1: Uh, given the ongoing, uh, sort of changes in Washington DC,

778
00:43:22,429 --> 00:43:24,750
Speaker 1: including new leadership and the first deputy managing director of

779
00:43:24,750 --> 00:43:27,540
Speaker 1: the IMF and so on, I sometimes wonder whether 2026

780
00:43:27,540 --> 00:43:29,299
Speaker 1: will be a year when, in addition to the tariffs,

781
00:43:29,370 --> 00:43:34,010
Speaker 1: the US also starts using exchange rate, uh, issues as,

782
00:43:34,020 --> 00:43:36,459
Speaker 1: as a weapon, if you will. Um, do you think

783
00:43:36,459 --> 00:43:38,699
Speaker 1: a country like India could also then fall under the

784
00:43:38,699 --> 00:43:41,658
Speaker 1: radar of US Department of Commerce because the RBI does

785
00:43:41,659 --> 00:43:45,239
Speaker 1: intervene on the exchange rate and has accumulated substantial reserves?

786
00:43:46,899 --> 00:43:48,310
Speaker 2: Well, for one thing.

787
00:43:49,409 --> 00:43:52,879
Speaker 2: India's current account is, is still, is still in deficit, right?

788
00:43:52,929 --> 00:43:56,129
Speaker 2: I think that's one, and.

789
00:43:58,149 --> 00:43:59,090
Speaker 2: The um

790
00:44:00,239 --> 00:44:03,899
Speaker 2: Uh, Remember, uh, the, the funny thing about India was

791
00:44:04,439 --> 00:44:08,759
Speaker 2: that there was a, you know, you're right that broadly, firstly,

792
00:44:08,840 --> 00:44:10,909
Speaker 2: the current account deficit will go in India's favor. I, I,

793
00:44:11,000 --> 00:44:13,719
Speaker 2: I don't think that will, uh, you know, uh, people

794
00:44:13,719 --> 00:44:16,879
Speaker 2: should look, I mean, they worry much more about surpluses, right? Um.

795
00:44:17,550 --> 00:44:22,030
Speaker 2: The, the second is that, you, you know, India did

796
00:44:22,030 --> 00:44:26,469
Speaker 2: deviate from its long-standing exchange rate policy for about a

797
00:44:26,469 --> 00:44:31,300
Speaker 2: couple of years, uh, uh, uh, uh, you know, until, uh,

798
00:44:31,310 --> 00:44:34,790
Speaker 2: early this year. Uh, in fact, as you know, we,

799
00:44:34,870 --> 00:44:39,310
Speaker 2: I wrote about this, uh, with, with some colleagues in India,

800
00:44:39,429 --> 00:44:42,469
Speaker 2: I think blew up about, um, um.

801
00:44:43,520 --> 00:44:49,199
Speaker 2: Uh, 100, 50 to $200 billion so the old policy of,

802
00:44:49,250 --> 00:44:50,899
Speaker 2: you know, um.

803
00:44:53,169 --> 00:44:58,689
Speaker 2: Prevent appreciation when the inflows, uh, and, you know, allow

804
00:44:58,689 --> 00:45:03,129
Speaker 2: the exchange rate, you know, flexibility downwards, that had changed

805
00:45:03,129 --> 00:45:05,810
Speaker 2: for some period, which would, of course, uh, uh go

806
00:45:05,810 --> 00:45:08,310
Speaker 2: to the uh redound to the credit of Indian uh

807
00:45:08,320 --> 00:45:12,968
Speaker 2: uh policymakers vis a vis Treasury, uh, scrutiny. Um, but

808
00:45:12,969 --> 00:45:15,409
Speaker 2: now I think, again, I think, uh, and, and of

809
00:45:15,409 --> 00:45:18,370
Speaker 2: course a lot depends upon how the dollar itself behaves, right?

810
00:45:18,610 --> 00:45:21,448
Speaker 2: The the dollar has been softer, uh, so.

811
00:45:21,534 --> 00:45:26,415
Speaker 2: I, I think that, um, you know, India doesn't have to, uh, uh, uh,

812
00:45:26,725 --> 00:45:30,054
Speaker 2: uh intervene as much. Uh, it's only when the, you know,

813
00:45:30,135 --> 00:45:33,655
Speaker 2: inflows are strong into India that, that you get this

814
00:45:33,655 --> 00:45:37,455
Speaker 2: kind of behavior which potentially Treasury could kind of single

815
00:45:37,455 --> 00:45:40,574
Speaker 2: out and say is, uh, problematic. But I think for

816
00:45:40,574 --> 00:45:42,774
Speaker 2: the moment, I think that's not, especially with all these

817
00:45:42,774 --> 00:45:44,964
Speaker 2: current account deficits, I don't think it's going to be

818
00:45:44,965 --> 00:45:46,594
Speaker 2: a major issue for some time.

819
00:45:47,159 --> 00:45:49,089
Speaker 1: So, I mean, the reason I brought this issue up

820
00:45:49,090 --> 00:45:51,379
Speaker 1: in the context of the new China Shock was that

821
00:45:51,550 --> 00:45:53,629
Speaker 1: it seems to me that today's wisdom is that if

822
00:45:53,629 --> 00:45:56,029
Speaker 1: a big country puts tariff on you, your best response

823
00:45:56,030 --> 00:45:57,939
Speaker 1: is not to retaliate because then you just make a

824
00:45:57,939 --> 00:46:01,709
Speaker 1: bad situation worse. I suppose I was thinking along that

825
00:46:01,709 --> 00:46:04,550
Speaker 1: line with respect to exchange rate policy. If you believe

826
00:46:04,550 --> 00:46:07,899
Speaker 1: that your marketist counterpart is pursuing an undervalued exchange rate,

827
00:46:08,229 --> 00:46:10,500
Speaker 1: do you then want to also play with your exchange rate?

828
00:46:10,550 --> 00:46:12,389
Speaker 1: I think I'm hearing from you that don't.

829
00:46:14,800 --> 00:46:19,040
Speaker 2: No, see, no, no, let me be, let me be, uh, uh, um, uh,

830
00:46:19,050 --> 00:46:23,290
Speaker 2: honest here. I was always in favor of that policy of,

831
00:46:23,560 --> 00:46:26,879
Speaker 2: you know, see, remember, OK, let's step back. I, I

832
00:46:26,879 --> 00:46:30,479
Speaker 2: was always in favor of not being too strong on

833
00:46:30,479 --> 00:46:33,679
Speaker 2: opening the capital account to portfolio inflows, right? That was

834
00:46:33,679 --> 00:46:36,959
Speaker 2: my original position. I still stand by that because that's

835
00:46:36,959 --> 00:46:39,919
Speaker 2: kind of a necessary con or or necessary condition.

836
00:46:40,320 --> 00:46:42,479
Speaker 2: For being able to control the real uh to influence

837
00:46:42,479 --> 00:46:44,949
Speaker 2: the real, real exchange rate. Once you open it up,

838
00:46:45,000 --> 00:46:47,799
Speaker 2: it becomes much more difficult. It's not impossible, but it's

839
00:46:47,800 --> 00:46:51,419
Speaker 2: more difficult to do. Uh having opened up, I think

840
00:46:51,639 --> 00:46:54,000
Speaker 2: I was in favor of the policy of the asymmetric

841
00:46:54,000 --> 00:46:55,479
Speaker 2: exchange rate policy, right?

842
00:46:55,860 --> 00:46:58,070
Speaker 2: Um, and I would continue to be in favor of that.

843
00:46:58,189 --> 00:47:00,459
Speaker 2: So in that sense, uh, to the extent that it

844
00:47:00,459 --> 00:47:04,110
Speaker 2: imparts a, a mercantilist bias to the exchange rate, uh,

845
00:47:04,189 --> 00:47:05,979
Speaker 2: I would be in favor of that. I, I was

846
00:47:05,979 --> 00:47:07,949
Speaker 2: always in favor of that because if you believe in

847
00:47:07,949 --> 00:47:11,830
Speaker 2: labor intensive exports, but in the context of tariff shocks, um,

848
00:47:11,909 --> 00:47:14,469
Speaker 2: I think it would be more legitimate, uh, uh, not

849
00:47:14,469 --> 00:47:17,388
Speaker 2: just as a development tool, but just as a protecting

850
00:47:17,389 --> 00:47:21,270
Speaker 2: yourself resilience tool, uh, in response to other countries' actions.

851
00:47:22,250 --> 00:47:25,060
Speaker 1: Absolutely fascinating. OK, very heterodox, but it totally makes sense

852
00:47:25,060 --> 00:47:29,580
Speaker 1: to me. Uh, Arvind, uh, great conversation, but I want

853
00:47:29,580 --> 00:47:32,340
Speaker 1: to digress a little bit at the very end, you

854
00:47:32,340 --> 00:47:38,169
Speaker 1: have written a substantial book, 750 pages, I believe, uh, written, uh,

855
00:47:38,179 --> 00:47:41,139
Speaker 1: jointly with, um, well, first of all, the title, 1/6

856
00:47:41,139 --> 00:47:45,060
Speaker 1: of Humanity, Independent India's Development Odyssey, co-authored with Deve Shapour.

857
00:47:45,409 --> 00:47:48,429
Speaker 1: Um, I know that for the listeners of Kope Time

858
00:47:48,429 --> 00:47:51,089
Speaker 1: in the US, the book is still not available. Uh,

859
00:47:51,129 --> 00:47:53,209
Speaker 1: I think it's the same stands for the listeners of

860
00:47:53,209 --> 00:47:55,409
Speaker 1: Kobe Time in Singapore. But those of us who are

861
00:47:55,409 --> 00:47:58,250
Speaker 1: listening to this from India should be able to buy it, correct?

862
00:47:59,580 --> 00:48:03,100
Speaker 2: Absolutely, and hopefully within a month or two, also at

863
00:48:03,100 --> 00:48:06,590
Speaker 2: least order it uh internationally as well, yeah. Uh.

864
00:48:07,439 --> 00:48:09,129
Speaker 1: Do you want to give us a little hint of

865
00:48:09,129 --> 00:48:11,069
Speaker 1: the scope and the framework of the book?

866
00:48:12,270 --> 00:48:15,080
Speaker 2: Yeah, and this is a book that, you know, uh, um, uh,

867
00:48:15,100 --> 00:48:17,729
Speaker 2: let me just say that, um, this is a book

868
00:48:17,729 --> 00:48:20,580
Speaker 2: that Devesh and I have written, uh, have, have spent

869
00:48:20,580 --> 00:48:25,659
Speaker 2: 5 years writing, researching and analyzing, and 10 years thinking. It's,

870
00:48:25,780 --> 00:48:31,060
Speaker 2: it's a really a, a kind of comprehensive look at, uh, development.

871
00:48:31,100 --> 00:48:34,419
Speaker 2: We have a new analytical framework for thinking about development.

872
00:48:34,949 --> 00:48:37,590
Speaker 2: Which is that development is not just, you know, a

873
00:48:37,590 --> 00:48:41,279
Speaker 2: narrow economics view of, you know, markets and states, or,

874
00:48:41,350 --> 00:48:44,909
Speaker 2: or a slightly broader view of states and society. What we,

875
00:48:45,100 --> 00:48:47,179
Speaker 2: you know, kind of uh say in this book is that,

876
00:48:47,590 --> 00:48:51,209
Speaker 2: especially for a new country like, you know, fledgling countries

877
00:48:51,479 --> 00:48:53,549
Speaker 2: like India, many other countries around the world.

878
00:48:54,030 --> 00:48:59,709
Speaker 2: Um, uh, what development comprises is, you know, obviously you

879
00:48:59,709 --> 00:49:02,388
Speaker 2: have to build markets and an economy, you have to

880
00:49:02,389 --> 00:49:04,948
Speaker 2: build a state, and in, in the case of colonial countries,

881
00:49:04,989 --> 00:49:07,790
Speaker 2: you have to reconfigure the state. You have to build

882
00:49:07,790 --> 00:49:11,229
Speaker 2: a nation. I mean, something that economists are very shy

883
00:49:11,229 --> 00:49:13,979
Speaker 2: about coy about, uh, addressing, uh, how do you build

884
00:49:13,979 --> 00:49:16,590
Speaker 2: a nation? And of course, uh, in the case of

885
00:49:16,590 --> 00:49:17,810
Speaker 2: India with all its,

886
00:49:18,014 --> 00:49:21,975
Speaker 2: Horrendous patriarchies and the caste system, how do you transform society,

887
00:49:22,054 --> 00:49:29,175
Speaker 2: you know, so nation, state, society, markets for transformations, and

888
00:49:29,175 --> 00:49:32,334
Speaker 2: uniquely in the case of India, via democratic politics from

889
00:49:32,334 --> 00:49:38,195
Speaker 2: day one, universal franchise, um, and how India did that, uh,

890
00:49:38,205 --> 00:49:40,675
Speaker 2: is kind of the focus of the book, uh, and

891
00:49:40,675 --> 00:49:41,875
Speaker 2: we kind of, so it's kind of an.

892
00:49:42,370 --> 00:49:48,649
Speaker 2: Analytical and comprehensive development history of India over 75 years, and,

893
00:49:48,729 --> 00:49:52,409
Speaker 2: you know, uh, it's, uh, we, um, one of the

894
00:49:52,409 --> 00:49:55,449
Speaker 2: things I'd like to impress upon, uh, uh, uh, your

895
00:49:55,449 --> 00:49:58,750
Speaker 2: viewers and listeners is that, you know, we provide data

896
00:49:58,750 --> 00:50:00,609
Speaker 2: on this 75 years.

897
00:50:00,810 --> 00:50:03,429
Speaker 2: For almost everything, so it's a lot of new data,

898
00:50:03,770 --> 00:50:06,850
Speaker 2: and we are hoping that, uh, not only will people

899
00:50:06,850 --> 00:50:09,040
Speaker 2: read it and, and take issue with us on our

900
00:50:09,040 --> 00:50:12,639
Speaker 2: main arguments, but that it'll serve as a reference book, uh,

901
00:50:12,649 --> 00:50:17,850
Speaker 2: and hopefully it'll spawn 1000 PhDs, uh, you know, contesting

902
00:50:17,850 --> 00:50:19,129
Speaker 2: what we say in the book.

903
00:50:19,879 --> 00:50:21,639
Speaker 1: Fantastic. I haven't had the pleasure of reading the book.

904
00:50:21,679 --> 00:50:23,439
Speaker 1: I look forward to it, but I did watch the

905
00:50:23,439 --> 00:50:26,389
Speaker 1: book launch, uh, that you had in Washington DC recently,

906
00:50:26,600 --> 00:50:29,689
Speaker 1: and there's one chart you showed, and already I'm captivated

907
00:50:29,689 --> 00:50:31,638
Speaker 1: by it, where in the horizontal axis you have log

908
00:50:31,639 --> 00:50:34,320
Speaker 1: of GDP of various countries on the vertical axis of

909
00:50:34,320 --> 00:50:36,919
Speaker 1: democracy ranking and how India.

910
00:50:37,320 --> 00:50:40,560
Speaker 1: At an unprecedented low income level had very high democracy

911
00:50:40,560 --> 00:50:42,570
Speaker 1: scores and had to sort of live with it, whereas

912
00:50:42,570 --> 00:50:44,479
Speaker 1: in the case of China, we see the exact opposite,

913
00:50:44,520 --> 00:50:46,199
Speaker 1: you know, no improvement in democracy. And

914
00:50:46,199 --> 00:50:46,320
Speaker 2: you

915
00:50:46,320 --> 00:50:49,158
Speaker 2: know, and how democracy both gave and, and, you know,

916
00:50:49,399 --> 00:50:52,679
Speaker 2: but also impeded in some ways. So that's part of

917
00:50:52,679 --> 00:50:54,209
Speaker 2: what's the book, so um.

918
00:50:54,689 --> 00:50:58,120
Speaker 2: Uh, uh, you know, um, you know, I don't know whether, uh, it'll, it'll,

919
00:50:58,209 --> 00:51:01,409
Speaker 2: I hope it'll at least provoke, because, uh, as Simon

920
00:51:01,409 --> 00:51:05,520
Speaker 2: Johnson very generously said, I think this is a book that, uh,

921
00:51:05,530 --> 00:51:09,840
Speaker 2: is about India, but then is about development more broadly itself, and,

922
00:51:09,889 --> 00:51:12,439
Speaker 2: and I think that's what we'd like to urge, uh,

923
00:51:12,489 --> 00:51:15,469
Speaker 2: you know, uh, uh, ask readers to check out whether

924
00:51:15,469 --> 00:51:17,639
Speaker 2: that's a legitimate claim or not.

925
00:51:18,050 --> 00:51:20,729
Speaker 1: It will be checked out. Arvind Subramanian, thank you so

926
00:51:20,729 --> 00:51:21,889
Speaker 1: much for your time and insights.

927
00:51:22,889 --> 00:51:24,179
Speaker 2: Uh, thanks for having me, Turia.

928
00:51:24,939 --> 00:51:27,659
Speaker 1: Thanks to our listeners as well. Uh, this podcast was

929
00:51:27,659 --> 00:51:30,739
Speaker 1: produced by Ken Del Bridgette's Fly Studios. Daisy Sharma and

930
00:51:30,739 --> 00:51:33,899
Speaker 1: Violet Lee provided additional assistance. Kobe time is for information

931
00:51:33,899 --> 00:51:37,939
Speaker 1: only and does not constitute any investment advice. All 164

932
00:51:37,939 --> 00:51:41,560
Speaker 1: episodes of this podcast series are available on YouTube, Apple,

933
00:51:41,580 --> 00:51:44,580
Speaker 1: and Spotify. For our research content and webinars, you can

934
00:51:44,580 --> 00:51:47,300
Speaker 1: find them all by Googling DBS Research Library. Have a

935
00:51:47,300 --> 00:51:47,860
Speaker 1: great day.