00:06for 70 days since the u.s. iran war began the government's public posture was one of confidence
00:12no advisory no caution no signal that indians needed to brace for anything then in the space
00:18of just 24 hours the prime minister made two direct appeals for the nation asking citizens
00:23to cut foreign travel avoid gold work from home use less cooking oil what does it actually
00:29mean what is the health of the indian economy joining me now is dr. shamika ravi who is part
00:36of economic advisory council of the prime minister ma'am thank you for speaking to india today two
00:41appeals in under 24 hours after 70 days of silence is the economic situation scary or is the government
00:48responding to a situation that is moving faster than anticipated
00:56thank you maria for uh having me uh well first of all it hasn't been uh so many days of
01:03silence we've
01:04all been following it very closely and uh it's only now that we know it's close to three months
01:12we know that uh the new pronouncements from both washington and tehran don't seem to suggest
01:19any time uh reduction in you know this uncertainty and you know as well as i'm guessing most of your
01:27listeners know how vulnerable we are in terms of how much we import and particularly from this
01:33part of the world or this street so uh it's time now for us to also begin to think of
01:40a long time of
01:42civil policy ma'am india imports nearly 85 percent of its oil and is one of the world's largest gold
01:50buyers both entirely dollar domin uh denominated when a prime minister asks citizens to cut both
01:59what is the math like well the math is very simple uh basically remember when 2014 to 16 when global
02:11uh petroleum prices had fallen to i think 26 uh dollars per baron and then subsequently in 2022 and
02:1923 also there was a significant reduction and the public discussion at that point was why is none of
02:26that price reduction being passed on to consumers in india and so it's about time we explained that
02:34this is a counter-technical policy where it is on account of the uh the storage expanding our
02:42strategic reserves as well as creating the fiscal space when the prices were down that we have been
02:48able to withstand nearly three months of uncertainty but moving forward given that this doesn't look like
02:55it's going to go away anytime soon we have to think of different ways in which now uh we invoke
03:03what i i can call a wartime uh fuel policy and remember because we are importing uh we do need
03:11foreign
03:11reserves and uh the outflow from gold is also significant so uh pm being a very big believer in uh
03:20public action and
03:21jan and then people being part of uh these austerity measures right now it's really an invocation it's not
03:29a policy that has been uh announced uh but i think it does affect people and uh people are going
03:36to respond to his
03:37exhortation uh dr shamika ravi what will be the negative consequences of any curves of consumption has that been uh
03:46factored in
03:48that's a very good question remember most of the affluent nations you have been reading that
03:53they have a almost a complete pass-through of the crisis you have seen big price rise in many of
03:59these
03:59economies uh in our case now given that you know we are an economy where we have just moved out
04:06of
04:06poverty there is a very large segment particularly let's say if you think of the bottom 20 percent
04:12uh where uh vehicular ownership has gone from four percent ten years back to today 40 percent
04:18you know simple price differences are not going to lead to the kind of containment
04:25that is required to respond to the supply chain so which which is another way to basically say our
04:31demand for petrol and diesel is not very price sensitive the price elastic which means uh and i mean in
04:39common english i would say that if a price the price rise needs to be 200 to 300 percent to
04:45really
04:46reduce consumption by any significant amount so quantity uh restrictions or quantity controls asking
04:53people to cut down consumption etc uh that is likely to have uh a more long term and a and
05:00a sort of
05:00a better impact also remember that passing on price shop also has a regressive distributional impact
05:08it's the farmers and the truckers and you know uh auto rickshaws uh or people with two wheelers who
05:15use for conveyance etc uh who are going to face the brunt of that trisanship so that's the reason we
05:22are not
05:22doing what uh the g7 nations have done uh we are doing uh what is uniquely i think an indian
05:29way of doing which is
05:30first appeal to the public uh to first uh show some greater discipline and come down on consumption
05:37and then we'll see how the future unfolds ma'am india's strategic petroleum reserves uh stood at only 64
05:45percent capacity going into this crisis 3.37 million tons out of 5.33 million well below the 90 day
05:53international benchmark if citizen behavior is the lever being pulled now what does the government's own
06:01balance sheet of preparedness look like well remember our strategic petroleum reserve we started to
06:12think about it seriously only from 1998 and most of our areas of reserve have only gotten operationalized
06:21since 2015 maria so i know that you know we tend to forget uh where we have come from and
06:28what the
06:28situation on the ground is of course remember simultaneously there are many other things happening
06:33from the supply side which is the reason we have not yet faced the full brunt of what is unfolding
06:39in
06:39the mid east think of uh just our dependence on renewables you know for an economy of our per capita
06:47income
06:47uh 20 of our total energy needs are met by renewables uh it's only 15 for a much larger economy
06:55like china
06:56so we have already begun to change the mix of uh energy uh to make it far more sustainable in
07:04the long run
07:05the big push for evs uh electrification of rain waves uh you know you are you are seeing a lot
07:12of
07:12demand substitutes we call them uh which i think this particular uh you know this war and this the way
07:20this
07:20is a sort of a extended period of uncertainty it's also a window of opportunity for us to do these
07:26longer
07:26term strategic things uh to make us more self-reliant or less dependent at least on that part of the
07:33world
07:33let's talk about gold here the rbi grew its sovereign gold holdings from 794 metric tons in september
07:432025 to 880 metric tons by march this year even as citizens are now being asked not to buy gold
07:51how do those two positions coexist within the same economic framework ma'am well uh indians do we do
08:01consume a lot of gold maria and it is a uh you know it's a trapped asset and of course
08:06we are we we
08:07spend a lot of foreign exchange uh reserves when we buy gold now of course jensen jewelry is also a
08:14very important uh sector of exports uh but the retail consumption of gold in india is uniquely high
08:22uh and uh this is the particular exhortation you have uh from the prime minister is a is basically
08:29asking people uh to uh to sort of uh you know slow their purchases because we do have to also
08:36protect
08:37the foreign exchange reserves what about unintended consequences gold and aviation sectors also contribute
08:44to the economy what happens to these businesses and the lacks they employ especially the jewelry industry
08:50yeah so i think there is a distinction there the sectors which are eventually using gold as an input
08:57for further exports uh they are unlikely to be faced with any kind of quantity constraint in fact right
09:05now nobody is facing the quantity constraint it's really a exhortation from the prime minister for the
09:11retail customers it's for common people it's for the rest of us to really just uh stop buying gold for
09:16some time uh because we do we do consume a lot of gold and remember this is not an asset
09:22which is
09:22going into investment uh you know as an economist sometimes you call these dead assets i mean these
09:27are assets which are uh you know kept away and they're not very liquid so we also are thinking of
09:34ways in
09:34which you uh make it more liquid and bring it into the financial system for investment and the spiral
09:41effect of lower fuel consumption uh dr ravi possibly much costlier fuel or the prices of essentials won't
09:49that really slow down the economy even more isn't that the fear well that that is a it's a it's
09:55a
09:55it's a worthwhile fear to plan against uh what you have to remember is because our demand for the
10:02petrol and diesel is relatively price inelastic which means we have to increase prices a lot
10:08to really reduce uh consumption this kind of self-curtainment now you know for instance if you
10:16are um someone who goes to work on your two wheeler a cutting down consumption is not an option
10:23right because uh you know it's highly inelastic whatever the price may be you're still going to
10:30continue using that because that affects your livelihood but uh there are many segments of the
10:36economy where people do have the bandwidth uh to reduce their consumption by certain amount and i
10:42think these are extraordinary times which do require some degree of cooperation from people at large
10:50my last question to you ma'am and this is with regards to the dollar the rupee is hovering at
10:5664.65 to
10:57the dollar it was at 16 2014 85 to 86 at the end of 2024 how much of that trajectory
11:05is the west asia
11:07shock and how much was already a structural story in motion well before the war began well remember
11:15while they're pushing export a falling rupee is good for exporter so please try not to look at the
11:25the reduction in the value of rupee vis-a-vis the dollar as a as an only measure of strength
11:30of uh uh
11:32the currency right it it affects a certain segment's positive particularly exporter the other is you know
11:39we are trying to make it more and more uh market-based with lesser intervention so rbi spending money to
11:47keep it at a certain value doesn't seem like a very smart policy and and uh and hence we're letting
11:54it
11:54discover its true value one concern is also about productivity what are the measures the government
12:01is taking to increase inflow into india that's the sport promotion right the inflow uh is largely on
12:12account of what we sell and that is why we are also hoping uh that over the medium term the
12:18new trade
12:19agreement etc uh we'll see uh greater airflow uh off of those all right dr shamika we really appreciate
12:28your time thank you for explaining to us the real situation because there were a lot of questions
12:33raised after repeated appeal by the prime minister thank you ma'am thank you for your time thank you
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