- 1 day ago
In this episode of Newstrack, watch the exclusive interview of Niti Aayog Vice Chairman Ashok Lahiri as he decodes PM Modi's austerity push amid the escalating crisis in West Asia.
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00:00Hello, everyone, and welcome to this special conversation.
00:03For over 70 days, India watched the West Asia crisis,
00:08and with every passing day, that crisis and the war is only escalating and deepening at the same time.
00:16Till now, there has been no call of restraint here at home, and that changed.
00:2372 hours ago, Prime Minister Narendra Modi gave the first call,
00:27appealing to Indians that they should watch their expenditure,
00:32cut discretionary spending, and also conserve foreign exchange.
00:37What does this actually mean?
00:40Are these some signs of concern for you and me?
00:44Let me take all those questions to the Vice Chairperson of Neeti Aayog, Dr. Ashok Lehri,
00:51and this is his first interview ever since he took charge.
00:54Dr. Lehri, really appreciate your time. Thank you.
00:57Should we be concerned?
01:00With the war waging in West Asia, which no one can predict how long it will go,
01:10there's really reason to be concerned, no doubt about that.
01:15But I'm surprised that some people are saying,
01:17why this national austerity?
01:19National austerity is another term for national savings.
01:22And forget this current crisis.
01:26You know national savings is the main source of national investment.
01:32China, the East Asian tigers, they used to save a lot.
01:38China saved more than 50% of its GDP in 2010,
01:43whereas my country, your country,
01:46we saved 34%, 15% less than this.
01:53So national austerity, if it's a synonym for national savings,
01:57asking people to save more,
01:59because that savings is what will finance investment,
02:03is always a good thing.
02:05But that's a suspicious way of answering your question.
02:09There's no doubt that with this kind of uncertainty regarding West Asia,
02:16it's always a good thing to avoid unnecessary spending,
02:24avoid gold imports.
02:26And gold is my favorite topic.
02:28You know gold, the foreign, the Afghans used to call it,
02:32Sone Kichiria.
02:34India has got something like 18,000 tons of gold,
02:39which is a lot of what all the gold that has been produced in the world,
02:45and your ancestors didn't produce any gold.
02:48So all the gold was imported from outside.
02:51And in a way, it's a waste of money.
02:53So if the prime minister is asking people to avoid importing gold,
02:58avoid unnecessary, ostentatious expenditure like destination weddings,
03:04things, we should be happy.
03:07This call could have been given in all times,
03:09but this is particularly important now,
03:12because as you know, the exports and imports,
03:16we export more when we save more,
03:19we import more when we spend more than what we earn.
03:24So that's the natural arithmetic.
03:28Don't you think that consumption,
03:30if the consumption goes down,
03:32that will have a negative impact on the growth?
03:35See, consumption is one source of demand.
03:39The other source of demand is investment.
03:42Consumption plus investment is total demand.
03:45If people are not consuming and people are not investing,
03:49then there is a problem.
03:51But if people are investing,
03:53it has to be funded from somewhere.
03:56Where will you invest money?
03:58Where will you finance it from?
04:01It is financed by my savings,
04:03which you borrow from the banks.
04:05The problem comes when I'm saving,
04:09you're not investing.
04:12So underconsumption is a problem
04:15when investment is slow.
04:17But if investment picks up,
04:20so it's the national income identity,
04:25consumption and investment.
04:26If investment is not picking up,
04:29then you ask people to consume.
04:31But as a general rule,
04:33you will find in East Asia and China,
04:37that's the Asian model.
04:38The U.S. developed with high consumption.
04:42They financed investment from foreign savings.
04:47But most of the Asian countries
04:49have financed their investment from domestic savings.
04:53So are we suffering from an underconsumption problem?
04:57I doubt it.
04:58I doubt it.
04:59Dr. Laidy,
05:00if we were to look at the volatility
05:02which has been around oil prices in particular,
05:06many would say that,
05:07is this too little, too late?
05:10This call for restraint?
05:13Should it have been given earlier?
05:16Now, you've already voiced concern
05:19that as soon as the Prime Minister says,
05:22cut down on these,
05:23is it a danger signal?
05:26We are worried about that.
05:28So I think the main uncertainty
05:31is the West Asian crisis.
05:34Is it going to last for a long time?
05:36Is it going to end in weeks?
05:38If it is going to end in weeks,
05:40then it's a short-term supply shock.
05:44Then we don't need to be worried that much.
05:47But if it shows signs of continuing and festering,
05:50then the problem becomes severe.
05:53So what should be the right approach?
05:57It depends on your judgment
06:00regarding how long will this festation crisis last.
06:04The middle class is already dealing with inflationary pressures.
06:08So if you have, you know,
06:11this appeal of some kind of voluntary measures,
06:15like cutting travel or even reducing consumption,
06:18even limiting gold purchases,
06:21can this really meaningfully reduce import dependence?
06:28Appeal to national sentiment
06:30and people's good sense.
06:35We know there are limitations.
06:381963, we had this gold control order
06:41after the Chinese war.
06:44All sorts of restrictions put.
06:46It didn't add up too much.
06:49But times have changed.
06:52And maybe people will have more sort of rationality
06:57in looking at gold imports,
06:59that why import gold?
07:01It's not even such a good store of value.
07:03Historically, you can show
07:04that gold has been a poor store of value.
07:07All the gold that your grandmother saved up,
07:11if she had put the money in stock exchange properly
07:15or a mutual fund or even banks,
07:17you would have earned more.
07:19But we have this touching faith in gold.
07:21But in any case,
07:23should this appeal have come earlier?
07:28If this appeal had come earlier,
07:30then again you would have said
07:32it's a danger signal.
07:36So I think the Prime Minister
07:37has done the right thing.
07:39If your question is,
07:40will this appeal be enough?
07:44I think you will need some other measures.
07:47And it has already been done.
07:48For example,
07:49when the Prime Minister's appeal
07:51for restraint on gold imports,
07:53he has also increased the tax rate.
07:55Yes, the import duty.
07:56The import duty.
07:57So you need a combination of two.
07:59So that brings me to my next question.
08:02Because the import duty
08:02on precious metals has been increased.
08:06Don't you think
08:06that it will impact the industry itself?
08:09Because this is
08:10one of the biggest employer sector as well.
08:13This is a sector
08:14which employs millions of people.
08:18Yes.
08:19In a way,
08:20no matter what you impose
08:21an import duty on,
08:24if it is used as an input
08:25in some industry,
08:27it will be affected.
08:29But the question is,
08:31is that more important
08:32than conserving foreign exchange?
08:36And if you do not buy gold,
08:40you will spend on something else.
08:43Or hopefully that money
08:45that you will save
08:46and put in the bank
08:47will be reinvested by someone.
08:50Gold to me,
08:51I actually don't understand.
08:53It's in my blood perhaps also.
08:55But our love for gold,
08:58the Indian love for gold
08:59is absolutely difficult to understand.
09:05But Dr. Lairi,
09:06for decades,
09:07this curb on gold,
09:08gold and also on electronics
09:10has been there.
09:11Do you think
09:12this appeal
09:13has to be matched
09:14with something more?
09:16Because those,
09:16you know,
09:17curbs
09:18really did not
09:19yield much results.
09:21asking people
09:22to voluntarily
09:23give up something.
09:24Is that enough?
09:26I think the right term
09:28for it is nudge.
09:30The government
09:31is nudging
09:31the people
09:32that side.
09:33Will the nudge
09:33be enough?
09:34I doubt it.
09:36It has to be
09:38supported by some
09:39concrete measures.
09:41And one measure
09:42that actually works
09:44automatically.
09:45How does the market
09:46function?
09:47Something,
09:49supply becomes short,
09:50price goes up,
09:52demand is curbed.
09:54If supply goes down
09:56and demand also
09:57is reduced
09:58to some extent,
09:59then the price
09:59does not go up
10:00as much
10:01as you would have
10:02if you hadn't
10:03restrained
10:04your demand.
10:06So,
10:07all these appeals,
10:09will it result in
10:10prices not going up
10:12at all?
10:13I doubt it.
10:14But prices
10:15will not go up
10:16as much
10:17as it would have
10:18if these
10:19restraints
10:20were not
10:21exercised.
10:22And we have also
10:24seen markets
10:25react
10:25very negatively
10:27to these appeals
10:28of spending wisely.
10:32See, markets,
10:33that's a counterfactual.
10:34We don't know
10:35the answer.
10:36Even without
10:37these appeals,
10:38the reason
10:39the appeal
10:40was made,
10:41for the same reason
10:42markets may have
10:43reacted.
10:44I don't think
10:45anyone with money
10:46is sitting comfortably
10:48with this uncertainty
10:49festering about
10:50the West Asian
10:51crisis.
10:53I mean,
10:55the
10:55futures markets
10:56are uncertain,
10:58currency markets
10:59are in a bit
10:59of a turmoil.
11:01And
11:01so you shouldn't
11:03be linking
11:04markets to
11:05the Prime Minister's
11:07announcement.
11:08Markets may be
11:09moving
11:10for the same
11:11reasons
11:12as the
11:14Prime Minister
11:16made his appeal.
11:17And Dr. Laidy,
11:19you know,
11:19when we were to
11:19look at
11:20the rupee versus
11:21dollar,
11:22the exchange rate,
11:23that has been
11:24a matter of concern
11:25much before
11:26this announcement.
11:28In fact,
11:29if we were to
11:30look at it,
11:31the rupee is
11:31hovering somewhere
11:32around 95 to 96
11:34to the dollar.
11:35It was at
11:3616,
11:372014,
11:3885 to 86
11:39at the end
11:40of 2024,
11:41which is before
11:42the West Asia
11:43crisis began.
11:46Now,
11:47here,
11:47I think we
11:48need an
11:49attitudinal
11:50change.
11:53You know,
11:54in the 19th century,
11:55late 19th century,
11:57the British
11:58were very keen
11:59about keeping
12:00the rupee
12:01appreciated.
12:03And Dada,
12:04Bhai,
12:04Naoroji,
12:05R.C.
12:05Dada,
12:06they used to say,
12:06depreciate the rupee.
12:09Don't make it
12:10so valuable,
12:11because if the rupee
12:12becomes too
12:13valuable,
12:14then your imports
12:15go up,
12:17because you can
12:17import with
12:18less rupees.
12:19Your exports
12:21suffer,
12:21because exports
12:22become uncompetitive
12:24in the markets.
12:24So at that time,
12:26during the freedom
12:27movement,
12:27we used to ask
12:28for a depreciated
12:29rupee.
12:30After independence,
12:32the rupee,
12:33the external
12:33rupee value
12:34has become
12:34almost a symptom
12:36of our manhood.
12:37We feel that
12:39our manhood
12:39is affected
12:40if rupee
12:41is depreciated.
12:42The price of
12:43rupee should be
12:44fixed by the
12:46market.
12:47Look at East Asia.
12:49East Asia never
12:50allowed its
12:51currency to
12:52appreciate much.
12:53So why should
12:55we have an
12:55appreciated
12:56rupee?
12:57Because when
12:58the rupee
12:58depreciates,
13:00your exports
13:01are stimulated.
13:03When the
13:04rupee
13:05depreciates,
13:06imports
13:07become more
13:07expensive.
13:08So domestic
13:11industry is
13:12stimulated.
13:13So I don't
13:14think we should
13:15take a sentimental
13:16view of the
13:17rupee exchange rate.
13:19But then what
13:20are the measures
13:21that are being
13:21taken to increase
13:22the inflow into
13:23India?
13:28It's, for me,
13:30investment, both
13:32domestic and
13:32foreign, are
13:35affected by two
13:36things.
13:36One is uncertainty.
13:37Money is shy.
13:39In this uncertain
13:40environment, where you
13:42don't know what is
13:43going to happen to
13:43West Asia, there
13:45are different views.
13:47Money to people,
13:48investors, will take
13:50cautious approach.
13:51Why do it now, do
13:53it after some time?
13:54Second, the ease of
13:56doing business.
13:58I mean, why
13:59domestic investment
14:00doesn't come?
14:01Domestic investment
14:03is not coming
14:04because of
14:05fundamental reasons.
14:07The, I have this
14:10belief that there
14:12are five important
14:13determinants of your
14:14development indicators
14:17and your development
14:18prospects.
14:19One is education, one
14:21is health, one is
14:22infrastructure, fourth
14:24is social welfare
14:26measures so that there
14:27is social stability, and
14:29last but not the
14:30least, a corruption-free
14:32administration and rule
14:34of law.
14:35I think these fundamental
14:37factors, they're
14:38improving, and as they
14:39improve more, there'll be
14:41more investment.
14:42But in today's
14:44scenario, I think
14:46it's, until the
14:49West Asian crisis
14:52is settled, it's
14:55not judicious to
14:58expect a lot of
14:59foreign investment.
15:00Okay, and on the
15:02oil front, let's move
15:04away from your
15:05favorite gold topic
15:06now to oil.
15:07India imports nearly
15:0985% of its oil, and
15:11one of the world's
15:12largest gold buyers
15:14as well.
15:16When the Prime
15:17Minister makes appeal
15:18to cut down on
15:19both, what is the
15:22actual maths looking
15:24like?
15:26If you ask me
15:27indirectly, just an
15:29appeal to your
15:30patriotism and right
15:32things, will it
15:33deliver?
15:34No, it has to be
15:35combined with some
15:36concrete measures, and
15:39whether you like it
15:40or not, if oil prices
15:42go up, oil prices have
15:44gone up from $60, I
15:46was looking at West
15:47Tech's WTI, it has
15:51gone up from $60 to
15:52over $100.
15:53So if it has gone up
15:55something like as
15:57much as 80%, then
16:02prices will go up, and
16:05your imports will be
16:06affected.
16:07So oil prices going up
16:10will have an effect on
16:11inflation, as well as
16:12growth.
16:13It's something like
16:141973.
16:161973, remember, you may
16:17have been a child, but
16:19the oil price shock...
16:20I wasn't born.
16:20You weren't born.
16:21So 1973, oil price
16:24shock, after the Yom Kippur
16:26war, I think, in the
16:28Middle East.
16:29And oil prices went up,
16:32inflation went through
16:33the roof.
16:34Compare with that
16:35situation there, inflation
16:37went to double-digit
16:38levels.
16:39We haven't gone to
16:41double-digit levels.
16:42We are screaming, just
16:43as inflation is trying to
16:45inch up to 5%.
16:46Now, when it comes to
16:48how do you deliver
16:50yourself from this
16:54constant vulnerability,
16:55vulnerability, one is
16:57after Bombay High, we
17:00haven't had much
17:00success in discovering
17:04new oil sources.
17:05Assas and Sigma, you
17:07know, are you in
17:09Neeti Aayog also
17:10looking at safeguarding
17:12jobs, because there
17:13would be sectoral impact
17:14of the appeal, or
17:16should I say, you
17:18know, the national
17:20austerity measure which
17:22is being adopted here,
17:23be it in hospitality
17:24sector, in travel
17:25sector, in jewelry
17:26sector, even segments
17:29of services?
17:32You know, some
17:33churning of the
17:35consumption basket, or
17:37output basket, is
17:40inevitable in a
17:42growing economy.
17:43Demand shifts from one
17:45sector to another, and
17:47you have to shift
17:48resources.
17:49You can't stay put
17:50with something.
17:53Now, hospitality,
17:55tourism that you are
17:56talking about, if
17:57times are hard, if
17:59West Asia is burning
18:01up, and inflation is
18:03going up, oil becomes
18:05very expensive, then
18:07some adjustment is
18:09inevitable.
18:10But as I told you, we
18:12need to know whether
18:13it's a three-day
18:14influenza that we are
18:15suffering from, or
18:17whether it's typhoid or
18:18malaria which is going
18:19to afflict us for long.
18:21I'm speaking to you at a
18:23time when Moody's
18:24ratings has also
18:25downgraded its GDP
18:26growth projections for
18:28India to 6% from 6.8%
18:31for 2026.
18:34Given the geopolitical
18:35tensions that we are
18:36seeing, Dr. Lehri, are
18:38you of the opinion that
18:39this national consensus
18:43around spending will give
18:46the direction to our
18:47economic resilience?
18:51It should.
18:52It should, because
18:54see, if there is no
18:58restraint, then what will
18:59happen is that the
19:01balance of payments, our
19:02balance of payments, mind
19:03you, foreign exchange
19:04reserves are quite
19:06comfortable still.
19:07They're much more
19:08comfortable than the
19:092013 tapered tantrum.
19:13We still have, I think,
19:15if I'm not mistaken, eight
19:16to nine months of foreign
19:17exchange reserves, which
19:19is quite comfortable.
19:24So the issue is that I
19:26think Moody's have
19:28downgraded, is the West
19:30Asian crisis continues, some
19:33reduction may be
19:35inevitable.
19:36But still, we are one of
19:38the largest, fastest
19:39growing economies among the
19:41large economies in the
19:42world.
19:44And more than that, see,
19:486% is not a bad number
19:50compared to other
19:51countries.
19:52That's right.
19:53I mean, we go into
19:54mourning when it becomes
19:556%.
19:55But remember the Hindu
19:57rate of growth that Babu
19:58Raj Krishna used to talk
20:00about?
20:00When we were young, we
20:02used to talk about 3%.
20:04That's the Hindu rate of
20:05growth, no matter what
20:05you do, it will be 3.1
20:07or 2.9.
20:09Now 6% and we go into
20:11mourning.
20:12That why is it 6%?
20:14I'm delighted that we
20:17expect more.
20:18But 6% in these uncertain
20:20times is not too bad.
20:22Not too bad at all.
20:25What is the Chinese rate of
20:26growth that they're
20:27predicting?
20:28I think it's lower than
20:304%.
20:31Most countries are going
20:33to grow at less than
20:355%, if not 4%.
20:37But 6% for India is
20:41unsatisfactory.
20:42As an ambitious Indian,
20:44I'll say that.
20:45We'll do whatever we can
20:47to bring it back to 7,
20:498%.
20:49That brings me to my last
20:51couple of questions
20:52questions because the
20:54government is also
20:55showing the way.
20:56Today, the Prime
20:57Minister's cavalcade, his
20:59own entourage, was
21:00almost halved.
21:02Chief ministers across
21:04the country of BJP rule
21:05states are also doing the
21:08same.
21:08They have reduced the
21:09convoy.
21:11All these measures are
21:13being taken.
21:13But are these signs again
21:18of something deeper that
21:20we are not aware of?
21:22Which you are aware of?
21:23I'm not aware of anything,
21:25but I'm a bit surprised.
21:27What did people expect?
21:29That the Prime Minister
21:31will say, please spend,
21:33please go on world tours.
21:38Should that have been what
21:39the Prime Minister have said?
21:41I don't think so.
21:43So, if he says the right
21:45thing and says, please be
21:47careful, don't spend
21:48none necessarily, we'll say
21:50there is, alarm bells are
21:52ringing.
21:53If he doesn't say anything,
21:55then he'll say, what are
21:56you doing?
21:57So, this is a problem that
22:01heads you win, tails I lose.
22:05My last question.
22:06You had recently said, when
22:09governments begin to
22:10signal frugality, it often
22:12points to underlying
22:14pressures that may not yet
22:16be fully visible.
22:18So, how are you
22:19interpreting the present
22:20times?
22:21Of course.
22:22I mean, I have been saying
22:23right from the beginning
22:24that the West Asian crisis
22:26is something which will
22:29worry any thinking man or
22:31woman.
22:32women, because there is a war
22:34between, mainly between U.S.,
22:37Iran, and Israel, and a few
22:40other countries.
22:42And we are not participants in
22:44it.
22:45We suffer the consequences.
22:47So, but any thinking man or
22:50woman will be worried about the,
22:51what may happen.
22:54doesn't it worry you as to what is
22:57going to happen to Hormuz?
22:59I mean, will Hormuz be closed for
23:01months, weeks, years?
23:04Will it escalate?
23:06If it escalates, what will be the
23:07collateral damage?
23:09What will happen?
23:10When so much oil passes through
23:11it, and the effect of it, not
23:15only on transportation fuel, but
23:19energy, fertilizer, plastics, so
23:24many chemical industries, it's
23:27worrying.
23:28So, it's better to err on the side
23:31of caution, and be careful.
23:36A stitch in time saves nine.
23:38Okay.
23:38So, this is the stitch in times
23:40right now that we are living in.
23:42Difficult times for the entire
23:43world.
23:44Dr. Larry, really appreciate your
23:46time.
23:46Thank you for putting the caution
23:49in context for our viewers.
23:53Thanks for watching.
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