00:00My first guest is the distinguished economist and the newly appointed vice chairman of Neeti Aayog, Dr. Ashok Lairi.
00:07Appreciate you joining us here, Dr. Lairi. I want to cut the chase and ask the big question.
00:13The fuel price hike announced by the government, do you believe it was inevitable or could it have been avoided
00:19given the oil price surge?
00:21Was it to be expected?
00:25The simple question, Rajdeep, is since we are not going to get oil at a subsidized price from the world
00:32market,
00:33and we import something like almost 90%, 85% to 90% of our oil, and we pay top dollars,
00:41an international price for it, India has to pay for it.
00:44Now the question is, in India, who? Are the users going to pay for it? Or are you going to
00:52pay for it by cutting down your health budget and education budget?
00:55So if you believe in users' pay principle, then it's the people who are using cars, transportation, and we need
01:05to sort of economize at least for the time being until the problem gets resolved.
01:12And the oil price rise, I think it's the right move, because the oil marketing companies cannot absorb this loss
01:21for a long period.
01:24So I think it's the right adjustment. And when you adjust the price, it is after all a supply shock.
01:31How will you respond? Yeah, it is a supply shock. But how will you respond, Dr. Lairi, to those who
01:39say that when global crude prices were low,
01:42the benefit was not passed on to the consumers by governments. Instead, duties were hiked and the government made windfall
01:48profits.
01:48And now, when global prices are surging, the burden is on the consumer, on the taxpayer once again.
01:57Now, here, I think we forget the history. For a long period, oil was a controlled commodity under price control.
02:06And there was an oil equalization fund where losses used to be accumulated.
02:12Now, whatever sins we committed in the past by keeping oil prices at subsidized rates,
02:18that those losses had to be made up. And partly, when oil prices fell, if domestic prices were not adjusted,
02:29it was partly to make up for that, to compensate for the sins that we committed in the past.
02:34Furthermore, if the government is making some money to spend on other meritorious heads,
02:44I don't think you can object to that.
02:50But should we be preparing for more? Should we be preparing, Dr. Lairi, for more fuel price hikes?
02:56Because earlier this week, the Prime Minister urged a spate of measures,
03:00including curbing, calling for fuel conservation, work from home, limits on travel.
03:08Do you believe that he's preparing the country for what could lie ahead?
03:12And do you fear that up ahead, there could be even more fuel price hikes,
03:17particularly if the West Asia conflict is not resolved and the Strait of Hormuz is not open?
03:24Now, here, you can read the signal in two ways.
03:29One, you have a supply shock. Supply has gone down.
03:33So either you can voluntarily cut down on your demand and supply and demand adjust themselves without much of a
03:45price rise.
03:46If you do not adjust demand, then prices will go up and do the needful.
03:51I think you can read the Prime Minister's message as this is what we can do.
03:58We can sort of manage the demand and soften the price shock that is likely to come.
04:04If you do not, then the price shock would be even higher.
04:08Now, do you read this as a danger signal?
04:12The Prime Minister is telling us all hell is going to break loose, so you brace yourself for it.
04:18I don't think we should read it like that.
04:21Because I believe, like many others, that the Strait of Hormuz imbroglio cannot continue forever.
04:30And it's going to be self-limiting.
04:33There will be good sense will prevail and the Hormuz will be open again.
04:37And oil prices, like we have seen in the past, the first oil price shock, the second oil price shock.
04:44After the oil prices go up, then they decline.
04:48I'm still waiting for that day when that will happen.
04:51When Hormuz opens up, you'll find all of a sudden international oil prices have gone down a lot.
04:56So, I don't think it's quite right to interpret the Prime Minister's message as danger signal and all hell is
05:05going to break loose.
05:06The Prime Minister is not saying that.
05:08According to me, the Prime Minister is saying there are tough times, turbulent times.
05:14They will come to an end.
05:16But in the meantime, if you want to soften the blow on the economy,
05:21you better brace yourself with some demand management measures voluntarily.
05:29But how does one look at the state of the economy at the moment?
05:34Because the rupee has depreciated.
05:36It's hit a new low of 95.94 paisae to the dollar.
05:41You've had FII outflows growing.
05:46Foreign investors have pulled over $20 billion from Indian equities in just the first four months of 2026.
05:53You've had the current account deficit taking a hit.
05:56You've had a general sense that growth is slowing down and inflation is rising.
06:02Look at the WPI wholesale price index numbers for the month of April.
06:06So, put together, how dire is the situation?
06:11And perhaps that has led to people pressing the panic button when the Prime Minister called for austerity.
06:18No, I don't think we should press the panic button because in this turbulent times, India is still growing at
06:266%.
06:26Most people are saying we're likely to grow at 6%.
06:29And 6% is not too bad.
06:32In normal times, I would have said 6%.
06:34We should go into mourning.
06:36But with this world turmoil going on, 6% is not too bad.
06:40Look at inflation.
06:42Inflation, consumer price inflation is still, I mean, whether it is breached, 4 plus 2, that's yet to be seen.
06:52But it's not double-digit.
06:53Remember, the second oil price shock in the 70s, I think, inflation has gone to double-digit.
07:01Now, foreign exchange position, we still have forgotten that at times our foreign exchange reserve used to cover only two,
07:12two and a half months of imports.
07:14We still have $700 billion, which is like nine months of imports.
07:20So, is all hell going to break loose?
07:22No.
07:22So, but if hormones trade is not open and the hostility is continued, if it gets prolonged and it's not
07:36an influenza which is going to correct itself in three days,
07:40it's typhoid or malaria which is going to take a long time, then we must prepare otherwise.
07:46But right now, I think there is still scope for optimism.
07:59You're saying there's still scope for optimism, but the fact is, even before the conflict broke out in West Asia,
08:05there were some worrying signals.
08:07For example, as I mentioned, FII outflows, FDI, foreign direct investment into the country seemingly was on the decline through
08:16the last financial year.
08:17And there's a sense, perhaps, that we need to do much more excellent reform.
08:22There were those who called it the Goldilocks moment.
08:25So, there were the optimists calling it the Goldilocks moments.
08:28And there are the pessimists now who are saying under the headline numbers, there are worrying signs for the economy.
08:34Is the truth somewhere in between?
08:38Now, what you say that this sort of slowing down of foreign investment, a lot has happened even before the
08:48Hormone Strait.
08:49Remember the tariff problem?
08:51The United States under Trump introduced all these tariffs and trade restrictions.
08:58So, these were turbulent, turbulent times even otherwise.
09:02And money is shy commodity.
09:06Whenever there is uncertainty, and especially in the United States, policies are not very clear as to where they are
09:12going to go.
09:14FDI and FII both became shy.
09:17So, I'm not denying the fact that foreign investment flows have not been buoyant in the recent past, even before
09:26the Hormone Strait crisis.
09:28But, having said that, I think investment, you will remember that whenever such foreign investment bottoms out, then when you
09:40improve your ease of doing business, and profitability prospects improve in the domestic economy, foreign investment flows back with a
09:50vengeance.
09:51So, I'm still waiting that if we do the right thing, when the uncertainties reduce, find foreign investment to flow
10:00back.
10:02Because they need China plus one.
10:04If I may ask you then from...
10:08Yes.
10:09If I may then ask you from your vantage position, one, two, three.
10:14Three policy prescriptions that you would like to see happen in the next few months to, in a way, cushion
10:22some of the hardship that might lie ahead.
10:28What would be those three policy prescriptions?
10:31First is, keep your cool.
10:35Don't panic.
10:37There is enough ammunition in our foreign exchange reserves.
10:41And in terms of depth of defense, that we can manage the crisis, as long as it doesn't get prolonged
10:49over months and years.
10:52If it limits itself to a few weeks or a few months, we'll be okay.
10:58Second, don't try to cushion the oil price rise.
11:04If international price has gone up, please adjust domestic price accordingly.
11:09Don't cut your health budget or education budget or your infrastructure budget to provide oil subsidy.
11:18Third is, accelerate the progress in ease of doing business so that not only domestic investment but foreign investment also
11:29flows in and improves the capital account.
11:33Do you believe all this talk of austerity must begin with government?
11:38Government needs to cut the flab.
11:40You've also been a politician.
11:42You're seeing the way freebies are being given during elections.
11:44And that's where many middle class people ask, taxpayers ask, that you're calling for austerity after the elections are over.
11:51During the elections, we see extravagance promises being announced.
11:54Most state treasuries are bankrupt or close to bankruptcy, facing huge debt.
12:00Do you believe all of that needs a relook?
12:05Now, when it comes to politics, your question is that these freebies, so-called freebies, does it show that the
12:14government is not austere?
12:16Now, you can have a debate with many people who feel these are social welfare measures.
12:23And as the country develops, we need to help the indigent, the poor, and the vulnerable.
12:30Others feel that in the name of helping the poor, indigent, and vulnerable, you're actually giving a free-for-all
12:38to all sections of society.
12:41I don't want to get into that.
12:42But that's the prerogative of political parties and political leaders.
12:47And, after all, these political parties are supported by the people.
12:51In a way, whatever policies are followed by political parties and political leaders, they reflect the popular will.
12:59So, I don't think we should absolve ourselves if you think this politics is not a good politics.
13:09I don't think that would be correct because good politics is what gets you the votes.
13:16Politicians think this is better than the votes, and people give votes according to that.
13:20So, it's been followed.
13:22Now, having said that, Shruti, government austerity that was announced was not in the field of policies,
13:30but it was in the field of cutting down the convoy size, cutting down on foreign travel, things of that
13:37kind,
13:37not having online meetings and not traveling to places for holding meetings.
13:45Those are being followed.
13:48Whether in the long run your question that will this bring more maturity to political parties and political leaders
13:58in being careful in giving welfare transports, that question we have to see.
14:05Because it will reflect what the political parties and political leaders perceive as what people want.
14:14If people want freebies and that is what the Giptic votes for, then I am afraid that political politicians will
14:24follow that policy.
14:32That question was answered a bit like a diplomat, but I can understand that it's a question that deserves a
14:39wider debate
14:40as to just to what extent should political parties announce these large cash transfer schemes.
14:46But for now, for joining me, I appreciate you for kick-starting this valuable debate.
14:51Thank you so much.
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