(21:13 IST) Arvind Subramanian: The drop is much less than the reported 86 per cent. Some of the demonetised notes were de facto used as legal tender. If you look at what the headline number is, people think the worst was in November. It was actually in December. We're remonetising and we're well on our way to reaching that.
Prannoy Roy: The impact eventually that you studied was that it will drop out GDP rate by 0.25 to 0.5 percent. FinMin had forecast growth rate without demonetisation at 7 pc. GDP with demonetisation has brought down to 6.5-6.75 pc.
(21:15 IST) Cash crunch after notes ban not as bad as believed Arvind Subramanian: That is less than what IMF and World Bank has forecast.
Arvind Subramanian: Need to distinguish short term cost and long term benefit.
(21: 20 IST) Arvind Subramanian: In all these things, just because we cant do everything doesn't mean we should not do anything.
Arvind Subramanian: For me, I am obsessed with bringing land and real estate into GST.
(21: 21 IST) Notes ban impact: GDP growth to slip in current yearPrannoy Roy: Tell us what Universal Basic Income (UBI) is?
Arvind Subramanian: Universal Basic Income is based on three principles.
- Everyone gets it
- Unconditional
- Agency...you get it as cash (in bank) not kind.
Prannoy Roy: This is the problem with current programmes like MNREGA.
(21:25 IST) Welfare schemes have not been targeted wellArvind Subramanian (team member): Under Universal Basic Income, since the cash goes directly into banks, there is less chance of misappropriation.
Prannoy Roy: Hopefully the UBI will tackle the problem of income inequality among states (rich states getting richer, poor states getting poorer)
Arvind Subramanian: If you contrast this with the world, poor countries are growing faster than rich countries.
Arvind Subramanian: What it depends on is one big political economy question.
(21: 29 IST) Gap between rich and poor states is growing Prannoy Roy: You said what you need for UBI is for the centre and states to agree.
Arvind Subramanian: I think one of the most elevating things I've been part of is the GST meeting, where states and centre sit together and hammer out all their problems. The institutions of cooperative federalism are improving. So, that's another unusual finding.
(21: 32 IST) Prannoy Roy: Let's look at the other aspects of India - the One India aspect. We are quite an integrated economy, which is a huge surprise. Internal trade within India has a lot of potential. In Brazil, its 76 per cent, China 74 per cent and in India it is 54 per cent. Do you look at it as a huge potential?
Arvind Subramanian: This actually underestimates how integrated we are as a country. Economists, they caricature us... Actually, these numbers are very high. India does much better than EU and Canada. That India is less integrated, is a myth. Look at the migration data, we are actually moving!
(21: 34 IST) Migration, trade across the country higher than estimatesPrannoy Roy: India's demographic dividend show huge potential, according to the survey. India will overtake China in the next 14-15 years. So, that's another unusual finding. Generally, our generation left you a bad state of affairs.
The other area that surprised was India vs China in terms of trade. China peaked around 2010. We have a greater percent of GDP in trade.
Arvind Subramanian: I follow trade greatly and I was struck when I saw this. China has dropped quite steadily and we have continued an upward surge.
Put the two together. In terms of international trade, we are bigger than China. In terms of internal trade, we are doing quite well. Our integration - internally and internationally is surging ahead.
(21: 39 IST) India behind China in internal trade India vs China: Demographic Dividend India ahead of China in foreign trade( 21: 41 IST) Prannoy Roy: Bank credit has generally been consumer led. Bank credit to industry is down.
Arvind Subramanian (team member): You see personal loans are doing well. But industry suffering (-8%) means there is a problem with companies and banks.
Prannoy Roy: 10 per cent plus in personal loans.. Does that include housing?
Arvind Subramanian (team member): No
Notes ban impact on bank credit (21: 46 IST) Prannoy Roy: Private sector investment is negative. The growth rate in public sector investment is declining but positive. But private sector investment is falling.. 0% in 2016 to -8% in 2017.
Arvind Subramanian: The heart of the problem is that companies are in bad shape. Most of the stressed assets or debt are in big companies. Big companies have debt, they are unviable and they have to write it down. It is a really difficult problem.
Arvind Subramanian: One big challenge in the short run is the double balance sheet problem.
Notes ban impact on private and public sector investmentPrannoy Roy: Bad debts are rising in Public Sector banks. Private Sector banks, not such a big volume. Public sector banks are in trouble.
Arvind Subramanian: I think the standard view of public banks is that there is crony capitalism. When India was having its boom period, when infrastructure got build, the private sector banks didn't participate. One has to be very careful to look at it as a morality play.
I think Denmark said that one of the most difficult problems in the world to do is for governments to write off debts of the public sector
(21: 57 IST) Bad debts of public sector banks continues to be a major worryPrannoy Roy: One of the things I was impressed by was this big data analysis and satellite analysis that you did for property. 80-90 per cent under-collection (in property tax).
Opportunity lost? Poor property tax collectionStudents ask questions: Q: After the economic survey, what is one programme we must change, one we must scrap, one we must add?
Arvind Subramanian: One thing we must change is that the whole banking thing we said. One thing we should scrap is the policy of some subsisides.. one thing we need to add is the Universal Basic Income.
Q: UBI is expected to cost a lot to disburse the income. So, does UBI replace all the poverty eliminating schemes we have today?
Arvind Subramanian: It has to replace existing programmes. What it must replace, that is a political decision. For example - there's the fertilizer subsidy.. Do we have the appetite to replace it?
Q: If you introduce UBI, we are adding one more scheme. The inefficiencies there are in other schemes will be added. Wouldn't that lead to more inefficiency?
Arvind Subramanian (team member): UBI is administratively easier. We need a proper electronic transfer mechanism. Once we get that, it will be easier.
Prannoy Roy: That survey is quite a piece of work and I congratulate all of you.
It is a wonderful read and I also have a lot to read.
Get your hands on it and you will learn a lot about India.
Thank you very much.