This Article is From Mar 05, 2021

Prannoy Roy's Townhall With Experts On Stock Markets, Bitcoin: Full Transcript

The focus of today's talks are the stock markets, India's economy, future of Bitcoin and the impact of the pandemic.

Prannoy Roy spoke to Raghuram Rajan, Paul Milgrom, Michael Kremer, Abhijit Banerjee and Kaushik Basu.

New Delhi:

NDTV: Welcome once again to the third Town Hall in our four-part series in which we are looking ahead to what's next for India, in a bounce back that has been forecast for our economy. Today we'll focus on an issue which each one of our guests has been most keen to speak about, the importance and the future of democracy, both across the world and in India, and how it connects to the health of our economy. We will also look at whether you should be investing in Bitcoins or run a mile from them. But first, let's look at India's stock markets, it's booming. Will that continue?

Everybody always wants to know about which way the stock market will move this year, and for us in particular, will India's stock markets go up even further or will share prices start to fall?

And most experts have one truly honest answer, frankly nobody knows. But there are many underlying factors which do impact our stock markets, and many of those factors are not always obvious and it's worth looking at them.


Raghuram Rajan, you have said that the (US President Joe) Biden plan of spending 1.9 trillion dollars could increase inflation. Now that will raise US interest rates and that will make asset values, particularly the stock markets, well maybe not crash, but come down sharply. How will that affect India?

Prof Raghuram Rajan: Well, one thing we've benefited from because of the Feds very easy policies, remember in March everything collapsed. Remember where the Sensex was in March and that was a result of portfolio flows leaving India and again, we were in a crowd then, because it left Brazil, it left Mexico, it left the Philippines and all emerging market prices collapsed. We've now seen the reverse of that, money has flowed in, in a really big way, which is why our reserves in India, foreign exchange reserves, are again at an all-time high. Money has come in. And so, this is fickle money. This is money that can go out once again. And so, if the Federal Reserve is eventually forced to tighten policy to combat the inflation, and the Federal Reserve has been very, very docile saying we will not do so, we are going to stay accommodative, but there's only so much they can stay accommodative. So, I would suspect initially what happens is inflation picks up, they look through it. But eventually, if it stays that high, and because of the spending, they have no option but to act. At that point, we'll have another taper tantrum of the kind we saw earlier, unless the Fed manages it really, really well.

NDTV: Just to be clear, you're not saying it is definitely going to happen. But that is a kind of forecast by you, and you always tend to get your forecasts right.

Prof Raghuram Rajan: No, no. So, there's many a step between now and there. So, if you have more reasonable spending, you have actually a fairly strong recovery in the US and Europe towards the end of the year, that can lift the rest of the world. That can be very useful. I mean, the US will run a large current account deficit, that will pull in imports into the US, which means China will export, which means China will pull imports from the region, which means many other countries. I mean, one of the things, India's success stories, has been our export performance over the years, something Arvind Subramanian has written very well about. And so again, we have the chance of growing out of our problems, if we are more open, if we embrace the world economy at that point and grow out.

NDTV: On the stock market, while in the real economy everything has been trending downwards, the stock market in India has been shooting up. Ruchir Sharma, the author and writer, who is now a Contributing Editor with the Financial Times, showed us data which points out that there's a real disconnect, the world economy has fallen by 4%. But stock markets around the world have shot up by an average of 13%. That is a kind of 17% spread. And it is even more acute in India. While the Indian economy is falling by 7.7, or 8%, still the stock market has gone up 12%, that's a 20% spread.

Now Professor Milgrom, this is a really startling contrast. The economy plummets downwards and yet the stock markets go shooting up. What is the reason for this huge disconnect?

Prof Paul Milgrom: Well, the stock market is about the value for the future. When you have assets, you have to decide where to put them. And one of the things that happened, the interest rates are so low, so if you put assets in a savings account or in bonds, you get almost no return on it. So, people don't have anywhere else to put their money that has reasonable returns. So, they buy stocks and they're not too worried about it. Everybody's talking about a quick recovery at the end of the pandemic. Pandemic assets, although the assets might not be making much money tomorrow, the day after tomorrow, they'll be making a lot of money when the economies bounce back, which we expect they will. So, where else would you put your money? There is no place else. I think that's why people are investing in the stock market.


NDTV: So, you think there's a low probability that the stock market is going to crash in the near future? I mean one shouldn't be too worried about that? I know that's a very unfair question but is that an accurate assessment of what you're saying?

Prof Paul Milgrom: As Keynes told us, it's all about passions. You can be right about values and still lose money in the stock market because other people have different opinions and they drive, you know, the GameStop stock way through the ceiling. Or something crashes when it shouldn't, you should always worry about that and mitigate your risk. And if you need the money in the short term, you shouldn't be investing in stock markets. But right now, the reason the values are so high, I think, is that interest rates are so low. There's no place else to put your money. And there aren't safe places that have reasonable rates of return. And so, people are pouring their money into the stock market because they have very little choice. That's what I think is going on.

NDTV: Professor Kremer, how has technology changed the world as we know it in this pandemic? And may I ask you a personal question, how has technology during this Pandemic changed your life, for the better or for the worse?

Prof Michael Kremer: I have a high enough income. My life is very easy relative to a lot of other people, and I haven't had a family member who's been infected. But you know, not being able to travel to see my father and my brother, that's been painful. My son has been going to school remotely. Again, you know, he can go to school electronically. So that's much better than many children in the world. But it's not a substitute for in-person education.

NDTV: Right. It's been tough. I can hear that in your voice.

Prof Michael Kremer: Yes. So, the sooner we can vaccinate everyone, the faster we can end the Pandemic. And increasing manufacturing and delivery capacity for vaccines means we can vaccinate people faster and get back to normal life more quickly. So, think about it like filling a bucket with water. If you try to fill a bucket with a narrow pipe, it'll take a long time. If you can build a high diameter pipe, then it will fill quickly. And vaccine capacity is like that pipe. Now, we developed in the world and especially in India, which is producing a huge proportion of the world's COVID-19 vaccines, we developed vaccines and we produced them at an unprecedented rate. Historically, we've never seen anything like this. But nonetheless, with the currently announced capacity, many countries are not going to be vaccinated for a long time, especially lower income countries. And our analysis suggests that investing now, because there are long lead times, investing now to expand capacity further, would be valuable, because it would let us reach widespread vaccination faster, particularly in lower and middle-income countries.

NDTV: Abhijit Banerjee, you're an economist with a difference, you have always worked with real people on the ground, a differentiating aspect that you won the Nobel Prize for. Looking back for a moment, what were the key aspects in your view of the Pandemic in India and its impact on ordinary lives?

Perhaps the biggest tragedy of this Pandemic has been the impact on poor migrant families. It was perhaps the most thoughtless policy repercussion of the lockdown. I can't even go into it here, it is too, it's too difficult. In fact everyone in India was appalled and actually deeply saddened by what happened to the migrants in our country. Have we as a nation learnt a lesson from that tragedy, a lesson that migrant workers are not only key to our country's economy, but also their numbers are in tens of millions, many, many more than the government ever estimated?

Prof Abhijit Banerjee: I think focusing again, with construction, goes the idea of focusing on the migrants and for once, they have actually now acknowledged that migrants are a big part of the economy. I think the 18 million number that they put out is probably too small. I guess this is much bigger than that. We just don't have a data set to get that. But they're also talking about putting some money into collecting data on migrants, so maybe that's something that I would be super interested in finding out what they're planning to do and do it right. Because I think we do it right once and change our view. We'll see, maybe find out there were seventy million migrants or something, and when that happens that's going to change how we think about the whole economy. We still think of the economy as being urban and rural, whereas in fact, it's all these intermediate people who are driving it. So, housing for the migrants is then something, again a construction idea, subsidy for low-income housing. That's all sort of connected around that ball of construction being the hub. And migrants will come to work in construction, stay in low-income housing, low-income housing will be built and hire more migrants, etc.

NDTV: Raghuram Rajan, closely related to any economic revival, is the geopolitical situation. And we've seen US-China tension, some India-China tension as well, but the US-China tension, especially under the Trump administration. And now there's the Biden administration and there's news of a coalition of democracies. India is a democracy, so is it going to help us, how do you see it unfolding, and how will it affect us in India?

Prof Raghuram Rajan: Well, I think in a departure from the Trump administration, which seemed to make cozy with authoritarian regimes, Joe Biden wants to reassert the US as the leader of a pack of democracies, or at least primus inter pares in that set of democracies. And it also is a natural sort of coalition to, let's say deal with China, to try and find a new modus vivendi with China. And that's really what the Biden administration has in mind. And in this coalition, naturally Japan and Europe will fit in, but what other countries do they bring in? Now in the past, it would be natural for India to be part of this coalition. Because it's the world's largest democracy, and certainly in the quad sort of structure where India, Australia, Japan, the US come together, those are examples of structures in which India's present. But I think there is also a worry, when you start talking about democracies today, there's a question mark on India, certainly in foreign dialogues, which I think is really, I think perhaps overstating what is happening in India, but also very worrisome, because of the trend.

NDTV: Important that you mention it. But how widespread is this global concern and apprehension about India's democracy? And how important is democracy for even our economic growth, do you see a connection between democracy and our growth rate?

Prof Raghuram Rajan: When you see India's democratic bona fides being questioned elsewhere, you know, for sure, our natural reaction is these guys don't know what they're talking about and India's strong and vibrant. But we also know when sitting in India, that there are, there is less room for free debate and free discussion than there used to be. And so, the question is how do we remedy this? Because I think, go back to our medium-term growth. Our medium-term growth, remember we are not a manufacturing power, we are more a service power. It is going to be in the areas of services. And it is going to be where we bring ideas to the table. We become consultants to the world, we become educators to the world, we also become R&D. A lot of R&D is being done in India today, huge amounts. Many international companies have R&D centers in India. So, all that requires free debate, free speech. That's where we score over China. So, to my mind, it would be very important, both in our geopolitical, now that we have problems with our neighbour to the north, our alignments are going to be more sympathetic.

NDTV: Does that mean you foresee some major changes in global alignments, with India becoming much closer to western powers?

Prof Raghuram Rajan: I'm not saying we're going to become a standard bearer for the West, I don't think we want to be that. But we're going to be more sympathetic to the West, because we see some democratic affinities with them. And I think given that, and given that our natural growth going forward, is going to be on the export of services, which we do really well. And providing services more, especially now that we can do services at a distance, Zoom, for example, is going to be very helpful in that. I think we should be focusing on creating a greater space for free speech, for debate, for enthusiastic back and forth, and not label anything that is critical of one stream of thought as anti-national, and not patriotic, and you know FIRs against journalists. This is not just bad for our country internally, but also looks very bad outside and makes us less central to the emerging coalitions that are going to be important in the world, certainly over the next four years.

NDTV: Actually, in fact the most wonderful thing about post-independent India, compared to other developing countries, has been our freedom, our freedom of speech. And it has led to our younger generation, youngsters like you, now with democracy in their very DNA, they question everything, I think they question too much actually. But our great freedom has always made us feel so proud. It is the essence of India, isn't it?

Prof Raghuram Rajan: It does. And what sets the government on the right course, is criticism. Constructive criticism, by all means, but criticism is important. Because then you learn from your mistakes, and you then straighten out. The government doesn't have information about everything that's going on. It acquires that information from the critics who say, look, this is getting problematic. That's a mess. And so, we need a government that continues to welcome criticism. Again, it's good that the criticism should be constructive, but sometimes you can't control it, by all means, let it be. That was India, that could be India again. We need to work a little bit on making it happen.

NDTV: So, once again, since you're based in the heart of western debate and opinion, is the world noticing a change in India?

Prof Raghuram Rajan: For sure. Look, I read the most respectable newspapers here, the New York Times, The Economist, Financial Times. Of course, there's a tendency in India sometimes to dismiss it. Oh, these are biased, it's hard to argue that Democrats are biased against India. Democrats cherish India. And the New York Times is largely a Democratic paper. But for the New York Times to start having article after article, now, again, you can argue newspapers look at the dark side, they don't look at the wonderful, positive side and there's a lot that's positive in India happening. But my sense is, we should understand that the mood in the rest of the world towards India is darkening. That the kind of countries that India is sometimes compared with on the democratic front, are not countries we want to be clubbed with. India is better than this. And therefore, we can say it's all about public image, but it's not just public image, it's also that we need to fix the reality. I saw an interview by Hamid Ansari, our former Vice President, just yesterday. I mean, he's a serious Indian, who has concerns. And we should understand that this is something that matters to our people, and matters to our future. We need to fix it.

NDTV: And Kaushik, you have spoken about concerns in the Indian economy even before the crisis induced by the pandemic. In fact, Arvind Subramanian, India's former Chief Economic Advisor, then at Harvard, now returning to India with the Ashoka University, has presented a series of charts on the pre, pre-pandemic slowdown of the Indian economy. He suggests that the slowdown in India actually began 10 years ago. Let's quickly run through Arvind Subramanian's brilliant findings.

Take India's exports for a start. Our export growth is plummeting from 16% and 24%, now down to a very worrying 3%, all this is pre-pandemic. Also, our imports fell from 15% in the Vajpayee government era, and now down to 4% now. Again, this sharp decline happened before the 2020 pandemic.


Industry and government infrastructure investment have also dropped to the lowest levels of only 2-3% growth per year, so the downward trend began before the pandemic, we can't just say that the Pandemic crisis was the reason for our problems. And even credit and bank loans showed the same decline well before the pandemic, and had fallen to its lowest levels for decades, down to just 4-6%.


So, we're bringing all these figures out to show that there was, as you have written, a deepening crisis before the pandemic. So, Kaushik, while the pandemic intensified the crisis, exacerbated it, the understandable collapse of our economy happened because of the pandemic. But the real concern is that there was a slowdown in the Indian economy in the kind of decade before the pandemic. So what caused the slowdown in the Indian economy, what caused the slowdown before the pandemic?

Prof Kaushik Basu: What is causing it, I'm not 100% sure. But there are writings, political economists, political scientists writing, sociologists writing, simple things in life like trust matters a lot. Everyday life, everything is not written down as a contract. Thousand things we are doing by trust. Once trust begins to erode in society, society gets polarized, not trusting one another, the economic indicators begin to do badly. Francis Fukuyama is the classic work, which points to East Asia's success, because not just economic variables, but East Asia is picking up trust of the kind that you get in Nordic and Scandinavian countries. This is there in East Asia. India, starting from I don't know when, the trust was probably improving.

NDTV: So, Kaushik are you saying that trust and non-economic issues that, like social issues, do have a direct impact on growth rates and poverty levels?

Prof Kaushik Basu: India has invested a lot, some will say too prematurely, in building a country where you feel a common identity, just by virtue of being in the country. That was the common identity. That is getting eroded. And, I cannot be completely sure about this. But I'm completely sure that the growth has crashed in a way that no one had expected. There has to be causes for that. And my feeling is, the politics has become so divisive. And here I'm not putting blame. Immediately nowadays, in public debates, you think that the blame is at this person's door or that person's door. I'm not doing that. But we have to recognize that it has become a very divisive politics. And that is probably what is adding to the mismanagement of the economy. There are a couple of things which were pure, simple mistakes and mismanagements. For instance, demonetisation was a very bad economic move. The lockdown, the way it was done, which left somewhere between 15 to 40 million people, actually, from 23 million to 40 million people, I know that data, scattered over the country.

Doing exactly the opposite of a lockdown because they had to find food and survival. Those mismanagements did contribute. But you can correct them. Mistakes happen, you can begin to correct them. The political divisiveness, when trust goes down in society, much harder to correct. I feel we should bring that on the agenda. And we have to reach out to people, that it's in your collective interest to stand together, too little of that happening right now.

NDTV: And I just want to ask you one more thing, the world is changing, you're in America at the moment, you understand first hand what's happening. There's been this huge change in America with Biden coming in, there's talk about, we just said there's talk about a coalition of democracies, by which some imply that China is on one side and democracies on the other. And that is actually really important for India, right? As you just said, India was proud of being a democratic country, where you could say anything, you could argue and freedom matters in India. Do you feel that changing, and in the new kind of post-Trump world, where being a true democracy could carry a premium now, a benefit in the Biden more democratic world? So, in the democratic world is there going to be a kind of face-off, a division, with democracies and the non-democratic world, and should India be aware of this, and should we be happy about it and will that affect us in any way?

Prof Kaushik Basu: Very much so. Because, on this we truly took pride in India. You know the time when India became independent, around that one or two decades, a whole host of countries became independent at that time, colonialism was breaking off. But if you see there's only one country with a record, that became independent then, and remained a democracy with complete free speech, is India. There's been hardly any interruption, there was an interruption during the emergency, 1975 to 1977, a two-year interruption. But, basically, India has been a vibrant democracy. You stand up and criticize, and I know that even at G-20 meetings when I used to go, people would say that it is amazing, in our corridor discussions, people would show a lot of respect to India, that you can speak. India is like a rich developed country in terms of that space. And we were also beginning to grow. So there was India's investment in that freedom of space for debate and discussion. The democracy which was vibrant, which makes growth difficult, but it puts growth on a stronger footing. And it had begun to grow. So it was an amazing journey for the country. And maybe at times, I feel we took too much pride in that. That is beginning to, India is eroding on that. I hope people wake up.

NDTV: Are there signs of a global trend of democratic values and norms being eroded?

Prof Kaushik Basu: I mean, the United States is a good example of a country today, we are again feeling very buoyant about the United States. That there is a recognition that the US was beginning to turn, but it's turned back. With that, one hopes that this is a signal going out around the world that, to do well in the long run you need the soft power of democracy which India had, the soft power. Prannoy, I may be digressing a bit. Once, I remember in China, I'd gone as an academic years ago. A journalist came to interview me on economic matters and asked, that can you tell me Professor Basu, what's the secret of a soft power? And there was almost an element of envy in the voice that India epitomized soft power, which is a lot of power, its soft power. And that is getting eroded. And it is in our self-interest, collective self-interest, to make sure that that does not erode. And the world, with the United States having turned around a very dangerous corner, hopefully there is a bit of a global rise in this sentiment, that democracy is important.

NDTV: Paul Milgrom, may I ask you a slightly political question? How does America avoid another Trump-like era? You don't have to answer that. But it is worrying for all of us across the world because America has never seemed to be so polarized as it is now. We admired America. And then we were shocked when the people of America voted in a politician like Trump. Now where hatred works. So, the rest of the world is concerned that this could happen to America again. Can the polarisation in America get even worse than now or can it improve?

Prof Paul Milgrom: I'm worried too. By the way, this gets back to technology too. I mean, you know, the Trump phenomenon is partly about Twitter, and it's partly about the lack of any single trusted source. Trump has been lying for years and riling up his base with falsehoods and teaching hatred. When I was growing up, we had Walter Cronkite, there was this authoritative newsman who everybody believed, and that told the truth. And now there's nobody we believe, and anybody can put on anything. And Trump was spreading all this stuff on Twitter. I think to bring the country together again, we really have to find a way to have somebody who's trusted and a way to clamp down on lies and falsehoods and hatred, which tear people apart and create this polarization. But I don't know how we're going to do that.

NDTV: Okay moving on now to a completely separate topic, which is very exciting, the new world of cryptocurrencies, like Bitcoin, which are actually designed to exclude the control of any government or any powerful authority. They are completely autonomous and a law unto themselves. Ruchir Sharma pointed out to us that there is a kind of generational divide regarding Bitcoin and attitudes to Bitcoin. Nearly 30% of our younger generation have invested in Bitcoins, while for the elder generation less than 3% have invested in Bitcoin. That is a big difference.

So, is Bitcoin a serious phenomenon and could it even be a future currency, or is it just a bubble?

Raghuram Rajan, there is this whole question of Bitcoin being a bubble, or possibly could be the currency of the future, which side do you lean on?

Prof Raghuram Rajan: Well, so, I think there are two versions of bubble. One is a pure bubble, which is what the economist version is, is something which is valued only because other people value it. There is no fundamental baseline value. I mean, think of Bitcoin. It's very hard to even spend Bitcoin, remember we're spending a nation's worth of energy to try and keep track of Bitcoin, right? It's a very inefficient asset. The amount of computing power that has to go on to maintain Bitcoin transactions is huge. So, in the longer run, it doesn't seem to me that this is a viable means of transacting, means of payment. If you take away the means of payment from Bitcoin, it really is an asset with no intrinsic value. It's a digital asset, which has claims on nothing. So, people value Bitcoin, only because other people value Bitcoin. When Elon Musk tweets positively about Bitcoin, Bitcoin values go up. But it's not as if there's some nirvana down the line when Bitcoin will become the means of payment everywhere. In fact, it's sort of programmed not to become that. So, this leads to the question, why are people valuing Bitcoin? I mean, the reason is, they are valuing it because others are valuing it. And that is part of the reason why it's volatile. One day, Elon Musk tweets, it goes up in value. Another day, somebody says this is heading towards disaster, and it falls. Now, there are some financial assets like that, some of the high-tech companies, which aren't producing anything right now, maybe of that kind. But broadly I would say that asset prices are high. I wouldn't say it's a bubble everywhere. I think there are, certainly in every country, a fair number of assets, which are fairly priced. But low interest rates are lifting everything, perhaps some beyond what their true value is.

NDTV: Paul Milgrom, there are so many pluses and negatives about cryptocurrencies. How should an average person understand and assess the role of these cryptocurrencies in savings and investment decisions that every household takes? You know the economies of countries across the world are diving downwards, but the stock market is shooting up, and Bitcoin is rocketing. It's like the Russian Sputnik vaccine.

Prof Paul Milgrom: It's a rocket ship.

NDTV: Explain that.

Prof Paul Milgrom: Well so, you're talking specifically about Bitcoin mostly, I think, which 10 years ago was what, $25. And now it's what's $50,000 - $60,000. I don't know. I haven't looked in the last few days. It's just incredible. What's happened to the values and it's also very hard to grapple with because I think that there's a lot of risk associated with it. People are investing in blockchain because it has some unique attributes, very easy to transact. The government can't confiscate it from you. People who are worried about that, like to invest in it, it provides a hedge against monetary inflation when governments are doing their monetary, all those things are reasons to invest. And yet, it would seem so easy to create substitutes. There are other cryptocurrencies that people are creating and if they catch on, then why would you put your money in blockchain, which is so expensive. What is the foundation for the value? It's a kind of fiat currency. It's something that's valuable only because other people say it's valuable. It doesn't have any inherent value of its own. So, we'll see. I think one of the things that's driving blockchain up is the fear of missing out. People are thinking, Oh, my God, it's shooting up. I should get some just in case it continues to go up and that's it. And the demand is feeding on itself, but that's bubble type demand. It could collapse again if people back away from that.

NDTV: Yes. FOMO, the fear of missing out.

Prof Paul Milgrom: FOMO, yes. Fear of Missing Out.

NDTV: So, what would you advise an average person to do, invest in Bitcoin or not? Number one, and number two, what would you advise a government, say like the Indian government, should governments allow Bitcoin, blockchain freely or try and have tight controls and ban it?

Prof Paul Milgrom: So, I think tight controls are pretty much impossible. I think that one of the appeals of blockchain, one of the reasons people invest in it, is they think that it's very, very hard for you, you have your wallet, your blockchain wallet, your secret passwords, nobody can see what you're doing. And, without blocking access to the whole internet, it's just very hard to control blockchain. For the average person, I think that there is this FOMO thing. People have some fear of missing out, but I think investing too much in it is extremely risky. I think we're talking about it really looks like a bubble to me right now and bubbles eventually break. People make money during bubbles too. And if you, if you have that fear of missing out, and you want to invest, invest a little bit, but don't overdo it. Because you could have your whole asset wiped out. We see the same thing with the GameStop. You know, the GameStop shares. We had just a bunch of people who decided they were going to drive it up and they did. And so a lot of people made a lot of money. A lot of people are going to lose a lot of money too, is the way it's going to happen.

NDTV: So, the Indian government, like many other governments, is trying to place strong controls on Bitcoin. Now, is that the correct path forward? Or is there a new world, with a new kind of currency and governments should just get used to it and not get involved?

Prof Paul Milgrom: First of all, I think that its use as a currency is going to be limited. I think governments can regulate its use as a currency. I think people are using it now more as a store of value. And I don't think that the governments can do very much about that. I think that we should watch it carefully, to make sure that it's not you know just a pump and dump scheme that draws average people in, where they lose a lot of money. I think that we're moving increasingly to electronic payments of all sorts.

I'll tell you a story. I visited Sweden with my wife, you know my wife is Swedish. I went to Sweden and most years when I go to Sweden, the first step I make is at the airport and I get some Swedish currency. But I wasn't sure what I was going to do with it. Last year, I was in Sweden for six weeks. I never got any Swedish currency. I could pay for everything with my iPhone or my Apple watch, I just never needed any currency for six weeks in the country. And it wasn't even inconvenient. I mean, we're all moving toward electronic payments. I think that's just the future. And I think Bitcoin is just one little piece of that whole thing.

NDTV: So now this next issue, that's completely different to what we've been discussing so far, but the issue that hasn't had the degree of attention that it should really have had, that it deserves, and that's the health of our children, that's deteriorating.

Kaushik there are some key trends in the Indian economy I would like to show you, as you have done lots of work in these areas. This data, which you are obviously familiar with, is from again another paper by Arvind Subramanian, former Chief Economic Advisor, then with Harvard and now back in India with Ashoka University, he's shown that there are two contradictory trends.

He's shown that there are some positive signs with improved access by ordinary, poorer people, vulnerable people, especially by women, to government welfare measures. For example, more people are using bank accounts, more women are using bank accounts, there's been a huge increase in gas cylinders for cooking, that women have really appreciated. On top of that many more homes are getting more electricity and the number of homes with toilet facilities has risen, though there's some way still to go on that. All good signs.


Arvind Subramanian also points out some really disturbing trends in the data and in what's happening in our country, especially related to child health in India. There's a sharp increase in anaemia, there is little or no reversal in the downward trend of stunting among children, and diarrhoea and acute respiratory syndrome are back on the rise again. These are awful signs. Kaushik in all your work on malnutrition and stunting, can you explain why child illnesses and stunting is so bad still and in fact illnesses are getting worse?

Prof Kaushik Basu: Hugely, and that should receive much greater attention Prannoy. The malnutrition figure is suggesting what some people are beginning to talk about, that it's a K-shaped improvement that is taking place. That the top segment is becoming better, it's like the top part of the K and the bottom is becoming worse. And the malnutrition data which has come out, and to me actually that is the biggest worry. And we should focus a lot of attention on that. And that is showing that since malnutrition is not something that the middle-class, upper middle-class, even the lower middle-class suffers, it's the very poor, and India still has a large segment of that. That segment is becoming slightly shorter for that age over the five-year period, I should give that data correctly. For 22 states and Union Territories the data has been given out, not for all over India. Of these 22, 13 states stunting has taken place, which has not happened before. So, stunting is taking place. It is true UP, the biggest state, is not a part of this data. So, unless UP is going in a totally different direction, it is an all India worry. There are a few states which have done better, Bihar surprisingly has done better. Hats off to that. I think Assam has done better. Andhra Pradesh not bad, Sikkim not bad. But the average is loss of height for age, for the below five-year age group, which demographers or health economists call stunting. Stunting becoming higher, greater, means the population becoming more stunted, is a very rare happening, that has happened from 2015 to 2019.


NDTV: So, what are the underlying causes and really the reasons behind this child malnutrition and stunting in our country?

Prof Kaushik Basu: Once again, we should immediately begin to dissect this. There is also some data which is suggesting that our sanitation has improved over this period. Cooking fuel, better fuels we are using so pollution is less, so those things are not causing this. So almost certainly the income of the poorest segment has been going down. Even while the country is growing, growth is coming down. But it is still positive growth. The poorer segments are becoming poorer. Inequality has gone up. We have got data from Oxfam, we have got data from, Piketty has analysed this data, inequality is going up. So, what is probably happening is that the poorer segments are becoming poorer, and that is leading to malnutrition, which should not happen for a country like India. With so many strengths, vibrancies, there should not be malnutrition increasing.


NDTV: And the trouble Kaushik is that the media tends to, not only in India but all over the world, tends to and has historically always tended to highlight major sensational events. Suddenly 10,000 people have died, or 5,000 people have died in this earthquake or a flood. But millions die because of malnutrition and millions of children, that, too. But that's not highlighted. Why? Because it's a slow process. It's not sudden. So, if it's sudden you report it. But if it's a much bigger problem, like malnutrition, it doesn't hit the headlines. But in your opinion, is that the biggest concern, malnutrition and child health, looking 10-20 years from now?

Prof Kaushik Basu: Absolutely. So, in fact, my future forecast, I will tell you, I think there's going to be an immediate pickup, of course, recovery, India's going to recover. Then it's going to be moderate, slowish growth. After that I'm again worried because of all these factors, what it will do in the long run? But the great rosy story of India, which began somewhere in 2003-2004, and continued for 7-8 years, where the whole world was talking about, that for now seems to be blighted. And, coming back once again to this particular topic, of malnutrition, is something that can do a lot of long run damage. For that, once again, we have to be focused on inequality. I mean, inequality is important. You just don't want the country to grow, because the top segment is growing very, very rapidly, because these kinds of factors will begin to cut into the country's long run growth prospects. And I feel a lot of the attention from here onwards ought to be in these sectors. But for that, once again, I'm going back. The country to stand together, not be as divided, and as you're saying Prannoy also, in analysing data, what you're suggesting, you're not saying, but I am saying, that you also need a bit of an openness. You can't, as soon as a number is pointed out, you don't say that I'm not going to take it seriously because this is ideological. The numbers are not ideological. So, we have to look into the numbers in the face. And then say that this is worrying. I can disagree about the cause of it. What you're saying is the cause is not the cause, there's always a dispute. But we must look at the numbers and the numbers are very worrying at this point of time.

NDTV: Michael Kremer, child malnutrition and stunting, some of the major problems facing India. You have studied this area in-depth. What can and what should be done for our children in the distribution of vaccines, which is the more likely future scenario?

Prof Michael Kremer: You know our analysis suggests that it's worth it for even the lowest income countries to purchase vaccines. And we did an analysis for Africa and virtually for every country in Africa, it makes sense, COVAX has pledged vaccines for up to 20% of the population. But it makes sense to go beyond that. And so, even for low-income countries, we would advise going out and if necessary, borrowing, to do this. The World Bank has made $12 billion available for financing vaccines, and actually much of that money has not been used. So, I think if I were a finance minister, and even in a very low-income country, let alone a middle-income country, I would think this would be one of the best expenditures that could be made. Now that's not to say that high-income countries don't have obligations. I think high-income countries should be contributing to this as well, through the COVAX facility.

Maybe you know, there'll be technical judgments about which vaccines are best, given the new strains that are coming out. Now, the other aspect is who should purchase this. And there, I think there's an argument for national governments to do that, in some cases. You know, the Government of India may want to do that. There's also a very important role for international organizations. The countries that have already ordered a lot of vaccines, Israel and UAE, US, UK. We're probably going to have a lot of our needs met through existing capacity. But there are many other countries in the world, where it's going to take a long time with existing capacity to vaccinate them. And so, you may need an international body like COVAX to order these vaccines. And then if they solicit bids, you know Indian firms are in a very good position to win those bids. India is really the vaccine manufacturer for the world. And so, of course, it will be important to produce to international standards and so on to do that. But I think both national governments and international organizations should be purchasing.

NDTV: Okay and finally, may I go back to you Professor Milgrom and ask a rather naive question? May I ask you for a moment about your own work, including the work for which you won the Nobel Prize and how it helped you understand not only micro human behaviour, on which it focuses, but is also very relevant for understanding the bigger picture? I mean, the connection between your work and how you can extend it, for us to understand what's going to happen next in the economy.

Prof Paul Milgrom: Well, what my work has been used for mainly, at least the work that was cited by the Nobel Committee, has been about designing better markets. We are starting to see lots more designed markets now, when we do markets for roads, as we get self-driving cars, the way that the car-sharing takes place. We see online markets now that are designed for matching, matching people more effectively. So, this isn't so much about the macro economy as about the details of how people are organized. And I'm one of many people who have worked in that area. And this improved efficiency is going to help a lot of people by using resources better, and making resources available more widely to more people because less of it will be wasted.

So that's the single biggest thing, but you know I'm going to dive away from your question a little bit. Sort of my biggest disappointment about the prize, the work that I'm proudest of, I can't answer your question with it all. A lot of it is really fundamental work about Game Theory, about the role of, you know, when I started working, economics was about supply and demand and conditions of entry, all physical things. And Game Theory says, you know, what people believe is also really important, and what they expect is also really important than driving their behaviour. And the fundamental work that I did in that area is the work that I'm personally proudest of. But it didn't get mentioned at all by the Nobel Committee. And it's not at all useful to you. Maybe that's why, because for somebody like you is saying, what can I predict about the macro economy with it right now. Well, nothing. I can't tell you anything about that. But it's very helpful in other personal situations. Would you like one more story? Can I tell you one more story?

NDTV: Yes, we would love that. Please go ahead.

Prof Paul Milgrom: The last story is about when I met my wife, and there's some Game Theory in this story. So, I actually met her at the 1996 Nobel Prize dinner when William Vickery and Jim Mirlees won a prize. I was seated next to her at the dinner, and we had a really pleasant evening, we danced and laughed and talked, and I flew home. I decided I wanted to see her again, but I wasn't sure how. I lived in California. And she lived in Stockholm. And how do you approach somebody like that? And how do you convince somebody like that, that it's worth taking a chance to even date you, when we're so far apart? So, what I decided to do, being the game theorist that I am, is I wrote her a letter and I said, look, I had a really good time and I'd like to see you again. Since you live in Stockholm and I live in California, I'll send you a plane ticket and meet you anywhere in the world. And, that was supposed to get over. You know, I was thinking, she's going to talk to her friends, they are going to tell her there's no future, and I have to do something big enough that it will shut up the friends and her confidantes. So, that was a game theorist's move. And it worked pretty well. We're married now and together for 20 years.

NDTV: Let me tell you, of all the economists that have given examples and lessons, I think for our viewers, that story that you just said, will resonate the most.

Well, that's it for now. Thank you all for being with us for these three Town Hall programme series. Our final Town Hall is a very special interaction with the great Amartya Sen. Don't miss it, it's really very special. Bye for now and thank you again for watching.