NDTV Exclusive: 3 Things IMF's Gita Gopinath Would Tell Government

  • 26:07
  • Published On: December 16, 2021
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NDTV: Hello, and welcome to the NDTV Dialogues - a conversation of ideas. And this week's special guest is somebody fascinating to discuss ideas with because she's Gita Gopinath, Chief Economist of the International Monetary Fund, who also will soon be the first Deputy Managing Director of the IMF. Thank you very much Dr Gopinath. Great to have you on the Dialogues.

Dr Gita Gopinath: I'm happy to join you, Sonia.

NDTV: Well, it's an interesting time to interview you because of course, we're going down headlong, it seems, into another COVID crisis with both the United Kingdom and the United States sounding the alarm on the Omicron variant. How is the IMF? How would you be looking at this impact in 2022?

Dr Gita Gopinath: Yes Sonia, unfortunately, we've been living in interesting times for a bit too long. And we are very closely following the developments on the Omicron front because we do our January World Economic Outlook update. And we have to decide whether we need to change our baseline or we think of this as a big downside risk. We, I mean, the short answer is we haven't settled on that yet. What we know is that cases are going up rapidly, that it seems to be, at least recent preliminary evidence is, that it's much more infectious than Delta. And now it could be less severe than Delta. But if the numbers are that big in terms of people being in effect infected, then that could just overwhelm the hospital system even if a small, smaller fraction of people ended up in hospital. And we've already seen, of course, the reaction in terms of restrictions on travel and mobility and so on, which obviously has implications for the world. But you know, how severe all of this is going to be, we are still making a determination at this point

NDTV: You don't have a ballpark estimate on the impact you think?

Dr Gita Gopinath: No.

NDTV: In fact, interestingly, many of the lessons you would have thought that the globe would have learned that perhaps shouldn't be done, for instance, shutting down travel for certain countries trying to contain it within borders, vaccine inequities are still very much a reality as we go into perhaps a phase two of this pandemic, as looking at it from the IMF perspective. What do you think the globe perhaps needs to do now right, and stop doing wrong?

Dr Gita Gopinath: You know, vaccine, inequity is tragic. And the fact that we're at the end of 2021, with high-income countries having 70% of the population vaccinated, in less than 4% of the population in low-income countries vaccinated is just it's a tragedy. You know, the targets were set to vaccinate 40% of the population in every country by the end of this year. There are over 80 countries that are not going to meet that mark, and for the vast majority damage, because they just don't have enough vaccine supply. For instance, you know, on Covax, the contracts it has with companies, only about 18% of its contracted doses have been delivered. So, they've never, you know, they've not been prioritizing the deliveries, that needs to change. The dose donations that were pledged need to be delivered. About 1.5 billion doses have been pledged, about 300 million have been delivered so far. And countries need to be helped to be prepared. So, when the shots come, they can go in. And that has to all, you know, it has to take place on a Herculean front. Now, of course, what we're seeing now is the big demand for boosters that have gone up, especially with the Omicron variants. So, I am worried that we might again have a problem with getting enough supplies to low-income countries with the fact that now there will be even more of a desire to hold vaccines at home.

NDTV: And you of course have been talking on inflationary pressures and the impact on monetary policy for whether it's developed countries or emerging markets, or, you just met the Prime Minister as well this week. As an emerging market economy, what do you think India needs to be looking at in terms of monetary policy, given the inflationary pressures? We just had wholesale price inflation at a record since 1991, retail inflation rising as well. What would your recommendations be?

Dr Gita Gopinath: Globally what we are seeing is that there are some common factors in inflation. So, when you looked at energy prices, and you looked at food prices, they were elevated. And both of them have fed into higher levels of headline inflation in many countries. Then you have had the supply chain disruptions, the supply bottlenecks, the semiconductor shortages, especially for the auto industry, which has affected all countries, including India, the auto sector in India. And imported input costs; intermediate input costs have gone up showing up again in wholesale prices in many countries in the world. So, I think these are challenging times, because for many emerging and developing countries, including India, while there has been a recovery, it's not complete. There is much more that still needs, much more distance that needs to be travelled. And at the same time, you're seeing inflationary pressures in India, you know, it's still close to the upper band, core inflation is about 6.1%. But it's sticky at that level. And so that's something you need to keep, you keep a very close eye on. And then third, the US Fed is moving towards, you know, much quicker normalization, very likely increase in interest rates next year, multiple rounds. So that should also then tighten global financial conditions. So, from an emerging market perspective, you're going to have to manage these three pieces, which are both the recovery, be vigilant on inflation and make sure that the financial house is in order, wise financial conditions tightened. For India, we think it remains appropriate to keep monetary policy somewhat accommodative in the near term. But, you know, if inflation starts going up, and especially inflation expectations show signs of serious de-anchoring, then it's important for us to move more aggressively on one monetary policy front.

NDTV: How did the meeting with the Prime Minister go? It's interesting, of course, this is a government that has really pushed through many reforms in these last two years, lockdown years as it were, but had to turn its back on farm laws and the reforms there because of domestic opposition. That's always an interesting balance, and how was the meeting with the Prime Minister?

Dr Gita Gopinath: Oh, it was an excellent meeting with the Prime Minister. There is a lot to worry about in the world right now with, with a pandemic, with what's happening, with inflation, you know, with climate financing, you know, climate challenges, which is another big issue, that is also a big risk on the plate right now. And also looking ahead, you know, India is going to have the G20 Presidency in 2023, which, you know, would make India very prominent on the world stage in terms of handling the G20. So, we touched on all these different issues.

NDTV: Not on reforms and getting them through?

Dr Gita Gopinath: No, we also talked about the multiple kinds of reforms that have been undertaken in India. And, you know, a lot has been done, I think this definitely was a crisis that was not the, you know, was used to kind of push through a lot of, of reforms. But again, as we all know, there is more recovery that's needed. And also, you know, the recovery has come through, but there is unevenness in the recovery, if you look at labour markets haven't healed yet, if you look at MSMEs, they still need, you know, the recoveries are still weaker. So, you know, but this is the challenge countries are facing everywhere.

NDTV: And of course, and as you know, well, of course, having served from India and having studied in India, that poverty is always a huge issue here. And India had great success in lifting a large number, millions out of the poverty line index, and now, worries about people slipping back and job losses are that something which is the focus time if especially in countries like India?

Dr Gita Gopinath: You know that is an unfortunate effect of this pandemic, which is the gains that were made in poverty reduction, some of that was reversed last year, in terms of, at least in people's access to incomes and jobs. You know, in many countries, lots of support was provided in terms of cash transfers in, within India, cash transfers, and food grains. So, that helped. But, you know, what we are worried about is that, if the pandemic keeps going on, like, you know, the way it has in the last two years, then most governments don't have the fiscal space to continue to provide large amounts of support. So, I think it's going to become more challenging, it has to be much more targeted. And your use your limited resources to make sure that it goes to the most vulnerable in the population. And at the end, given the global finite, like I said, because interest rates are going to go up in the US and other advanced economies, it's important also to have very good medium-term fiscal consolidation plans. So, it's very clear that the economy's on a good trajectory on a fiscal basis. Reserves, having a large amount of reserves India does have, also helps, so you're going to have to manage these trade-offs. But it is the fact that poorer households, you know, more vulnerable households have been deeply affected is, is a big concern.

NDTV: It is, as I said, it's an interesting time also, to interview you when you were heading back to Harvard. And now you're staying on at the IMF with that huge new promotion. In fact, it's wonderful that the two top positions of the IMF will be held by women economists. And that's a huge change because often, you must have been the only woman economist in a room, you and your counterpart, that's changing. What is it like for you? Has it been a challenging journey to reach?

Dr Gita Gopinath: It's been challenging, yes. You know, it's been exhilarating in some sense too. Um, I am a workaholic, so, I don't complain about being awake at all hours. And, you know, the last two years have been intense. You know, originally, I thought I would be going back to Harvard, resume my academic life, which would be at a slower pace, but just given where the world is and given all this stresses that are still there. I just thought I should stay on in public service for some time longer. And you know, it's going to be, these are going to be very challenging times for sure, on multiple fronts.

NDTV: It is interesting to be called a trailblazer role model for young women, especially Indian young women because you've had the trajectory of, of course, studying in Mysuru, then LSR and D School. So a huge inspiration for so many young Indian women out there, what would you tell them?

Dr Gita Gopinath: Well, first of all, I'm very kind that somebody says that. I am always, whenever I hear it, I'm like, well that's very nice to people to say that and but you know, it is true. I went, I grew up in Mysore. I went to Nirmala Convent and Mahajan College and took my first class in Economics at Lady Shri Ram College. So, you know, I think, I hope you know, my story is something that says that you could be, come from pretty ordinary backgrounds. And if you set your mind to accomplishing things that it can happen.

NDTV: I read a lovely interview of your parents where your father, like all Indian parents, says that you're a pretty average student, till you were in junior school. And your mother said you still make time to call her every day. So, in that sense, it's a nice time also, for us to be, as Indian journalists to see so many Indian origin CEOs shattering many ceilings, tech companies, a Chanel CEO, and of course, IMF Chief Economist as well. What do you think is driving Indians to do so well, in these global positions right now?

Dr Gita Gopinath: Well, I think there are lots of talented Indians. And we are large numbers. So, we also show up at the global, global stage. But you know, I think we're all extremely thankful for, this I can speak for myself. I'm extremely thankful for the education I had in India. The fact that your parents put a huge priority on it, my parents put a huge priority on my education and, you know, just dreaming for the best possible. So ...

NDTV: You know, I think it's wonderful, in that sense, we talk about global openness, that this opportunity is also available to immigrants in other countries. And it's just merit-based, I think that's a huge impact as well. And also, just the point when we look at global and this bit about the closing of borders and restrictions, is IMF going to come up with some kind of recommendations, perhaps on more openness when we're looking at the economic impact of what shutting down borders often has?

Dr Gita Gopinath: Right. So, I mean, of course, decisions of shutting down borders, are tied to health-related issues. And we leave that to the WHO to comment on. But our view has been that when it comes to global trade, that it is important to, you know, not put restrictions on vaccine exports or exports of medical equipment and so on. You know, trade has actually held up very well. So now we are seeing the supply chain disruptions and so on. But that's partly a reflection of the fact that demand for goods has grown very strongly, at a time when people cannot spend on services, where they're not traveling, where they are not, you know, going to large stadiums and attending events like that. So, people are purchasing a lot of things online. And so, there's a huge demand that's being placed on the world trade network, and that is leading to disruptions. But I think, you know, it's been a big source of strength to the economy in terms of, you know, having an integrated global system with something we always push for.

NDTV: For India somehow our benchmark, our competition is always looking at how can we occupy space China perhaps has and we looked at India, of course, IMF, and at a function at LSR the then IMF chief had described India as the bright spot in globally challenging economies in the world. Do you see India in that position? Or where do you see India now?

Dr Gita Gopinath: For many countries, the difficulty is, I mean, being hit by a pandemic and the recovery that comes after that, I mean, these are incredibly challenging times. We are seeing recoveries. In the case of India, I do think that the potential remains in terms of the large young labour force. Of course, there are challenges that are still there in terms of making sure that they have the right skills and get up and get the right kind of employment. The large English-speaking population, I mean, all of these are, you know, which traditionally are touted as the strengths for India, which remain. There have been additional new reforms that have been going on are also encouraging, the privatization of Air India, I think, is been a very good step in that direction. So, there are reforms happening, but, you know, we have to keep in mind that even before the pandemic, there was slowing growth in India. And so, you know, the question is to ensure that coming out of the pandemic is robust enough growth in India. I don't think it can be taken for granted. But, you know, it is one of the absolute engines of growth in the world.

NDTV: One of the axioms in India has always been that good economics is bad politics. Do you think that's going to play out as well? When I mean, we've got elections coming up. So, do you think that you're going to see a slowdown? Or what would you do, how do reforms make good politics?

Dr Gita Gopinath: I mean, firstly, I don't think is necessarily the good economics is bad politics. So, for instance, in this pandemic, it was very important to make sure that you were supporting, you know, people and firms in terms of, also in terms like cash transfers, providing support to small enterprises, loans, and so on. All of that was both good economics and I guess particularly good to make making sure free food, health spending, spending in the health sector. You know, I mean, more will be needed on that front, on spending on health and spending on education, even in, in especially in India also. So that will be needed. So that's not an issue. We have studied, though, the problems that come with trying to do reforms that are much trickier, like labour market reforms. And it's certainly the case that those are much harder to do at a time when the economy has not fully recovered. And it's easy to do when there is strength in Europe, you have a booming economy. So timing is definitely important in terms of when you roll out certain reforms.

NDTV: How worried are you about the impact of online education, especially in India, where the digital divide is so stark in the access that children have to devices to access remote education? Do you think we're going to see a huge impact on that, especially in India?

Dr Gita Gopinath: I'm very worried about that. You know, I saw some recent studies from us, you know, the evaluations that were done in terms of reading capabilities and math capabilities, and that it has taken a hit. So, you know, two years of children not having proper access to education is very costly. And these are the future labour force for the future human capital for the country. So, I think there's absolutely action that needs to be taken to make sure that this is remedied. I am quite worried about it.

NDTV: And, Gita Gopinath, if you had three things to say, you met the Prime Minister already, but if you had three things to tell the Indian government right now, on how to get on track now with another COVID potential crisis looming, but luckily our cases are down right now who knows, what would they be?

Dr Gita Gopinath: Well, I think first, which again, is true for all countries is to make sure that you are doing your vaccinations on a war footing, you know, India is at about in terms of the share of the total population, it's about 37% of the population that's fully vaccinated. Of course, that number, in terms of the first dose is much higher, closer to 60%. But what we see around the world is that when vaccine cases come down, it, you know, pressure comes off, people, you know, don't think about getting vaccinated. So, getting over vaccine hesitancy, and just on a war footing, pushing through much higher rates of vaccination, I think is essential. It's not going to solve the, I mean, you're still going to get infections, you're seeing that in the UK, even with higher levels of vaccination rates. But everything points to the fact that even with Omicron if you are vaccinated, you get some protection against severe disease. And that's what we should be targeting. So, I think that's one big area. The second area is recovery, like we said, you know, there has been recovery, we've seen it up to Delta, there's been a rebound after the reopening. But it's not done, it's not complete, there's still a big gap between where India would have been in the absence of the pandemic and where it is. So, there is still a need to keep in the near term, fiscal and monetary policy accommodative. But at the same time, you know, you communicate how you are going to consolidate over the medium term. So, it, kind of very clearly, how would you bring the fiscal house in order over the medium term. Similarly, for the monetary policy side, keeping a very close eye on infection, sorry, on inflation, I guess because we talk so much about the health crisis, infection, inflation get mixed up now. So, and then the last thing is there are lots of long-standing issues that have to continue to be addressed, making sure there's sufficient spending on health, on education, India's done very well in terms of investment in physical infrastructure and digital infrastructure. But, you know, there is much more that's needed, and of course, on climate change, and, you know, big announcements have been made, but that will require very ambitious policies to attain those targets.

NDTV: Gita Gopinath thank you so much for being on NDTV and we look forward to seeing January's economic outlook. Thank you.

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