Why Is No One Talking About India's Unorganised Sector? Economist Arun Kumar Explains | Neon Show

So in India there are two sectors the organized sector and the unorganized sector the organized sector is doing well the unorganized sector is the one that is suffering I was recently talking to worker in maruti and he said that you know 10 years back we used to produce one car in 58 seconds and we had 10 workers and 10 robots working now we have 20 robots and five workers so output is increasing but employment is Decreasing 88% of the unemployed are educated youth these children are getting frustrated they've done a degree they're not getting job

appropriate to what they are and the parents are telling them you are not good for anything we have sent you to alahabad mukarji nagar to Kota we spend money and you're not getting a proper job that adds to the frustration of the children so either they're sitting on their mobile phones and wasting time or They're doing substance abuse black income generation is the single biggest problem that we have India has been losing 5% rate of growth since the mid '70s when the Black economy became more than 10% so if you add 5% every year from

The mid-70s Today Indian economy would be at least eight times larg wow so instead of 3 and2 trillion you would be about 26 trillion You' be larger than the US economy is the number getting reported that we are a $3.6 trillion Economy is that correct number or not now people say that look but IMF is supporting the government saying we have a 7% rate of growth World Bank is saying that we have a 7% growth we are the fastest growing large economy and so on but the point is IMF World Bank EDB are not data

collecting agencies because the errors are there in the government data they're also the errors in the data from IMF World Bank at ADB so a rate of growth has not been set 7 8% is been More like hi this ISAT Alia welcome to the neon show I'm your host and also co-founder of neon fund a B2B SAS fund that invest in the most emerging software companies coming out of India building for the globe today I have with me Professor Arun Kumar so so glad to have you on the podcast today you have been a professor

at economics at jaal Neu University and you have published six Books you know the books are black economy higher education Indian economy s Independence demonetizing GST and your latest book on covid right and I'm looking forward to your new book on uh the Indian economy uh so today's in the podcast discussion the goal is to provide our listeners a framework to see the truth really where we are and what better we need to do to move ahead uh possibly what what is required for India as a first step to go towards a $10,000 GDP per

capita uh goal right like we have various goals floating like a 2047 goal right but I think a good quality of life a good education a good healthare system for all right that's what you know uh is a good framework to see right the truth and I want to start today by you know saying that at 19 47 you know when India got its independence all the South Ean countries uh China you know uh even Singapore and others Thailand Indonesia they were at Korea Japan they were at all at the same level even in some

countries the basic infra was completely destroyed for example Japan right because the US has completely shattered after the World War II they infraa right what these countries did differently in the next 50 years right what did we do that they are where they are and we are where we are so sidhart thanks for having me uh it's a pleasure to talk to you uh you've raised many questions actually together You know uh I think we need to go step by step and see uh what has India done or not done as you rightly said uh

and you know if you look at southeast Asia uh and India in 1947 when we got independence they were roughly at the same level of poverty illiteracy ill health that weer and then they pulled ahead so uh in 1986 there was a paper which showed that what did they concentrate on they concentrated resources on education and health they Had all children in school by 1965 so they gave good education and good health which we could not and even till date all children are not in school because we still have child labor child labor means they're

not going to school the proportion may be much smaller than what it was earlier but nonetheless we haven't achieved that goal which the southe Asian countries managed to achieved by 1965 so what has happened is that their Labor has become more productive because good education leads to better productivity good health means you're more productive so all these countries whether China Korea Malaysia Thailand they've all got very productive labor in India we have that problem that the Acer reports come uh from 2005 they show that in government schools and rural areas 50% children in the fifth

class cannot do second class Reading Writing and maths and they drop out they Don't have basic uh training recently the AA report which came out 5 months back showed that the age group of 14 to 18 this is different from that earlier part but age group of 14 to 18 40% cannot do second class Reading Writing and maths so in other words the training is very poor the education is very poor now if your education is very poor then you cannot absorb knowledge if you cannot absorb knowledge then you cannot develop knowledge you know and

you Cannot therefore develop technology also so we've lagged behind in these parameters of Education Health and Technology development so for Any Nation to become great it's the human resources that have to play their part the human resources that we are producing where large number of children are unable to cope with modern technology that is the setback that we have at the moment whereas in these other countries the Southeast Asian countries their people Are able to absorb technology to develop so South Korea became a developed country way back in the 19 late 1980s China has uh

stolen a March over us in the last 40 years their per per capita income and their GDP are now five times uh India's you know and they become competitors with the USA because they're spending 3% of GDP on R&D India is spending only 7% so in other words China is spending 20 times more in R&D than India spending and as a result they Become the manufacturing Hub of the world uh similarly in say advanced technology like chips Etc South Korea's done well Etc now how do you develop education Health you have to actually give resources

for these things huh so yes as compared to the colonial times we have given more resources for education and health we've set up many more schools universities I IMS and so on and so forth but in totality our expenditure as a percent of GDP is very low so Malaysia and all I heard have gone up to 10% of GDP on education we've never as a nation crossed 3.8% on public education so that's very low compared to what we need to spend similarly on health we should spend 3% of GDP on public health we've never crossed

1.3% on public health so therefore the health and the education that would actually make our labor productive that would make it be able to take on the challenges that are coming that has been low now today the World is globalizing now in a globalizing world you have to meet the global Challenge and the global challenge is coming from technology and technology means education and R&D so if you don't spend enough on education and R&D then we will not be able to take on the challenge and there any number of examples available like for instance defense

is a very critical area now in the case of Defense we started the light combat aircraft Project way back in the late 1980s and still it is not fully where it should be uh the engine is borrowed from G uh g44 engine uh and then you know we we started the main battle tank also making it in the late 80s we had the plan to do it and that also has the leopard engine of Germany from that time so we in critical areas you know whether it be ship building so aircraft carriers or submarine building

Etc we haven't managed to get the self-sufficiency that A big nation requires if you want to be one of the top Nations so this backlog of Education Health higher education R&D has plagued us all through uh since Independence so I'm not saying we have not done well in education you know we have improved compared to 47 in health also we have improved and that's why our population rate of growth Rose because the death rate declined because the health systems are built up hospitals dispensaries Etc so I'm not saying we've Not done anything we've done but

not compared to what southeast Asia has done or what was required now the second thing that you asked was about our growth Now growth of an economy can take place but you have to also see whether the growth is taking everybody along with it so are disparities rising or disparities declining so in India what has happened is that there are two sectors the organized sector and the unorganized sector the organized sector Is doing well the unorganized sector is the one that is suffering and 94% of the people are in the unorganized sector only six people

6% are in the organized sector so the 6% are doing well 94% are not doing that well as a result the disparities are growing so even though in terms of per capita income we are at the 140th level in the world okay but the number of billionaires we are the third so we have more billionaires than countries which are much richer than us Like Germany Japan Britain France huh uh so that itself indicates the kind of disparity that you have large number of billionaires but very large number of poor people also at a very low

per capita income our per capita income is only about 5% of that in the rich countries so it's 12th or 130th at times compared to the uh rich countries so if we have to develop then the development should be also more even otherwise we'll not be able to call as a developed Nation now to be a developed nation in today's terms you have to be at $144,000 per capita uh income we are way behind that now assuming that the data is correct that the Indian government is putting out uh we will need at least a

9% rate of growth if in the next three years we are to reach the third largest economy uh that $5 trillion gold and we've had only 6 and half% average rate of growth for the the last 10 years so we are unlikely to achieve suddenly 9% Rate of growth also similarly if by 2047 we have to become a developed economy we have to reach $4,000 per capita from where we are that would require 11 and a half% rate of growth for the next 25 years now hardly any economy has achieved over 25 years 11 and

a half% rate of growth so we are also unlikely to do that so we may reach you know uh maybe $9,000 per capita something like that but we not likely to achieve $14,000 per capita so what is likely to Happen is that the the better off countries the developed countries they're also growing at one or two or two and a half% so $14,000 which is the definition so these countries are also progressing so their per capita income will also grow so the distance between us and them will reduce but will still be quite considerable so

to become a really a develop Nation we need to have bottomup approach where we take everybody along it can't be that 6% or 10% do well and the remaining uh 94% or the 90% uh they they remain at a uh low level and you have evidence for that for instance if you look at the income tax data then you have 9 CR people filing uh return but 5 CR of filing almost nil return that means that income is below the taxable and as the Prime Minister said in his 15th August speech two years back he

said only 1.5 CR that's 15 million are effective taxpayers so these the well offs so you Know 140 CR population of 1.4 billion population you have only 1.1% who are effective income taxpayers so those are The Well of people on the other hand we have the uh esram portal where the unorganized sector workers are supposed to register and on the East portal 300 million that's 30 CR have registered and 94% of them say that they're earning less than 10,000 rupees per month so you can see this Gap those this 1.1% who are doing well uh

who have substantial Income and pay substantial income tax and then this huge number of people who are working at 10,000 rupes or even less than 10,000 rupees per month of income so this Gap is enormous so so our development has been a top- down development rather than a bottomup approach Gandhi was the one who said during the national movement that we need to have a bottomup approach we have to develop from Village upward unfortunately what happened post Independence was that we went for a top- down approach why did we do that because we were very

keen that we should become a developed economy huh so we started setting up big factories big dams and so on but that that does not generate many jobs so therefore that the top- down development meant that trickle down should have taken place but trickle down has not taken place it has remained confined to a small percentage of the population this uh fruits of development And that's why these disparities have grown now as a result of this top- down approach what is happening is we are investing now in more and more Capital intensive areas so the

organized sector with highly Capital intensive Technologies and so on is not generating jobs and that's why in spite of 75 years organized sector employees only 6% of the workforce and 94% is there so these people who should have come up and got absorbed in the organized sector they're Not getting absorbed in the organized sector they're remaining unorganized so if we had development From Below then everybody's income would have risen and the organized sector would have also done well because if people at the lower level have higher income that demand would be more and when the

demand is more then the organized sector would also do well so to give an example suppose you give 100 rupees to a rich person that rich person will spend five Rupees and save the remaining 95 so demand will not increase much if you give 100 rupees to a poor person in the unorganized sector then he spend the entire 100 rupees he'll buy a chapel for himself maybe a blouse for his wife maybe a school bag for the child maybe uh you know cout uh for for the kitchen or something but the entire 100 rupe would

be spent so demand would get generated and when demand gets generated then industry does well today the Problem is given the disparities that are there where the top is doing well the people the 90% below they're not doing so well demand has become a problem that's why even before the pandemic the rate of growth officially was dropping in 201718 quarter 4 the rate of growth was 8% it it dropped to 3.1% in 201920 quarter 4 just before the pandemic and why was it dropping because the disparities were rising and with the rise in disparities the

rate of growth Declines so we have to remodel our policies today if we don't remodel of policies which are more Equitable which give more precedence to labor intensive sectors then this problem will continue and the rate of growth may go up at some point and then come down again so for for instance look at the current budget the current budget has raised Capital expenditures huh so from 5 lakh cres to 7.5 lakh crores now to 11.11 lakh CR but where is this expenditure Going it's going in big Railway Freight corridors big highways you know in

the power sector and so on you know infrastructure but modern day infrastructure doesn't give much employment earlier in the 70s and ' 80s if I saw Road project there' be hundreds of people working you know because all all manual today these big road projects or Highway projects or these Freight Corridor projects there you see 10 people working with big bulldozers big Cranes and so on so direct employment generation is very low in the modern day infrastructure sector but our emphasis is on that so therefore they will not generate jobs they will not generate employment so

where will you generate employment in the labor intensive sectors and which are the labor int ensive sectors education is there health is there rural development is there agriculture is there and then the rural employment guarantee scheme but you find That in real terms we not allotting more funds to these whereas we are allotting more funds to the capital intensive sectors so this is promoting the organized sector but not the unorganized sector so think about the unorganized sector because if we don't focus on the unorganized sector the rate of growth cannot go up very much because

if 94% are suffering then the rate of growth cannot be very high so I'll come back to this question of growth rate a little Later but think about it that what is the unorganized sector Agriculture and small in micro sector so agriculture 85% of the farmers are small farmers they have less than 5 acres of land so they're very small and they are saying that their incomes are not going up because their costs are rising Ing and the price they get in the market is not high so therefore their incomes are very low so the

201718 survey showed that from agriculture an Average agriculturist gets only 27 rupees per person per day which is close to the poverty line so these 85% of farmers are close to the poverty line their incomes are very low so that's one segment huh other segment is the small in the micro sector and the self-employed that are there now of the msme sector the micro small and medium sector the micro sector is 99% of the units and 97.5% of the employment and this micro sector suffering and the Small sector suffering so these large segments you know

because The Big Industry doesn't generate job so in the year 2000 or so we used to say there's a jobless growth investment taking place in big industri but jobs are not getting created now we say job loss growth because growth is taking place but work is becoming less and less so I was recently talking to a worker in maruti and he said that you know 10 years back we used to produce One car in 58 seconds one car would leave the factory gate in 58 seconds huh and we had 10 workers and 10 robots working

now we have 20 robots and five workers so output is increasing but employment is decreasing similarly take banking sector now in the banking sector we are all benefiting from the fact that we can work on our mobile phones we can use our laptop Etc and get to the thing we don't have to go to the bank branch so the work of banks has increased in The last 30 years by a thousandfold but the staff in the banks has become half okay so the work is increasing but the number of people you need is much less

this is the S state of uh Affairs in large part of the organized sector that it is in increasing it's growing but it's employing less and less people that's why it's called job loss growth and that is because more and more mechanization is being used more and more automation is being used and this Is before AI now more and more AI is being used and AI will displace large number of people who are doing normal work like call centers bpos now you can have Bots doing that work huh you can do even 3D printing you

can make a house a small house you can't make a big house at the moment but a small house can be made through 3D printing but very soon you'll have even bigger structures being created by 3D printing then you may not need Masons and you may not need workers Who do manual work lifting bricks and cement and all that so in other words coming times the AI the way it's going uh you'll displace even skilled workers I mean like chat GPT can displace teachers for a uh at certain level not completely but at level doctors

because lot of you know surgery can be robotic surgery Etc you know it can be Sally done from one place you know by somebody uh what kind of medicine to give AI can maybe prescribe better than maybe a Doctor because the AI can absorb one lakh articles whereas a doctor in his lifetime May absorb thousand articles so lot of these things even in skilled jobs is going to displace uh skilled people so the threat to employment is enormous so as it is we have a huge backlog uh of employment and we had done a report

in 2022 showing that in India there are four kinds of unemployment first is those who are looking for job and not finding so they Are unemployed but in India because we don't have social security therefore what happens is that you have to do something the poor people cannot afford to sit at home and I say unless I get proper work I'll wait even if I have to die in in advanced countries you have some social security so you have unemployment do and you can wait but not in India so people will do something but they're

not getting adequate work so in India our Definition of employment is that if you do one hour of work in the week you are called employed now but can you support your family with onear work so you're underemployed so India is characterized by underemployment much more than unemployment so government's official data shows only 3% 4% unemployment actually underemployment is probably 10 to 15% at least so underemployment is a crucial thing then the third is that there's disguised unemployment because If you have nothing to do you'll go and sit at your parent shop you'll go to

the field but there's nothing to do so these are called disguised unemployed because we count these people as employed if they're going and sitting in the field if they're going there so third category is disguised employ fourth is those who stopped looking for work so in India we have the periodic labor force survey huh which gives us a data on employment unemployment this periodic Labor force survey this tells us how many people are in the workforce uh so in America in uh China in Brazil you know about 65 to 70% of those in the relevant

age group are in the labor force in India as per l definition only about 45 47% are there so we have 20% less people in the labor force as compared to these other countries so why is that so that shows that these people have stopped looking for work they haven't been able to find Work and they're concentrated amongst women and educated youth so the recent IO report showed that maximum unemployment is among the educated youth 88% of the unemployed are educated Youth and that's why you see this massive rush for work you know I mean

recently about 6 months back there was the police exam in up and 47 lakh children applied for 60,000 jobs you know and you could see the huge rush at the railway stations at The bus stands because the people are trying to travel to get to the exam Center and the tragedy was the exam got cancelled because this paper leakage huh so they have to again do it so this paper leakage has become a big problem then in up in I think 2016 or 17 one of those years I forget the exact year but you had

360 jobs of peons in the up government and 23 lakh children applied of which 380 were phds two lakh were btech mtech and bcom mcom you know so You can imagine that you get a degree and you're not getting job appropriate to your skill so there are large amount of un unemployed educated youth Youth and women and so on and this is resulting in a huge social and political problem why is the social problem there because these children are getting frustrated they've done a degree they're not getting job appropriate to what they are so you

know on NDTV they were showing in 2019 uh it was that mbas are doing cleaning of the drains so they were asked why are you doing that so they said this is a test for becoming a safai Kari in the ipal Corporation so you've done an MBA and you're not getting job and you're willing to do a job of a Safi Kari so that shows the the mismatch and the frustration that the children are facing and the parents are telling them you are not good for anything we have sent you To alahabad to mukarji nagar

to Kota we spend money and you're not getting a proper job so that adds to the frustration of the children because the family doesn't recognize the neighborhood doesn't recognize them and they realize that they don't have a job so with the result they're getting into substance abuse so either they're sitting on their mobile phones and wasting time or they're doing substance abuse you know drugs drinking etc etc Now they don't have money because they don't have an income so snatching money at home so violence is entering homes where their children who are unemployed uh their

violence is entering so there's a big social impact of this and political parties are using these youth who are unemployed who are looking for some small thing so parties are drafting them so there's a political implication of this and then the uneducated youth itself is now protesting so that also Has political implication so this unemployment is a huge issue and this unemployment is a result of the government policies and the technology together because technology is not uh enabling enough jobs to be generated in the organized sector those who are which are the desirable jobs so

in our report we estimated that these four kinds of unemployment mean 280 million Indian don't have a proper job only 320 million Indians have a proper Job out of 600 million so what does it mean it means 320 million who are earning they have to support a population of 1.4 billion that means each working person has to support 4.4 people if these 2080 million also had work then 600 million would support 1.4 billion so each one would support 2.3 so family Prosperity would grow so unemployment is the reason for continuing poverty also also so even

though wages have risen but in the last 10 years the real wages have not risen because there's been inflation also so you have on the one hand wages not Rising on the other hand the corporate sector profits and the organized sector profits they have risen and that's the source of disparity now what does all this suggest all this suggest that there is the unorganized sector which is declining the organized sector is rising so where does the data come from we don't get data for the unorganized Sector we get data for the organized sector and we

are usually discussing the quarterly data that you know every quarter what is the rate of growth of the GDP that data is coming from the organized sector the unorganized sector is assumed to be growing at the same rate as the organized sector now we know from the field that the unorganized sector is declining whether it be in textile sector leather goods sector whether it be pressure cooker sector Whether it be luggage sector uh and so on on so unorganized sector declining is the organized sector Rising so in other words we are proxying the unorganized sector

by the organized sector which means we proxying a declining sector by a rising sector so therefore the 7% rate of growth which is officially given is actually the organized sector's growth it is not the unorganized sector's growth unorganized sector declining and One another hint that has come to us is from agriculture which is the big chunk of the unorganized sector where 46% of the workforce is employed last year the government said we've had record production of Wheat and of Patty now if you had record production of Wheat and Patty why is it that wheat and

Patty price have been rising sharply and because they were Rising we banned the export also and yet the Prices Rose so what agriculture experts are saying is that agriculture data is not correct the manner in which we collect our agriculture data is not correct and that's why the data for agriculture is not correct the unorganized sector data is not available and therefore whatever alternate data is available shows that it's declining at about 5% so 55% of the production from the organized sector may be rising at 7% that gives you 3.75% rate of growth but The

45% which is from the unorganized sector that is declining at 5% that gives you minus 2.25 so your real rate of growth is not 7% but more like 1.5 to 2% so this is the big problem that our official data is not reflecting the reality of the decline in the unorganized sector and to get a totality of the picture we have to look at the unorganized sector separately and the organized sector separately and then come to a conclusion So if this is the reality that since the time of demonetization because demonetization hit the unorganized sector

GST hit the unorganized sector then next year nbfc hit the unorganized sector and then in 2020 the pandemic and the lockdown hit so the unorganized sectors had four big shocks so you can ask why is it demonetization hits the unorganized sector because unorganized sector is very tiny small the micro sector has 1.7 average employment that Means one person and one worker so it's very tiny it works in cash it has no accounts when it works in cash and cash is short then they had to closed down they didn't have the working capital for either buying

raw material or for hiring people and so on so large part of the unorganized sector closed down doing demonetization and could not recover then GST hid them because GST also requires accounts to be kept unorganized sector does not keep accounts I mean you Go to a neighborhood uh you know say fabricator of Steel work or something he's not keeping accounts he only got a rough idea of what is his input and what is his output so these people have been hit very hard by GST because they go don't get input credit whereas organized sector gets

input credit so its cost has come down so therefore demand shifted from the unorganized to the organized sector and this is you know I I I remember the statement of Mr jaganathan Who is the chairman of The Prestige pressure cooker uh you know company and he's the he was the head of the pressure cooker Industries also so he gave a statement in 20 8 one year after the GST was implemented that we are five units in the organized sector we are very happy we are growing at 24% is said there are 25 unorganized sector units

and they are declining because they can't cope with GST so this pressure CER industry is a clear example of how Demand is shifted from unorganized to organized sector same way in the luggage industry Mr podar the chairman of the VIP industry he's he also said the same thing that the unorganized sector is the dominant sector in l industry they're declining so our demand is going up same thing was said by the leather goods industry the biggest leather goods company in India his chairman was being interviewed on CNBC he said exactly the same thing that unorganized

sector is Declining so our demand is going up so this is coming from across the board so we have to correct our data now people say that look but IMF is supporting the government saying we have a 7% rate of growth World Bank is saying that we have a 7% growth we are the fastest growing large economy and so on but the point is IMF World Bank ADB are not data collecting agencies they take the government data and then they give their figures they will add a little Subtract a little but their figures are close

to the government figures so because the errors are there in the government data they're also the errors in the data from IMF World Bank at ADB so in fact I've been arguing that India has one of the best databases among the developing world and if Indian database is so incorrect the database of the other developing countries also must be equally compromised therefore I've been arguing that these tables that the World Bank IMF and ADB generate of for Global uh you know economies right they are hugely in error because the developing world what what gets captured

in that is coming from the government and government data is incorrect then their data will also be incorrect so we have to be very careful we have to look at our situation and we have to move move the unorganized sector if we not able to move the unorganized sector we will continue to have these problems of Poverty of unemployment and so on and this is also having a political impact because if there's such a large amount of unemployment and the youth is frustrated then it's bound to have a political impact you know and Sir what

you mentioned is is having several societal impacts also like in spite of 75 years of Independence what recently happened in Kolkata around 12 years back happened in Delhi in Nira case right these incidents Keep on happening right uh right whereas in in developed World these incidents are far and few like America has gun problems but not women's safety problems well they may have you know some but not on this scale not on the scale that we have every day you have these reports and this where I had a recent article in the leaflet where I

said that there are broken systems in India we're not able to fix St systems you know because what is happening is there's huge amount of Corruption what I have researched the black economy you know and this black economy has meant that what should be done is not done so I characterize the black economy as digging holes and filling holes what does digging holes and filling holes means that during day you set one person to dig a hole at night you set another person to fill the hole and therefore next morning you have zero output but

two incomes are earned so I call this activity without Productivity so it has meant our investment productivity is low and I keep giving this example that you lay a road you don't put enough tar in it you don't put enough aggregate rain comes it gets washed away so roads are po hold so therefore the speed will get affected of the cars their axles will break down more accidents will take place right so what I've argued is that black ecy means the systems are not functioning and policies fail so if as Rajiv Gandhi said In 1988

when one rupe is sent from the center only 15 PES reaching the ground so if you're trying to set up a school and only 15% is going then you'll take s years to set up the school rather than one year so education targets get hurt similarly in the health sector there's massive amount of corruption on every kind of thing you know for instance doctors will prescribe tests that are not needed you know they'll give medication that is not needed and Medication there's a huge amount of spurious medicines so there's one study I won't name uh

this but they found that rine which is used for T TB treatment they took samples from different parts of Delhi and they found that in instead of 600 migrs that should be there some of the refine had no ampine in it and some had 50 gram some had 100 gram so you may be taking the drug in time but your TB will not get cured because you need one milligram per Kilogram of weight but you're not getting that so spurious medicine means your health will get affected right uh so in the context of the three

students who died recently because the basement got flooded in this Rous study Circle why is that that shows the broken systems everywhere why are roads get flooded because the drains are not clean why are the drains uh stuck because we as Citizens are throwing our garbage in the drains you know we eat uh pan parag Or we eat some potato chip and we throw the thing there it goes ultimately into the drain and chokes the drains so citizens are responsible for the drains getting choked the municipal Corporation is responsible because the they're not cleaning the

drains in time the contractors who are supposed to do it are in the pay so they you know don't employ the worker that that they need to employ then this Rouse study circle is Holding it in the basement because that's cheap you know they're trying to save money on that so they charge a lot of money but they don't do it so in other words if you look at look at one of these and analyze in detail everything is wrong so why is it that we are not able to correct these simple things why is

it that that our education system is not able to teach children so that they don't have to go to these coaching centers you know because exams Are held in a certain way those exams have to be multiple choices okay in in a particular way so therefore we are not teaching properly because of which coaching is there and because the coaching centers have to attract students so they're willing to do all kinds of Hanky Panky including question paper leakage and you know marks fixing and so on so you had the vapam scam in madha Pradesh what

was the vapam scam the vapam scam was fake degree Certificate so you haven't done a degree and you uh get a degree so you you don't know that the engineer actually has done engineering or the doctor has actually got a doctor's degree right so therefore we are victims of that you know and that's how the vapam scam was caught because somebody's mother died and then he discovered that the degree that the doctor had was a fake degree so he exposed that right and 47 people associated with the vapam scam died Mysteriously so the systems are

very powerful the corruption is enormous so this black economy has set back all systems because people are interested in making money rather than actually performing well so in India our attitudes is CH if we had done something then you know that's okay we we don't achieve Perfection so in other words you know the point that you're making about these uh uh women and so on it is because There's corruption in the police there's corruption in the municipal Corporation and that money goes right up to the top so it's not that you know only people at

the bottom are corrupt so why is it that we are not able to set proper medical standards why is it that our institutes are not functioning properly because there's you know the head of the the institution is a political appointee h as long as the political contact is there they doesn't have to care about How the system is functioning in the hospital or in the University or in the college so the teaching is very poor because now I'm told in very good colleges Etc also people have to pay money to get a lecturer's job so

who can afford that only somebody who has black money so only the top 3% or 4% who have substantial black their children can get those jobs right so if you recruit children who are not capable then your teaching will Suffer so on the one hand we say because of reservation we are taking people uh who are not capable on the other hand we are taking people who are you know coming because of money they can afford to pay the capitation fee in medical colleges in the engineering colleges and then get into jobs which are paying

more right so this black income generation is the single biggest problem that we have so I've shown in in a paper in 2005 that because of the low investment Productivity because you are doing this digging holes and filling holes uh the low investment productivity means India has been losing 5% rate of growth since the mid-70s when the Black economy became more than 10% so if you add 5% every year from the mid 70s today Indian economy would be at least eight times larger wow so instead of you know 3 and a half trillion you would

be about 26 trillion you'd be larger than the US economy okay so the black income Generation is what has set back a lot of policies lot of uh what India could achieve because policy failure means you're not able to achieve what you want to achieve and therefore chidam in the 2005 budget said expenditures don't lead to outcome in the budget you allocate funds but those are not properly spent and therefore the outcome is not there so whether in Education Health drinking water and so on so drinking water pipelines laid everywhere but still Every home we'll

have a arrow we'll have boiled water we we'll you know have bottled water so you first spend money on that and then you have to spend money on all this so tremendous inefficiency so in other words policies failure policy failure that's a big thing in India we are not able to achieve so government intervention may be there okay government is trying to improve but because the systems are all corrupt right up to the top therefore we Are not able to achieve the so as a nation systems are broken and therefore we are not able to

achieve what we need to achieve what we should achieve and that's why our development gets set back so even though the vof may do well but after all the vof also have to live in Bombay or in Delhi in their own Farm hous Etc if that environment around them is unclean if you know the education of workers is uh weak then they will also suffer from it so they May have done well through illegality and various other things but the kind of service that they can get in an advanced country they will not get they

will have to live at a lower standard of living even though they may have more servants and so on and so forth and that brings me uh to my you know data point that is the number get getting reported that we are a $3.6 trillion economy is that correct number or not that's what I mentioned that Since demonetization the unorganized sector has been declining so our rate of growth has not been 7 8% has been more like one two and so on and in some times like demonetizing actually became negative because the unorganized sector declined

dramatically and the organized sector also we could see for those months of November December January that you know malls were empty the people are not going out shopping because they didn't have cash you know I uh on NDTV They interviewed a beggar woman and I was there for that interview and she said that she did not she used to get 200 to 300 rupees uh AMS every uh day and she was getting only 20 rupees and she could not feed her children so one of the child who was sick died so the unorganized sector I

mean this is an extreme case but the unorganized sector declined dramatically and could not recover for quite some time I went to uh guer in the month of March uh 2017 almost uh 5 months after the and I went I said let me go to the wholesale Market let me go to the labor market and see what's happening and guer is you know in the heart of India it's a prosperous uh uh town so there the wholesale Market had not open till 12:00 and the uh the the owners of the shops they were sitting outside

playing cards so I said how come you're not opening he said work the we are not getting clients we are not getting the retailers from The neighboring Villages because they don't have cash so what's the point of opening we've come here we'll open for one or two hours in the afternoon and that's it then I went to the labor chalk and at 12:00 it was full of people because they I said that if you not got work they said no no even even if we get one quarter of day work we'll wait so they're waiting

for work so that means demonetization the actually economy declined even though the government's Data shows a 8% rate of growth for that year but actually the economy had declined and that's because the unorganized sector is not captured GST is hit it next and GST hit the unorganized sector very hard and that effect is still there so so again the economy decline but that's not captured then the nbfc crisis because the nbfcs are important for the small sector and for consumers also so that again hit it and then the pandemic hit it very hard Okay so

these data are not captured the unorganized sector data and the unorganized sector is not able to recover so our data is incorrect as I said unorganized sector is declining at about 5% the organized sector may be growing at the rate given by the government of 7 7 and a half% if you combine the two then our rate of growth is not more than 1 to 2% so so what's the real number of a GDP right now if it's not 3.6 trillion where where do we Stand at then so I think we are probably at still

$2.5 trillion because in the last eight years since demonetization from 2016 we've not been growing at an average of 6 and a half 7% but more like one or two and in some years like demonetization be declined uh then again you know when the government said before the pandemic the rate of growth was 3.1% so if the organized sector is growing at 3.1% and the unorganized sector is declining that would have been also Minus1 - 2% so of these years the average could not be more than 1 and a half% and therefore we are still

probably at about 2 and a half trillion or thereabouts uh and that's why you see you have unemployment that's why you see continuing poverty that's why you see the various kinds of problems the disparity also that you see is because the unorganized sector is declining the organized sector is rising so you cannot explain Uh if the economy is growing at 7 half% or 7% then why is unemployment so high why is the youth protesting so much you know why is the distress so much in the agriculture sector it is it can only be the problem

that we are confronting can only be explained if the unorganized sector is declining and the rate of growth is really only 1 to 2% and not 7% so at 7% the picture of the economy should be quite different from what it is presenting uh itself you know people Would be more happy there'd be more incomes there'd be more expenditures and so on so organized sector is doing well 6% of India working in the organized sector is doing well but the unorganized sector is not doing well and that's the 94% and they are in uh distress

and their distress is uh increasing so we have to disaggregate India to find out which sector is doing how and then come to a conclusion about the economy as a total we can't just look at the Organized sector and make our thing and the unorganized sector in every sector so it's it's across the board uh so for instance in hotels and restaurant you have five star hotels and you have dhas uh in transportation you have Railways which is organized sector and you have ralas you know who are the unorganized sector right uh you may have

malls Etc and then you have the neighborhood stores and trade sector one sector which is one of the big sectors where the Unorganized sector is declining because e-commerce is growing e e-commerce has been growing at 20 30% when the economy is growing at only 6 7% and if they're growing at 23 30% they must be growing at the expense of the neighborhood stores so neighborhood stores are declining I mean I can say for our family also before the pandemic we ordered nothing from uh e-commerce today 90% we are ordering from e-commerce so we're not going

to the neighborhood Stores right so neighborhood stores and after agriculture that's the second biggest employer the trade sector so the trade sector is suffering that they are declining so this kind of evidence you know of the decline of unorganized sector so you may have biscuits manufactured by britania and you have biscuits manufactured locally you have sweets manufactured by the big guys and you have sweets manufactured by the local so every sector has organized an Unorganized sector and this unorganized sector is suffering so you have 6,000 large companies six lakh small and medium companies and six

CR micro units and the six CR micro units give about 11 CR employment the large and the medium don't give much employment they're highly automated so it's the small and the micro sector that's giving bulk of the employment and that is where the unemployment problem is coming so we have to disaggregate the economy look at Agriculture look at the small micro large sector Industries and so on then only we'll be able to get the real picture of the economy then then it's a it's a government failure if you change government would it be fixed it's

a policy failure it's a execution failure what what level are we because you mentioned clearly we need to fix things Bottoms Up right bring you know people in agriculture in or organized Sector uh up right either they move to by Skilling they move at a large scale to organized sector right no so you can't make see average micro sector employs 1.7 it can never become organized okay an organized sector is using more and more technology and not generating jobs so it will never become organized so how do you separate the lines how do you define

both these sectors first so organized sector is one where unions exist where they're able to Bargain for a wage unorganized sector they cannot bargain for a wage so that's how we Define formal and informal is different formal means you're registered with the government informal means you're not registered with but formal sectors employing a lot of unorganized labor because there's a lot of contract labor now so like even in our University in jnu for the last 20 years increasingly it's the service providers which are providing jobs at very low Income so you can look at the

Gap look at a postman in the government maybe getting 60 70,000 rupees a career guy doing the same thing will be getting 10 12,000 rupees huh a a guy who's a chauffeur in a company or or in the government maybe getting 60 70,000 rupees a a driver in at a private this thing or a taxi stand may be getting 10 12,000 rupees right so the Gap is enormous between the unorganized and the organized sector so this Gap is what is Creating the problem and these people who are self-employed Etc will never become organized but we

have to support them to generate more income so how do we do that right that's the next question government's policies have to change we have to focus on education and health we are not doing what we need to do even the Kari Commission in 1968 said you should spend 6% of GDP on public education we have not crossed 3.8% right So we are not doing what we need to do and because we are way behind in education compared to other countries we need to go to 10% in health also health is abysmal in India you

know pandemic showed that most tier 2 tier three cities and Villages had no health facilities and people were dying I did an interview with 25 different districts of uh up some friends organized that and there they were saying that earlier in our village One person would die in a month now one person is dying in a day that means 30 times more deaths and they're not recorded and they said ke the the the people are saying we had breathing problem and then they died there's no doctor to diagnose no medication no uh uh oxygen available

h so our Ed health is abysmal in villages in semi- rural areas in small towns Etc so we we need to improve that that'll give product so education and health that'll improve Productivity that'll give a lot of employment because these are also employment generating sectors we need to do rural infrastructure our urban areas have rural infrastructure but rural areas don't they won't have dispensaries they won't have schools they won't have proper roads they won't have proper Telecom so compared to urban areas which all this they're backward so what's happening you're not generating jobs there so

people are migrating to the Cities but cities are very expensive you know to create infrastructure in cities costs a lot of money so if you have to set up a school in Delhi you need 152 crores of rupees because the land is expensive and then you give facilities in a village you can set up a good school in 50 lakhs so you can set up you know 20 times more schools in the amount that you're spending in but look at our policies you're not generating job in rural area So people are flooding into urban areas

and they're flooding into slums so therefore you're doing the wrong thing if you did development From Below people would not come flooding into urban areas so our development would not be so expensive you know I mean today in a big city like Bangalore or Delhi you need flyovers you need metros and these are hugely expensive you know at 100 crores per uh kilometer of Metro overhead and 300 uh crores per kilometer underground It takes a lot of money you know in a few lacks you can provide a road in a rural area but resources are

being preempted by urbanization okay so this urbanization is preventing resources from being invested in rural areas okay because we are focusing on that now we may say that urban areas need it okay but the point is so do rural areas but our priority is urbanization Okay so with the result that we have all the wrong things coming Up because resources not there employment is not there so people will come flooding and therefore cities are bursting 60% of the city uh people probably are living in slums in Delhi Bombay in very poor condition so health problems

come up uh education problems come up and so on and so forth so this has to be changed where if we begin to have Micro sectors developing micro sector provide lot of employment What what would be example of micro sectors in villages for example all kinds of things that they're doing in the thing you know whether it be you know small production of uh fmcg Goods soap this that you know the kind of gandhian program where you know he said you can make soap at home you can make biscuits at home you can make sweets

at home you can have all kinds of things which are being produced for the rural areas what is being produced in large Scale by the say fmcg company like Hindustan you L nestl Etc you know you can produce also at home or in small units at the local level but this big network of roads and of fret corridors will enable uni liver and nestly Etc to penetrate into rural areas and therefore kill whatever is there so what are the problems of micro sector there are two big employes micro sector and agriculture we have to try

and get them up so agriculture the incomes are very Low so how do you boost their incomes you boost their comes by giving MSP if you give the minimum support price then only where their incomes go up they may be producing more but if they are not able to sell it at a good price then their incomes will not rise so that's why farmers are saying we want MSP on full cost not MSP on some partial cost so MSP on full cost will increase incomes in agriculture when incomes in agriculture increase then the demand for

Micro sector will go up and demand for organized sector will also go up so everybody so that's 46% so there agriculture income now there you had to also improve technology what's happened is that expenditure and R&D on agriculture is also gone down and extensional services which used to be there in' 60s '70s I'm told are no more there so how do you take technology to the field through extension services so you need to spend a lot more on Extension services for agriculture so agriculture becomes uh better in terms of technology and productivity and so on

and then people there are Surplus so you have to take them out very will you take them out into the micro sector because the organized sector will not give them employment so micro sector has to be boosted how do you boost the micro sector micro sector has three problems average employment is 1.7 so how can they develop technology or how can they Develop you know Finance or how can they develop marketing so you need to produce cooperatives of these so just like you have Farmers producers organization being set up so that the small farmers can

get together and access the market the micro sector also you need to Pro make cooperatives so like aligar may have brass you know or locks kurja may have ceramics B may have carpets ichal karanji may have textile so you create cooperatives as a Cooperative then they can do marketing and they can access Finance technology research will have to be done by the government and provide better technology to them so that they can continue to upgrade themselves right so the focus has to be different GST has to be reformed GST been the big damage that done

to the micro sector so GST make it a last Point tax I've been arguing since 2015 in an article in epw why GST is not appropriate for India because we are a Dominant unorganized sector micro sector small sector which is not the case in France or in other developed country which went in for vat and GST much earlier than us so what they could do we can't do we have to actually have our own uh you know method of doing things so in other words GST which is now collected at every stage so you collect

two PESA from the chartered accountant and four PESA from the transporter and then uh X PESA from the supplier of raw Material and the Y from this things so you have hundreds of stages for any production and ultimately it's collected from the citizen so it's a final Point tax so just collect it from the citizen forget all these intermediate stages it simplify GST and it mean that no input credit is required and therefore the disadvantage to the unorganized sector of put credit that will go and therefore they'll have the same uh situation as preg GST

when they were competitive with The uh organized sector given the the concessions that they had so make GST the last Point tax okay uh that will not reduce uh your tax collection because 95% of the tax is collected from the organized sector only 5% is collected from others and jely famously said 5% units pay 95% of the tax 95% pay only 5% of the tax so therefore you'll only collect from the organized sector and organized sector accounts are there and you can continue to collect from them as You're doing so therefore that's next is you

reduce the GST to just maybe two slabs at the moment it's very complicated there are eight nine different counting if you count gold and if you count you know uh jewelry and so on uh and then you count the composition scheme 1% then there are 8 nine taxes makes for complication so just have two simple rates one which is completely exempt a normal rate and a uh you know luxury rate and apply to the Final goods and final luxury goods then how do you get Revenue you have to collect from direct taxes direct taxes at

the moment are paid by a very small percentage of the population as the Prime Minister said effective tax payers are only 1.5 15 million that's 1.5 CR or 1.1% of the population and that is because the black economy is very large so you have to tackle the black economy for which you'll have to use wealth tax and inheritance tax which the rich Oppose at the moment okay but that will help in generating uh resources so when you get more direct taxes then you can cut the indirect taxes which will lower the inflation and which will

lower the impact on the unorganized sector also now in India we are a grossly under tax Nation only 6.2% taxes coming from direct taxes which fall on the well off and 11% is coming from the indirect taxes which are regressive which are coming from the uh Large part is coming from the poor people who consume something or the other so if you reform your taxes to collect more from direct taxes and less from indirect taxes then it'll benefit the unorganized sector it'll lower the inflation rate lowering the inflation rate means that the purchasing power of

the poor people will go up the demand will go up Etc so reform of the Public Finance of direct tax indirect tax will be another step that would be required And uh mind you because of the black economy uh our direct our tax GDP ratio is only about 17 and a half% if you check the black economy then this could rise dramatically because at the moment large number of people who should be paying direct taxes are not paying direct taxes so you could collect a lot more from direct taxes and then reduce your indirect taxes

so I failed to understand when the Bottom of the pyramid The Villages the rural areas constitute 50% of the V bank for the government right and it makes sense for the government right to develop these right and at least keep the people there so first step is maybe build systems of higher education there so people don't move out people migrate first for education and then for jobs right and once you have higher system of education then develop Industries uh there micro macro or large scale right you can also through your incentive structure uh get larger

Industries to come to the remotest part of the country and because you are saying that my road network is already developed right uh your cost of Transportation of goods will continuously go down uh over a period of time so this is this makes common sense why why is it not happening then see it's not Happening because our policies right from Independence have been topped down so we've decided to develop the modern industry first you know so modern industry meant that certain centers got developed right the public sector the only one which started setting up Industries

in remote areas like B haridwar was set up where you know there was not even adequate transportation they had to strengthen Bridges so that you could Move generators and so on you developed uh steel industry in the remote parts of uh you know where the iron or was available bilai buaro and so on and so forth but private sector will go only where there's a developed infrastructure private sector will not go into areas where it's underdeveloped where they'll have to spend money on development of infrastructure but public sector also post 1991 now has to generate

a profit so they're also not going to go on their Own unless the government tells them to go They're not going to go into remote areas and do the development so on so as a nation we have to reorient policies as I said we are going for Capital intensive rather than labor intensive that's also part of the way that organized sector is being developed right uh then we are not focusing enough on education and health so if you're not focusing on enough on Education Health we are not going to set up good uh Institutions in

rural areas right uh but there's need for good education everywhere so all children have equal opportunity today the children of poor don't have an equal opportunity as compared to Children Of The Rich so not only do the those who are well off have contacts where they can get their children placed but also they get better education they get better infrastructure Etc so our Focus has not been right right since Independence but in the last Uh 10 years what has happened is that the focus has shifted even further towards concentrated uh development towards organized sector away

from the unorganized sector and that's why You' had one after the other GST and demonetization and digitization Etc which are impacting the unorganized sector further so we have to realize as a nation that these policies are not going to be a to deliver so you can see that there are we've had policy induced Crisis demonetization was not required it was done that so that's a policy induced crisis GST could have been better structured structurally it wasn't done again to help the organized sector but why why does the government want to help organize sector because you

see you must look at the political economy all political parties need funds for election these come from Big businessmen so big businessmen then dictate policies what kind of policies to follow the Rural areas may have 60% of the population voting population huh but they don't they don't count because you see all political parties are favoring the organized sector the big business and so on that's where they get their money from so in other words you're modalizing otherwise as I said unorganized sector 94% but they're not they're not organized so they cannot have the political influence

that they need to Have if tomorrow they could get organized then all political parties will cater to their interest so political parties cater to the interest of those from whom they get money and then they actually are fooling the average public so what has happened is that this government is developing big conglomerates you know like the chai balls of South Korea huh so you have Hundai and Dau Dau of course closed but uh Samsung and so on and so forth right But those chai balls develop because they develop technology whether it be automobile technology whether

it be steel whether it be uh you know uh uh uh your mobile phones or whether it be chip technology and so on right Indian chai balls have grown by acquisition not by developing technology neither tatas have developed technology nor Adis nor ambanis uh Etc they've imported technology and on the base of imported technology they've done it so our chai Balls are growing through agglomeration through acquisition so this is spoiling the investment climate because any profitable Enterprise if say uh Adis want it and they get it then those who are running their profitable Enterprise will

run away yeah okay so that's why large number of high net worth individuals are leaving the country between 2014 and 2019 23,000 left the country in 2019 another 7 and a half th000 left we don't have the data in Between but in 2022 it was reported another 7,000 left the country so out of the 250,000 High na individuals if 10 12% are leaving the country that shows that the investment climate is poor so not only demand is a problem but even the investment climate has become a problem that if you have these uh big agglomerates

which are able to acquire assets easily and the cement is one prime example where you know ultr Tech was trying to acquire these two Companies and suddenly at the last minute the two cement companies were acquired by Adis so airports ports you know power in everything you know these agglomerates are dominating so you have that on the one hand on the other hand you know that the poor are suffering so you start giving 5 kilo of ration you start giving you know gas you start giving free bus tickets and so on because now the public

doesn't TR trust the politicians we have been saying look We will develop at the top and reach you it's not reaching so public now says what are you giving me today if you're not giving me something today I'm not voting for you okay so therefore the entire comparative politics we are now spending resources on giving these things you you want to give them instant gratification instant gratification in each election you have to give so you have 80 crores who are being kept poor and then you're trying to get their vote By giving this instant gratification

okay so the the 80 CR gets fooled by these things because it's not going to help them in their long-term development right and you are getting uh the big organized sector these aerates uh to uh grow so this is the wrong strategy the country cannot become a developed country in this manner we have to change our policies to a bottom up approach rather than a top- down approach and the politics has to become more democratic Where the voice of the 0 crores the unorganized sector and so on that voice has to come up okay but

that's a political process in the political process I mean look at your trade unions they're divided the trade unions are not able to organize the unorganized sector so therefore the workers are not able to pitch the demand that they need to pitch and therefore the parties are also doing the bidding of the big business so it's a political question that has to be Sorted out in the country before policies change so economics and politics go hand in hand you cannot separate economics from politics because those who are big players they would like the economy to

be in their favor so this development Paradigm that we have adopted that needs to be changed but that be changed only if those at the bottom they get inran they get empowered but the big business and even the middle class would like the unorganized sector To remain because that keeps wages low okay so when you keep wages low businesses make more profit okay and middle class in the upper middle class is able to employ cheap labor at home so we have servants and we have drivers and so on now think of a middle class person

in the US maybe getting 40 times more than a middle class person here but cannot afford a full-time servy okay can part time well maybe part time once a week or something they can get but they Cannot afford a servant they cannot afford a driver so in other words cheap labor serves the purpose of the middle class and the well-off and the businesses okay so that's why this unorganized sector I call the reserve Army of Labor because everybody in the organized sector is worried that if I lose my job I'll be in the unorganized sector

at 1if the salary so I don't want to so you'll not be as vociferous in demanding what your right is as if the Employment situation is much better if the unorganized sector is declining so it's part of the political economy which is leading to the kind of situation we are in where with lack of Education lack of understanding lack of empowerment you know the unorganized sector is not able to demand what it should get then then how will India even become a develop because this is a vicious Loop right if we don't get out of

this Loop we'll be we we not going to get a become a Developed country by 2047 or 2060 unless we change policies even for forget about becoming a developed country even if we have to double our GDP per capita it won't happen because if this vicious Loop no you can you can still have with this kind of thing you can maybe double your GDP per capita but all the gains will be at the top the top 6% the bottom will remain more or less where it is okay but if you want to go to a

per capita income which is 20 times 30 times Then you have to change your policy and only when your per capita income becomes 20 times 30 times what it is will you catch up with the advanced countries and mind you you also need to remember that our population which is 1.42 uh 1.42 billion now will cross 1.6 billion so the population is also increasing so not only does your GDP have to increase but also have to take into account this that's why I said that by 2047 At 7% rate of growth we may reach $9,000

but we won't reach $14,000 so at for $14,000 per capita we' require 11 and a half percent of growth because the population is also increased so what is 1.42 billion will become almost 1.6 billion so therefore your per capita income will rise less because the population is still increasing but now we know that our fertility rates have dropped China's fertility rates dropped and therefore now its population started Declining and that that's why we've crossed China's population but our fertility rates are dropping slowly uh and therefore in some areas especially North India the population will continue

to rise and we'll probably stabilize at 1.6 billion or thereabouts but but do you still think uh uh in the in the current model even if you take for next 50 years I don't think then uh the current framework it there going to be a developed India Forget 2047 yeah you're right you're right that to become a developed Nation without the 94% in the unorganized sector coming up we'll not become a how China become it you mentioned that they focused on education and Healthcare but they would have also was it a bottomup model that they

adopted in China no it's not a bottomup but you see they the state intervention enabled people to come up because with education with health your Productivity goes up your small sector did very well your you know small Industries and so on uh agriculture also came up and workers were siphoned out of Agriculture into industry and services so therefore what China did was not quite bottomup approach but the the spread of the uh development was much uh wider uh than what we see in India I had gone in uh 2008 to Shanghai and I went to

a village I asked them to take me to a village so they took me 50 km out of Shanghai to a village there were a few Huts but very few most of the houses had become pakka the development seem to have taken place over there Etc so they did manage to get uh the fruits of development uh down uh now that's because I think the the local bodies there and the state bodies they had more autonomy so I think autonomy is another issue that in India we face that uh our autonomy given down to the

local bodies is very little their resources are very Few and property tax which should be a good source of income for them property tax is uh not adequately paid our property tax rates are low because the voff segments don't want to pay much property tax so it's become a vicious cycle where you know uh resources are not being made available for Education Health and they should go to local bodies and local bodies should be able to ra their resources and should have check on health and education in their Area so this um decentralization is also

very important so there's been a discussion on decentralization and uh when we were campaigning for alternate policies in 1990 9192 we had this formula that 50% of the resources be with the center and 50% be transferred to the states and States resources 50% go down to the local body so that there's a formula 50 50/50 so if the local bodies have more resources they can generate uh employment in the local Areas so like the rural employment guarantee scheme you need an urban employment guarantee scheme where the local bodies would generate uh resources and would spend

so that'll generate more employment more education more health and that could become a way of transforming the economy and becoming more developed I think uh in India it's always been that way we never lagged uh the Brain right because we have the best Think Tank right uh our cosos almost run the the Us corporate economy uh but the same uh execution we are not ready to bring it here yet so there are two things one is you see as I said 95% of the children have very poor training so they're not the people that you're

talking about right we accidentally produce 20 30,000 worldclass people because they are excellent they'll do Well no matter what even poor decrepit education system will still produce these people huh but what about the 95% they're not at that level so when we talk about these things we have to talk about the level of Education the quality of Education you know uh how we learn we learn through root so in my uh teaching from 84 onward because I'd seen that at Princeton I used to give open book exams and children were scared of the open book

exam they didn't want an open book Exam huh because I would say that then you don't need to mug up you've got your class notes you know you need to apply but they were not used to the idea of thinking in an exam so they say sir sir please don't give open book exam there I would get feedback every semester and they would say we don't want open book but I'd say no you should know one exam which is different from the way you've been learning so I had complete sympathy with them that for 15

years that learned By root and then mechanically reproduced the uh answers and got good marks but here they had to think so at complete sympathy that suddenly you can't start thinking so I would you know correct the scripts there a lot of mistakes and then give them marks liberally but in India the absorption of knowledge is very poor even in a good University like jnu we had difficulty so as I said we produce accidentally not because of our education system in spite of our Education system we still produce 20 30,000 but otherwise the education system

is greatly lacking and why is that because of several reasons we don't give enough emphasis to education you know uh we have not given autonomy to teachers which we need to give because if you're teaching at a higher education level then you need to teach what you think is the subject but we con constrain that so we give autonomy to Vice Chancellor but not all the way down To the teachers so with the vice chancellors or Deans or uh head of the Departments are like feudal Lords controlling the system whereas knowledge generation requires free thinking

you require freedom of thought huh now if you're told you have to teach this then where is the freedom if you're told that you have to do research where is the thing so I have argued often that my head of the department can't can't come to my room and say today you have to Give a good lecture a good lecture comes from the heart their days have prepared well for a lecture but it hasn't gone well because I can see in the eyes of the children that they're not understanding they have to modify that to

make it interesting so good lecture will inspire the children an indifferent lecture will bore them to death they'll forget it they'll not learn so we need good teachers huh who will Inspire the children and that's not happening it's a very mechanical thing people with poor capabilities are becoming teachers similarly my vice Chancellor can't come and say today you have to do good research a good research also comes out of my commitment if I work 10 12 hours a day it's not because I'm going to get paid but because I enjoy doing research okay so you

have to enjoy doing research now when can you do good research if you have absorbed the Subject if you've not even absorbed the subject you'll cut and paste I mean most of the Publications in India are you know of that nature they they take something from here something from there add it up and uh publish a paper but that's not original work so large number of phds large number of Mills large number of papers that are published are not worth the paper on which they done so if you have such poor education naturally you produce

very few people Who are cable so you need to reform your education where autonomy is given today we are saying for instance in the new education policy that we want to decolonize the Indian mind and indeed our minds are colonized you know because we had the M system of education and we think that what comes from the West is better than what we are doing huh so we are not generating our own ideas we are just copying from China from USA from This that and the other but that's not the way good education can be

done so what we need to do is we need to actually promote indigenous thinking which will come if there's autonomy to the teachers if they are good teachers and there are good academics then only will it happen it will not simply happen by you know the new education policy saying that we decolonize the mind now look at the contradiction when we say decolonize the Mind then we invite foreign universities if foreign universities come they're not going to take our framework they're going to take the framework of the their universities their society so the decolonization will

not happen right then what does decolonization mean does it mean that all the knowledge that is developed in the last Thousand Years we're going to give that up and start again it can't be that so decolonization of the mind is a good idea but you have To take the knowledge that is existing and generate from that new knowledge for which you have to reform your education system so that children are not learning by Road they're actually absorbing the knowledge for that you need good teachers for that you need good education infrastructure and that should be

available to all so that everybody gets opportunity now very often it said resources are short I think it's not a question of Resources whatever you have you can utilize it better and if you check the black income generation then the resources that are wasted because of black economy they will also be available so it's a question of the political will of the country it's the political will of the country that is damaged where we have all these problems of top- down approach focus on the organized sector you know uh good uh people going abroad and

we are also Trying to export we are saying demographic dividend and what is demographic dividend that our youth will supply them those economies which have less of Labor that we'll Supply them now how can you export your best talent and say that we'll develop so it's a contradiction we have to try and retain the best by giving them work here and trying and develop fast now think of it if you were a v Guru why are such a large number of Indians going to Canada And Australia and so on are Canadians and Australians trying to

come to India are Americans trying to come to India a vuru would attract Talent rather than export Talent so these are enormous contradictions in our thinking of policy makers and the new education policy is another disaster along these lines because it's a very confused I mean it has very nice words it has very nice thing but if you look at the totality of it the thought that should be there to Develop education system is in words but not in the practice in which it would work so as a nation we have to take care of

all these contradictions of these confusions that are there in our mind and come out with clear thinking about our education about our development about our unorganized sector about our agriculture so uh somebody said that outside one of the South African universities it is written the best way To destroy nation is to destroy its education system if your education system is bad if your education system is weak then everything up the line will also your policies will be incorrect your understanding would be incorrect with the public would not be empowered they would not be able to

demand what is required so focus on education on health and will become even more crucial in the coming years as AI comes I mean we are Going to be in soup with the current sit situation and the AI developing the way it is developing we'll been a tremendous soup and you have been an academics for almost 40 to 50 years now first as a student and then you know uh leading economics at jnu uh have you seen any vast difference on our education system or has it gone backwards well from what I can see uh

it has deteriorated uh for instance Janu the Way it has been treated in the last 10 years it has gone downhill you know this idea that we'll capture J has actually meant you know that it's down you know now J's number one University if you leave out Indian Institute of science Bangalore it probably is remaining number one because other universities are going downhill even further so the autonomy that was required is been killed the kind of Research that should be done that has been affected very adversely so in other words you know what I see

from jnu and what I see of Delhi University the two best universities in the country because Kolkata Chennai and uh uh Bombay universities had declined considerably even earlier but these two good universities they have declined I see in the last 30 years the kind of critique of policy the kind of critique of theory That used to come out uh I don't see that coming out uh so much now so the idea of a university is knowledge generation socially relevant knowledge generation that idea seems to have declined we are borrowing more and more copying from outside

more and more we're saying you know Bombay should be like Shanghai and things like that you know uh where it can't be so genu has to be genu and Howard has to be Howard we can't say Janu should be like Howard Because originality cannot be copied that's a contradiction in terms right so it's this confusion that is there which I find uh enormous confusion uh which is creating a problem you have you know problem of uh corrupt ion in recruitment you have enormous problem where there's ad hoc teachers part-time teachers who don't have their heart

into teaching because they always worried that they may lose their job they're being given lot of Administrative work school teachers are given lot of administrative work like you know earlier they were even asked to cook the midday meal or if election comes and they're giving election Duty Etc so how many hours do they get to really focus on teaching so they think that by keeping the authorities happy uh they can get their promotions so why should they concentrate on teaching so I think teaching and research has to be taken far more seriously in our country

If we are to become a developed country and you rightly said right even even uh sometime I think in 5 six years ago what happened was that a education University like jnu was a narrative was trying to develop that it's anti-nationalist because you see by Nature education has to be critical yes if I keep saying Amar is the last word then economics will not Advance if I keep saying Einstein is last word then Physics will not advance so when I got my students to research you know I'd say take this paper of samon or this

or that and critique it so you have to be critical about what is going on in society for it to be improved so therefore a student of jnu was always critical now you say that that's being anti-national so anti-national is different from being critical for knowledge generation right and then we See that poverty is persists so if you say that poverty persists and these are the reasons you'll have to be critical of the policies now that is not anti-national that's only trying to help the development of the nation that you have to have better policies

right but so this distinction between what is critique of policy and what is anti-national that has been confused that any criticism is treated as anti-national and unfortunately in our Nation large number of people don't understand this distinction that being critical of policy is not anti-national so the government spread the propaganda that's anti-national tu tu gang and that labels have got widely uh sort of uh accepted in the population because people don't understand most people don't understand the nature of higher education nature of knowledge generation and so on so to them if you're critical then you're

anti- me you know so the Being critical and anti- me is something that most people don't understand the difference uh so knowledge generation is receiving a big setback because without critique you cannot develop knowledge generation so like for instance on one TV debate uh that I had in 2016 soon after the this incident that took place in juu so they said what do you teach in jnu what do you students learn that was a question so I wrote a piece in the Trib What do we teach in jnu and what do our students learn so

I said we teach the children to critique we we teach the children to say this is what is lacking in the knowledge this is what is lacking in the policy and this is how it can be reformed okay and that's how knowledge will advance so we teach the children to be critical now if we teach the children to be critical then they will critique if faculty has to be critical they'll be critical of policies also because that's How policy will change so so what is good in higher education if you take it negatively as being

anti-national then knowledge generation will suffer and that's why today we are getting set back in knowledge generation thank you so much sir I would like to have a further discussion because I think uh sure you know I learned a lot from you and I hope my listeners learned a lot and aide that critical mode of thinking you know that that you showed us a glimpse of in this Podcast episode all right that to to become a developed Nation we don't have to be unbs right we have to to to find the truth for ourselves does

it lie and act on it right right thanks much thanks