Interview with Mr. Subodh Mathur

Mr. Subodh Mathur is an economist with a Ph.D. from the Massachusetts Institute of Technology. He has wide-ranging experience in international and U.S. policy. He has worked in several countries in Asia and Africa as a consultant for the World Bank, along with working as an economist for a variety of U.S. agencies like the D.C. Public Service Commission, the D.C. Department of Energy and Environment, Maryland Energy Administration, and the U.S. Postal Service. He is also an occasional adjunct professor of economics at the Johns Hopkins University School for Advanced International Studies.


Link to his book: Core Economics: Concepts & Application


1. The Economist has compiled a comparison of the IMF Growth Forecasts made in April 2020 and October 2020 for a number of countries. India is one of the three worst impacted countries, alongside Venezuela and Lebanon (both those countries are under severe civil strife). Does this show that India is failing in terms of managing its economy? How can India rise back up?


Mr. Mathur: Well, I think in terms of numbers, India may be comparable to those two countries. But in terms of performance and potential, India is far ahead of those two countries. So we are certainly in a temporary downturn. But the potential is high. And let me explain it. Even before the COVID-19 hit, the Indian economy had slowed down. The GDP growth had slowed down, employment growth had slowed down. GDP is just a number; the job is what everybody wants. So, job growth had slowed down. And then COVID-19 hit India. India really didn’t do a great job of managing it. In fact, it's fair to say that the union government, and I never say central government, the union government just gave up the fight. They are just not doing it for several months, they lost their heads of it, they never talk about it, you never read what the health minister says, you don’t hear from the prime minister on it except once in a while they say that “Oh based on this international comparison we are not doing as badly as some other countries.” Well, when you’re dying in your own country, you don’t care whether other people in other countries are dying, it doesn’t matter to you. So I would say that India has not managed the virus well at all, not on an emergency basis at all, and as a result, the economy has suffered. You just don’t have the people willing to spend money to buy the things that keep the economy going. So, the people with money are too scared to go out and spend it and there is only so much you can spend by staying at home, you need to have some meetings, parties, go to clubs, go to big weddings or go on vacation or buy things. But right now the mood is not there for any of it. Right now the mood is to stay at home and buy some things which are in the sense functional, necessary. So, the economy is not doing well at all and right now some of the demand is bouncing back, people are tired of being bored also, so they are, a little bit trying to spend some money. But we do not really see the framework for which we can bring back growth. So I would say yes, India is different, and India will eventually bounce back. But right now, it is not a happy scene.


2. A study shows that India’s GDP could fall by more than 20% with warmer temperatures. Do you feel now is the time to prioritize sustainable and eco-friendly growth?


Mr. Mathur: You know it’s always a time to have sustainable growth. It’s not now, it's always a good time to have sustainable growth because really there is no contradiction between economic growth and the environment. You are from Delhi, you have suffered through the winters, and when the air is bad, you know the productivity is down. Nobody can go outside and play, and the impact on the health of the people is such that they become less productive. The children grow up stunted. If you are well off then you may not be, but if you’re not well off, you grow up stunted. So you are actually killing your future economic growth right there. It's reckless to say that clean water and clean air come at the expense of economic growth. Actually, they do not come at the expense of economic growth, they facilitate long-run economic growth. So there's no point in simply polluting all our rivers, air and saying that - look we will fix it later. Fix it later - now look at the clean-up of the Ganga. Rajiv Gandhi when he was prime minister in the 1980s, he said we are going to clean up the Ganga. Prime Minister after prime minister says we will clean up the Ganga. But the Ganga is not clean. We can have some show projects which show that this part of it has been cleaned up and that part of it is cleaned up. But it’s not clean. There is no way anybody can swim in it, there is no sustainable fish life, it’s like a disaster. So, we cannot afford to create such disasters. It is really not the right approach to create such disasters, and I’m talking to young people - you are looking at your lifetime ahead, 30-40-50-60 years to go, and you really do not want to splurge on your natural capital now. So essentially, not caring about the environment is splurging on your natural capital. We are endowed with natural capital, and if we splurge it now, anybody can convert capital into income, so you inherited a lot of money and you spent it and you say you’re rich - no, you’re not rich, you’re just spending the inherited money. So you can have a good life by spending the inherited money and you’re done with it. Well, we have inherited the natural capital as a country, and if we are going to splurge on it now and waste it and used it all up and then say well now what? We can’t step outside because the air is not clean and we can’t drink the water so we all have water purification if we’re well off. So all this is not going to be workable. In fact, there is no contradiction between the two - we need to have clean air and clean water so that people can be outside, healthy and productive. So, there is no contradiction between the two. Now yes, there is a problem because you are dumping all that garbage near the river. So you have to find a way to stop it. To stop it is not easy because there is a cost to stopping it. So there is a cost. There are some factories around the river Ganga, where they are dumping the garbage into the river. Getting them to stop is not easy, you have to find alternative activities for them. Or you have to somehow get them a subsidy to not throw this into the river, to treat it. So, I’m not saying that it's easy to do sustainable growth, but it's doable. And we can do it, provided the people understand what is going on and provided that the politicians turn to experts and instead of just giving some slogans, actually try to get it done. So I don’t see the contradiction, certainly not from a 30-40-year time period. Or even a 15-year time period, between the two. You can see the disasters in China, where they didn’t care and the water bodies throughout rural China are now polluted. You cannot and then you will spend money later to fix them.


3. A very big question has always been the balance between ecology and economy. How can we attain the same? Please comment.


Mr. Mathur: Well, you know, you have to actually look at it in terms of case by case. Every place has to figure it out by itself. This is really you know; I will hark back to one point which I keep making everywhere that, this is not just an issue for the Union Government. As you can see in Delhi, the Union government has no say in it. This is Kejriwal's problem and the problem of the Chief Ministers of Punjab & Haryana. So when we look at this, many of the issues are to be dealt with, at the state and interstate level. The Union Government has almost no power in many cases. Let me see, in Delhi what can the Union government do? They cannot tell the Punjab Chief Minister that burning the stubble is bad. No, they cannot. There is no such possibility. They cannot tell Mr. Kejriwal that a lot of the problem is due to construction dust, so you need to stop the construction dust. Then he will say, listen, this is none of your problem. I am the Chief Minister. So really the problem is that there are some major national issues but a lot of it has to be done at the local level and until the local people wake up and hold their local authorities responsible, we are not going to get action, we are not going to get results.


So bad air is almost always a traffic problem. Bad traffic or traffic congestion almost always creates air pollution. Local industries which you can't control, almost always create air pollution. So, when people talk about their environment, even the forest, yes, it is a union subject. But, how you manage your forest, is very important for the local authority. So, I think this just points to my general message that doesn't just look to your Union Government to solve all of India's problems. We have three layers of government in the Constitution, the Union, the state and we also have the Panchayati Raj as a Constitutional body, though they don't have money. So, let us look to give each one of them the due responsibility. Right now we just ignore everything and they just want the Prime minister to do everything. The Prime minister doesn't have the power. I am not talking about Mr. Modi; I am talking about the Prime minister. The Prime minister just cannot do everything alone. We need to do everything. I have already given you examples of how this would work for the environment. This is just a general point that I make all the time these days because I find that people aren't aware that the Chief Ministers also have to play their role.


4. In India, the eight-core industrial sectors fell by about 18% in April-August 2020 compared to 2019. The sectors are coal, crude oil, natural gas, refinery products, fertilizers, steel, cement, and electricity. They account for 40% of the Index of Industrial Production (IIP). What steps do you think the government must take to give these sectors a boost?


Mr. Mathur: You know the whole problem, rather there are two key problems in India right now. One is, that there isn't enough demand, and when there isn't enough demand, your industrial sectors cannot be boosted, because people have to buy what they produce. In the end, people have to buy what they produce. So if you don't have that demand, you cannot just keep producing. Where will you store it? There is no place. And the other problem is that you don't actually have for the longer run, you don't have enough investments. But in terms of the sectors, you have to give people a sense of confidence, a sense that the economy will improve, it's okay to go out and spend. You don't have to be so cautious; you don't have to be so careful. Now the Government says we will give you the fiscal stimulus. This is the usual Keynesian economic policy but increasingly the government is too small in comparison to the economy. The amount of stimulus that they can do, is very limited. You already have deficits and they cannot increase the deficit endlessly. Now the US government is a very special case. It can borrow money at low-interest rates, forever, it seems. Nothing happens. But that's not true for most governments, so they cannot borrow money. In the end, it comes down to catch and kill the virus. If you are able to say, listen, we will not just kill the virus, but if you are infected, we can test you right away, and then we can quarantine you, then treat you then you need not be so afraid of your life. You can call it, test, quarantine, and treat! Then you need not be so afraid of your life.


Now, the fear is that you will die. Older people are scared that no one will be able to see you when you are sick. Like, I have been stuck at home for so long, we don’t go anywhere, not even to a store. Unless we are able to give people the confidence that life is going to be normal, we will not be able to get over the virus. Yes, there has been an increase in home delivery jobs but they are cheap. You cannot make a living out of these jobs. So we come back to the main point which is true in the US also - unless you are able to control or neutralize the virus, you are not going to be able to get economic growth. And then, once you’re able to get the virus under control and demand going up, the economy will be stressed. Once the sectors come up, they need to invest more and increase the capacity. Private investment in India has been coming down as a share of GDP over the years. That is a problem that economists know and should explain to everybody - that unless private investment takes place, we are not going to have 7-10% GDP growth, we are not going to create a massive number of jobs without private investment. They had once hit about 35% of the GDP and we’re now down to 29%. Without investments, we are not going to have jobs. It need not be all foreign investments which are very limited. What we need is Indian investment and we have enough savings to finance the investments. If Indians want to borrow, they can borrow from fellow Indians or abroad and then invest and get Indian investments going. We cannot approach it sector by sector; they are saying we have a package for hotels - this is all a scattershot approach. You cannot convince people to go to the hotels because then you need a package for a train or a plane which you do not want to use. So, the economy is all interlinked and you cannot just focus on any one sector unless we have some specific issue in hand and right now, there is no specific issue. What we have is a general economic issue and that is that the demand is down, the investments are down. That’s in short what the problem with the economy is.

5. You recently published a book, “Core Economics: Concepts & Application." Through this, do you aim to spark an interest in students to take up careers in Economics? What were some other reasons which inspired you to write this book?


Mr. Mathur: It was inevitable that I would write this book. There is an inner professor in me who wouldn't let go - I didn't have a choice. That’s just very me. Since a very young age, people have been telling me that I have a good way of explaining. But there was a triggering event - way back when I used to work with my colleagues who were very smart but not economists, I realized that they did not know anything about economics because they said that we don’t explain the terms in an easier way, they said we just talk nonsense, you know! So I accepted their criticism and told them that one day I will fix it. So I went back to teaching, and I only used to teach non-economists and then one day finally, as I was going to teach a course at Johns Hopkins University, but the course was canceled and so I had a lot of spare time, I sat down and wrote it. People say that when you write a book you run into writer’s block; I was at the other extreme of it. It felt as if I had writer's diarrhea. The words were just flowing, it was sheer madness! I wrote this in 8 weeks and it has 9 chapters. It was madness and I was living in a different world. Nothing to do and it was a dam that had burst.

I enjoyed it very much and now I’m thinking of writing a book on India - which would be about 100 pages only because many people think more than a hundred pages are too much. It won’t be based on the short run; it will be looking at the next 10-15 years. It would be aimed at younger people.

From my perspective, it’s very important to see where India would be in the next 10-15 years and to get an overall view. So, I want to frame overall thinking. For e.g. we have 40% of our labor force in agriculture which produces only 15% of the GDP. So we have all these young people who are sitting in agriculture and young people growing up in villages; but where will they get the jobs from? Agriculture is already overstuffed with labor. So how are we going to deal with these fundamental problems which are going to be there for the next 10-15 years? It is projected that the growth of young people; I mean coming to a working age of 16 years and above. It is a fundamental issue. It’s not something that can be dealt with today’s one action. It’s going to be persistent. I’m going to deal with these key issues. Not going into too much depth, these days very few people want to read in-depth and I have learned how to write in simple and short ways, and one day when the dam bursts again, I am going to write that book. I will go mad and the book will emerge!


Interviewer- Sanaa Munjal and Visaaya Bamba

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