Transcript of Sanjeev Sanyal on Trump’s Tariffs and India’s Economic Strategy

Longer term, however, our ambition is to actually have a free trade agreement with the US which is zero tariffs on both sides. And I think that would be good for both economies. So that is what we would be working towards, rather than try to wriggle room within this newly emerged environment.

Longer term, the world will probably divide into two major supply chains. One will be China-oriented and there will be one which is US-oriented. Of course, they’ll trade with each other as well. And if we do end up with a free trade agreement with say the US, maybe the UK, and possibly one with the European Union further down, we would aim to be part of at least one of these supply chains, likely the US-oriented one.

This will require a fair amount of flexibility and thinking on our feet by our policymakers, which we are prepared to do. It will also require Indian industry to really step up and take advantage of the opportunities it will create because we will have this huge big market. But it also means that there will be competition from foreign companies internally, which may not be there today.

At some point, Indian industry will have to adjust to all of these situations. Trying to protect our current status quo may not be an option at all. And I think our best interests lie in being as adjustable and flexible as we can be.

Government Efficiency Efforts in India

SHARAN SETTY: When we look at the US and the DOGE reforms and the pushback against bureaucracy that’s happening, it inspires several classes in India to aspire for such a situation where there is actually minimum government and maximum governance, so to speak. But what are the challenges that are somewhat different in India in your experience? Because you’ve been holding this position for a while now and know the intricacies within the government.

SANJEEV SANYAL: We’ve been trying to do many government efficiency efforts here in India for some years now. Our approach has been somewhat different. If you look at the US, the DOGE effort by Elon Musk has been basically blitzkrieg – go and do a whole bunch of things suddenly, shock and awe. Maybe it works in their system. I personally think that some of it will be genuinely good for the US in the long term in terms of getting rid of government wastages.

However, that approach also has its downside, which is that very often you may throw the baby out with the bathwater because you’re doing too much too soon. It’s not possible under those circumstances to go through each line item and optimize. You may end up with a lot of legal cases being dropped on DOGE and so on. And eventually, the unintended consequences, plus legal cases, etc., there will be a problem of sustaining this for too long.

We in India have gone for what I think is a more gradual approach. We will be accused of being gradualist, but we have gone about this one process at a time, one institution at a time. Now it takes a long time doing this, and I’m sure there’s a case to be made for speeding this up now that we’ve gained some experience. But the way we have done it is much more careful.

We have indeed shut down several outdated institutions in the government. We have eased up lots of processes in the system. Of course, when you’re doing it so slowly, it means that while you’re doing it somewhere else in the system, something else has become less efficient as well. So the net gain in the system is not always that large. But we have, on the other hand, avoided having a large number of cases. I’ve done many process reforms so far, and at least I don’t have a huge amount of litigation.

SHARAN SETTY: Is it about taking everyone along?

SANJEEV SANYAL: It’s partly about taking people along, partly also about having crossed the T’s and dotted the I’s, also thought through the unintended consequences. So supposing there’s something where there is an institution, a process, something, 80% of it is bad, 20% of it is decent. Now, in order to throw the 100% out, you will mean that you sacrifice 20%. It is possible when you do it slowly to take that 20% out and account for it in some fashion. It is not possible in the DOGE blitzkrieg approach. So ours is attrition warfare. Attrition warfare does mean that you keep at it over time and of course you keep getting accused of being slow.

Challenges in Implementing Reforms

SHARAN SETTY: Do you think that the acceptability of reforms that we look at in India, for instance, we are trying too hard to convince people?

SANJEEV SANYAL: Sometimes that is true. For example, with the farm laws, I still believe the farm laws were, generally speaking, good for the farming sector. But obviously we had to backtrack because there were some losers and they were very vocal, and the vast majority of the winners remained quiet. So, yes, sometimes you have to backtrack as a result of this.

But on the other hand, that is one case where you can see what happens when you try to do something somewhat more drastic and you end up with huge amount of opposition to it and derail the thing. So it’s not that this government doesn’t do drastic reforms when necessary. We have done a lot of structural reforms, whether it’s the introduction of GST or the cleaning up of the banks. So fairly radical things have been done by this government, but the general momentum is carried by these smaller process reforms which don’t make the front page. And most of these are efficiency gain things which DOGE is trying to do. DOGE is basically a government efficiency effort. So we do government efficiency efforts all the time.

India’s Economic Growth Strategy

SHARAN SETTY: Don’t you think in the Indian context at least, we could have taken better use of many opportunities, especially in a post-pandemic situation? When the global economy was recovering, you saw that many Southeast Asian countries recovered very quickly.

SANJEEV SANYAL: Actually, as it happens, our growth accelerated as well, very dramatically. In fact, we grew much faster. The Southeast Asian economies, as it happens, our growth was much higher. But that does not mean you have to go for a maximalist growth over fastest possible growth rate. Because if you are growing fast, it also means the imports are growing fast. By definition, your energy needs go up.

Now in an uncertain environment, your ability to export at the same rate is limited. Look what is happening now – the global situation is uncertain. If you press the accelerator on a bumpy road, you will get thrown around and maybe your car will crash. That is the situation we are in and that is the point we have made throughout.

We are now growing at 6.5 to 7%. Can we grow a little bit faster? I would argue yes, we can definitely grow much faster. In fact, grow about 8% or so. At some point we need to grow at those 8-9% growth rates. But this is not the time to attempt it because the external environment is too uncertain to be able to export at the same rate as we would import.

So my point is that to remain restrained at this juncture is a good thing. This doesn’t mean that we are not growing. We are still growing at a 6.5% plus growth rate, which is a pretty decent growth rate. But I am against this idea of trying to have a maximalist growth rate. In fact, as I said, even with this, we are growing faster than those Southeast Asian countries.

Urban Development and Regional Disparities

SHARAN SETTY: We live in an era where NCR is expanding. Mumbai has now two different cities in its neighborhood. Bengaluru is expanding. Chennai is catching up. But at the same time, you see many paradoxes in India, especially when it comes to economics and even politics. You’ve been very passionate because you come from West Bengal and we know that Calcutta was at the center of economic growth even during the Empire. And it’s very unfortunate that such a big potential economic center has not been tapped into. So how do you sort of pull together other states and territories that are left behind?

SANJEEV SANYAL: So there are several dimensions to that question. One is the creative destruction and evolution issue. One is the geographical disparity issue. They’re connected. First, an important thing is, look, when growth happens, you will get urbanization. You will get creative destruction of various kinds. That will happen because the act of growth is driven by economies of agglomeration. So cities will grow. It is difficult to kind of plan this thing because exactly how this will evolve is impossible to tell.

I mean, there is no way I could sit in 1990 and have planned how Gurgaon was going to evolve. If I had attempted to heavily plan it, I would have ended up with something like Chandigarh, which doesn’t have that kind of growth momentum. So chaotic as Gurgaon is, it generates that growth momentum. Organized as Chandigarh is, it doesn’t.

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The Importance of Adaptability in an Uncertain Future

SANJEEV SANYAL: So you have to be very, very careful that this is not about the ability to predict what is going to happen in the future, but creating the circumstances where uncertain things allow for creative destruction. Which goes back to your very first question about what young people can do. I’m trying to tell people the most important thing for young people is to remain flexible, be willing to work hard and take risks. If your purpose in life is to have this grand plan about how things are going to evolve, let me tell you, you’re going to fail. The future cannot be planned. Nobody on the planet knows how it will evolve.

The point is to take some calculated guesses, some of which may go wrong. The great jobs of 15 years from now are unknown. Artificial intelligence will destroy a lot of jobs. It will also create a lot of jobs. I have no idea what those future jobs are. Therefore, the people who take advantage of those future jobs are people who are basically adaptable.

After all, who knew that social media influencer was going to be a job profile or that doing this kind of podcast was actually going to be an activity done by many people? In fact, there are now people who do podcasts who have followerships bigger than major TV channels.

SHARAN SETTY: They’re making a lot of money.

SANJEEV SANYAL: Yes, raking in a lot of money, but nobody would have thought that was going to be a career. So the reason I’m telling you this is that similarly, AI will destroy some jobs and create new ones. The idea is to be able to respond to these opportunities as they come and not attempt to have some grand plan through some great wisdom and projection of past trends. You would never be able to guess all of this.

Diversity in Aspirations and Mindsets

SHARAN SETTY: Tell me, I wonder how difficult it must be for somebody like you when you sit in Delhi, thinking about how you can pull the country together. There are different mindsets involved. When we speak about young people, somebody from Bengaluru has a very different mindset. When I came to Delhi for the first time, it was a cultural shock for me, looking at the bureaucracy and the way politics functions here because we are not exposed to that sort of environment. Somebody from Bihar may be more aspirational towards bureaucracy. So how do you sort of get that synchronized mindset at a national level?

SANJEEV SANYAL: I don’t want to synchronize it. That is the point I’m making. I want this creative destruction. Different people in different places will want to do different things. My objection is to this herd mentality. My objection to everybody and their friend and cousin writing the UPSC exam is that mindlessly people are doing this and wasting large parts of their life. Now, there may be people who really want to be a civil servant. That’s fine. I have no problem with that. But I object to people who have no other plan in life except to do this.

By the same token, I object to people having the same mindless pursuit in other areas too. That doesn’t mean I want everybody to be a professor or a cricket star. It’s not possible. What I’m trying to say is that the world will evolve. You will have to be flexible in it. And there are many ways to succeed. There is no one template.

SHARAN SETTY: So the avenues are going to…

SANJEEV SANYAL: The avenues are going to keep changing. And so that goes again, back to your first question. What about people who are investing in markets? Well, you know, if you cannot take risks, don’t invest in markets.

Meeting Historical Personalities

SHARAN SETTY: Fantastic. On a lighter note, if you were to meet a historical personality or maybe one or two or three, what do you think that conversation would be about? And how do you think they would envision India’s future?

SANJEEV SANYAL: I think the people I would like to meet are those who were there at certain turning points in Indian history, because we are at a turning point in history. So it would be very nice to hear how they thought about certain things, particularly ones that were successful.

For example, I would love to meet Chanakya. He was there at a major turning point in history, being one of the co-founders of our first great empire, the Mauryan empire. I would love to meet the founders of the Vijayanagar Empire, Harihara and Bukka, the brothers. I would like to meet Shivaji. Again, another turning point in history and a participant in that. What was he thinking? Remember these people were taking enormous risks when they were doing whatever they were doing.

Samudragupta is another interesting figure. His father sets up a small kingdom, but he is there at a time where India is under tremendous pressure from foreign invaders who have taken over northwestern India. He then sets up an empire to take on this threat.

So at various points in time, turning points have had very interesting characters who have come. I talked about political characters, but similarly, there are cultural characters who have been at turning points in history, like Swami Vivekananda. The people I’d like to meet are those who participated in or maybe even triggered major turning points, whether political, civilizational, economic, etc.

Envisioning India in 2047

SHARAN SETTY: How would you envision Bharat in 2047?

SANJEEV SANYAL: Well, I’ll tell you what I hope it will be. As I said, I believe in uncertainty. So it’s not a prediction, it’s what I would like it to be. I would certainly want that Bharat is able to reclaim its rightful place in the world. We will at that time still be the world’s largest population. And I think we should have our rightful place of whatever our share of population is. We should have that share in the world GDP and in terms of our weight in global affairs.

So it will hopefully be a reasonably developed country as an economy. There will be not just economic but cultural and social regeneration. In some ways, the 800 years of decline that we have had in our place in the world will be reversed. Even if you allow for a few bumps, by and large until the 1990s, our share of the world economy kept declining. I would say that in the last few decades it has gone up, but it’s just bouncing off the bottom. We need to go to a level where we have our real position in the world.

India’s Historical Perspective

SHARAN SETTY: Right. And the concept of boundaries. When we think about India’s history, perhaps this is one moment in the last 2000 years where India is actually reviving its glory, its heritage, its economy is becoming stronger.

SANJEEV SANYAL: Not in 2000 years, I would say in the last 800 odd years. In the grand scale as well, I think the first millennium CE, we were doing quite well. We had some great empires like the Guptas, the Cholas, and others.

SHARAN SETTY: Yeah, it was a general observation. My question was that when you look at the developments in the neighborhood and generally, do you feel that we are slowly somewhat departing from a Westphalian system where boundaries and borders are concerned?

SANJEEV SANYAL: The Westphalian system in its pure form existed for a relatively short period, and there were many exceptions and exemptions to it. What we are is not a Westphalian type of state. We are a civilizational nation and the Republic of India is its modern manifestation. This does not mean that there are no other countries in the world which don’t have a civilizational nation idea. The Chinese have a civilizational state concept, the Japanese have it, the Iranians have it, and so on. The European Union is an attempt to weld together a civilizational state of a sort past the Westphalian state by combining together Westphalian states. Israel is an idea of a civilization nation that has been recreated.

India’s Maritime Heritage

SHARAN SETTY: Is this one of the reasons why you say that in geopolitics, we are always continentalists in nature? Because we are talking about Vande Bharats and having a lot of airports, civil aviation.

SANJEEV SANYAL: But it has nothing to do with our nation-state view because our civilization’s nationhood has historically not been land-based. If anything, we were always a very highly maritime-oriented civilization.

SHARAN SETTY: I was curious to know about your experiments and why you believe that India is yet to explore that sector a lot more?

SANJEEV SANYAL: Well, there may be many reasons for this, but if we take a proper history tour of our country, we will see that some of our most important moments in history are entirely maritime. If you look along our coast alone, you see whether it’s Konark or Somnath or Mahabalipuram, all of these are ports of importance. We’ve always had ports. Our civilization has spread long distances, mostly through the maritime route, whether to Southeast Asia or as far as Korea, China, and Japan. It’s always by the sea, and even westward. There’s enormous evidence of Indian influence during the Roman period in the Persian Gulf and so on.

Depending on which point in history you’re dealing with, you will have a different view of what our civilization footprint is. For example, if you take ancient texts, it’s quite interesting who is called Mleccha (the Indian word for barbarian). It’s quite clear that the people of Southeast Asia were not called Mlecchas. They’re inside the civilizational boundary. They’re the Naga people. The Bird Naga or the Snake people or the Serpent people is the Indian term for people of Southeast Asia.

So this footprint has gone, you know, the footprint of our civilization has waxed and waned. Today it is by and large in India and maybe a little bit like Nepal and so on, but basically our civilization footprint is now the Republic of India.

State Reorganization and Delimitation

SHARAN SETTY: There’s also a lot of comments going on, especially with the whole north-south divide and internal issues concerning identity. Do you think that the state reorganization perhaps, or the delimitation exercise that may happen at some point in the future can be inspired from how states were originally back in ancient times?

SANJEEV SANYAL: We have to be very careful about this because at different points in time, different states look different. So which point do you do a cutoff? Why is that cutoff better than doing a cutoff based on 1971 population distribution or 2026 population distribution? So anything that you do will be arbitrary.

SHARAN SETTY: Right.

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SANJEEV SANYAL: So the question is, what is a practical solution as things stand today, and you know, the rules when the constitution was set up, that would be based on population distribution. And periodically this would be done. But let me point out that, even in southern India, if you did it by pure population, you would not get the sort of distribution of parliamentary seats you get today.

SHARAN SETTY: Correct.

SANJEEV SANYAL: Karnataka, for example, will have a lot more.

SHARAN SETTY: Tamil Nadu should have a lot less.

SANJEEV SANYAL: Yes. So, there would be many such redistributions that would happen. Secondly, if we should freeze it at a certain date, is it not unfair to those states that have seen population growth? And incidentally, we now live in a time where our population has stabilized and may even begin to decline. So in fact, those parts of the country that continue to have high fertility rates are doing a favor to the country, you know, like keeping fertility rates higher. In fact, southern India, I would argue, should, and large parts of India should simply remove population control departments and methods, because otherwise we will, with a little bit of a lag, end up with the Chinese or Japanese problem.

SHARAN SETTY: Yeah.

SANJEEV SANYAL: So I think already in urban India, our fertility rates are worryingly low.

SHARAN SETTY: Yeah. And historically, I mean, civilization has always flourished along these rivers, whether it’s the Ganges or Mekong and even in China, for instance.

SANJEEV SANYAL: So the point I’m making, quite apart from that rivers and all that, you know, may not be the right way to think about modern civilizational clusters. But the point is that, we now need to shift away from this idea that population growth is bad. India’s population growth has basically stabilized. Our population growth now is purely because we are living longer, which is a good reason to have population growth. And it’s very low. Meanwhile our birth rates are too low. So in fact the fact that certain parts of the country are now well below 2.1, which is the replacement rate, is really an argument for those parts of the country to do something about increasing their fertility rates rather than criticize those parts of the country that have managed to maintain them.

SHARAN SETTY: Last couple of questions before we wind up in the short term. What do you think India’s priorities must be especially in terms of reforms? Say there is a hope that somehow we’ll be able to reach the 10 trillion mark by 2030. But regardless of the numbers, what do you think India must prioritize at this point?

India’s Economic Priorities and Reforms

SANJEEV SANYAL: So we are already a 4 trillion economy and now we should. This is about the same size as Japan’s economy, about $4.3 trillion. Where we are, we are also about 4.3. In about 18 months or so we will go past Germany which is at 4.6. So to become the world’s third largest economy from there we have a long way to go because the US and China are level bigger than us. But still I think it’s reasonable to expect that we will be growing faster than them.

But can we do better? Absolutely. And in fact after this current period of trade turbulence is over, hopefully we’ll get a clear patch where we can grow much, much faster. There has to be some point in our history we are growing at 8, 9%. We can’t wait till that turns up and then we have to create the conditions for it. And that requires many key ingredients.

So we need for example a private sector that is willing to go out and take risks. Unfortunately, India’s private sector is mostly comfortable to live behind protected tariff walls. They do neither invest in large scale upgradation of capacity or in R&D. Many of them are quite reluctant to go out there and capture international markets unlike what Chinese or at their height the Japanese used to do. So I think we need to see some more fire in the bellies of Indian industry in terms of so how.

SHARAN SETTY: How do you think we can increase that risk?

SANJEEV SANYAL: So one of the things is to increase the creative destruction internally. I think we need a new crop of investors, entrepreneurs, etc. That’s why it’s right in the beginning I said that the important thing here is for having much higher risk appetite in the Indian economy. We simply do not have the kind of churn you would have for a cutting edge economy. We need to be encouraged some companies every year to go bankrupt. Just like we have new startups coming up. We need to continuously refresh our business elite.

We can’t have the same guys who were there 40 years ago still turning up in all the meetings. Few can, but large part of them should turn over. We need to get completely new talent in. So all of that churning needs to happen all the time and that requires that we as a society are comfortable with that churning.

So that is one big thing that we need and I have talked about this. Creative destruction needs to be taken much, much more seriously by policymakers and by general society at large. And that means that we need to encourage much more risk taking by young startups, for example. And you know, till very recently we had the system was biased against this. We actually had something called Angel Tax which was biased against startups.

So we need to create systems. That requires smoothening of regulations allowing much more new entry. Even when we create national funds for science, technology, startups, etc, you must be much more willing to give it to completely new people with completely new ideas. Today we will ask, oh, where is, what is your track record in a new technology? What track record? It is a new technology, you know, so we have to find ways of financing them, allowing them space to. And a lot of those people to fail. Yeah, because that is through which we will get that.

SHARAN SETTY: We actually treat our entrepreneurs really horribly, really shabbily.

SANJEEV SANYAL: And to the extent we pay attention and sort of give them space, it is always somebody who’s established. But we actually should have the opposite view.

SHARAN SETTY: When we hear the stories of founders and of successful startups maybe not commercially committing suicide, it’s absolutely hard.

SANJEEV SANYAL: So we need to have that. That class is the class that we need to encourage. We need people with completely crazy ideas to be allowed to do those crazy ideas. That is how progress happens. Now by its very nature some of it will fail. That’s why they’re crazy.

SHARAN SETTY: Right.

SANJEEV SANYAL: Unfortunately, as a society we see these kind of risk taking and failure as some sort of a moral failure. But in fact what we should see it is that this is one pathway. Somebody tried it out and it didn’t work out. He’s done a favor to everybody else. Try another one out.

SHARAN SETTY: This takes me back to that. There’s a joke going on the Internet that Bangalore startups are more focused on ideas, innovation, but they never make money. But the ones in Gurgaon may have the normal dhando idea, but they make a lot of money.

SANJEEV SANYAL: No, that’s fine. Both of them are important. I want people to make money.

SHARAN SETTY: Yeah.

SANJEEV SANYAL: I want some of those guys in Bangalore to make money. I have no problem. I want more creativity. But you know, there are large Indian companies which should be doing large amount of research, development and so on and creating new products which don’t we have, you know, restrict themselves to remaining service providers, to some existing technology which will take you part of the way but will not take you out.

And we have generics companies. For example in India in pharmaceuticals. They’re no longer small companies, they’re large companies. But how many molecules have they invented? We have large software companies. How many products do you use on a daily basis have they invented? This is a. This requires a different level of risk taking which is not coming through.

SHARAN SETTY: Yeah.

SANJEEV SANYAL: So this is one big area that I am interested. Unfortunately what happens is that once industrial group or entrepreneur or whatever has created some size, there is a strong preference in India to then provide a moat to this and regulate it to allow it to consolidate itself. Now that leads to laziness in a sense within a generation and certainly by the third generation, you then create inheritors who are not risk takers. Instead you will. They’re more interested in going to Dubai and setting up family office and living an easy life and not being on the shop floor. So you need to be willing to create more spaces for new entrepreneurs. Otherwise, you see, the entrepreneurial class will be mostly fighting their cousins about their art collectedness or lecturing other people on some CSR project or something, not actually doing the hard risk taking on the ground.

SHARAN SETTY: Any concluding thoughts?

Concluding Thoughts

SANJEEV SANYAL: Yes, I mean I think the thing that I tried to. The point I tried to make through the course of this thing was we need to be comfortable with a churning uncertain world. This is a particularly uncertain time. But let’s say that periodically there’ll be uncertain times. Today this is uncertain time. A few years ago there was Covid, when I was in college, there was Soviet Union collapsed and India itself had a 1990 moment. Both a crisis and then an opening up. So at any every point in time. Periodically you will go through this. This is the nature of life. And sometimes it will be a technological shock, sometimes it will be a pandemic, sometimes it will be technology, sometimes there will be a war. World is always will be going through this. And you will also get periods of stability, except you can’t predict when there will be.

The game has to be flexible to be prepared when those brief periods of stability come. And you can take full advantage of it. But that requires that you’re continuously investing into the yourself as a person, into the country as a country. So for at a national level we need to keep building our infrastructure. We need to create a culture of risk taking. We need to really clean up our legal system so that you know, enforcement of contracts and those kinds of things can be sped up. So we need to keep investing in the system. And so when if you have invested in a good car and in learning how to drive and at some point you will get a good flat patch where you can accelerate.

SHARAN SETTY: Yeah.

SANJEEV SANYAL: But you can’t turn up at that flat patch and then try to buy a car and learn how to drive.

SHARAN SETTY: Yeah. Right. Thank you so much for this wonderful conversation Sanjeev. Thank you so much. Okay do let us know what you thought about this conversation and please do subscribe to Bharatvaarta. This is your host Sharan signing off. Until the next one.

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