Dr Rathin Roy, ex-member of PM’s advisory council, speaks on India’s economic roadblocks post-demonetisation

Hyderabad: “There are no easy or technocratic solutions,” said Dr Rathin Roy. “If we do not have a legacy of wealth, even the top 10 per cent cannot expect the same standard of living,” said Prof Roy, addressing a packed hall of eager economists.

Dr Rathin Roy, the director of the National Institute of Public Finance and Policy (NIPFP), New Delhi, spoke at the Guruswamy Centre here on the topic of ‘Repairing the Indian Economy, tackling challenges and driving growth.’

About Rathin Roy

Mohan Guruswamy, economist and commentator, introduced Prof. Rathin Roy, a former member of the Economic Advisory Council to the prime minister. He holds a BA (Hons.) in Economics from St. Stephen’s College, University of Delhi and an MA in Economics from the Jawaharlal Nehru University and holds a PhD in Economics and an MPhil from the University of Cambridge, UK.

'Demonetisation adversely affected present generation'

Speaking about his career beginning with his link to Hyderabad, Prof Roy, who was born at Shenoy Nursing Home, Secunderabad, said there were only three options when he was looking at career options: to go abroad, join the army or government service.

Then, liberalisation came in and benefitted citizens for many years. “However,” he said, “The growth model which had relied on the top 10 per cent of the population has ended. Until now, every generation in India was better off financially than the previous generation but not anymore. The new generation cannot have the same level of prosperity seen between 1991 and 2016 when the adverse effects of demonetisation set in.”

No technocratic solutions

During his lecture, Prof. Roy said: “There are no easy or technocratic solutions.” He said a majority of bureaucrats come mostly from technical backgrounds, but most of them are caught in the middle-income trap now and there is no escape.

“If we do not have a legacy of wealth, even the top 10 per cent cannot expect the same standard of living,” Prof. Roy said. It was the IT and pharma sectors that had fueled growth in Hyderabad and Bengaluru but this cannot happen continuously and has ended in 2024.

“We are now in the same lower bracket as Brazil, Turkey and the Philippines where per capita income has grown but we have crime, destitution, stunting, poor health and low-level education,” he said.

Against the idea of subsidies

Prof. Roy said he is against subsidies. He said citizens should be able to pay for housing, healthcare, education, clothes and food from their own income for India ‘to claim economic success instead of being subsidised by schemes like Aarogyasri.’

Enumerating the measures that could be taken to remedy the situation, Dr Roy said a good quality shirt that cost just Rs 300 could be made in Tirupur or Surat by bringing in cheap labour from North Indian States, instead of importing them from Bangladesh or Vietnam.

Failed SEZ model

“Instead of complaining that the South is subsidising the North, we should be asking why Uttar Pradesh got deindustrialised.”

Prof Roy said that the special economic zone (SEZ) policy, where labour laws were suspended, was once thought a sure fix for the economy. But the SEZ model has failed to live up to hype and productivity did not improve.

Collective social action needed

He said, “To create jobs, India should alter the structure of economy and produce things. The inequalities that we see in our society are a result of a lack of fraternity. Collective social action has to be increased. Otherwise, the top 10 per cent will be content to be rich people in a poor country.”

Interesting Q and A session

During the question-and-answer session after the lecture, Mohan Guruswamy said that the process of budget-making was a sham:

“It only mattered in the license permit raj when those like Dhirubhai Ambani and Nusli Wadia lobbied for a change in duty structure to benefit their respective companies. What matters is the annual report and ratios of savings to GDP, capital investment to GDP ratio, and inflation to capital investment. The allocations made in the budget go haywire after the first quarter and things like education and health suffer as there is no constituency to lobby for them. The education system is broken.”

Guruswamy said that the 5-lakh health insurance scheme by the government cannot be a solution for the people’s health problems.

More about Rathin Roy

Elaborating on Prof Roy’s achievements, Mohan Guruswamy said, “Prior to NIPFP, Roy worked with the United Nations Development Programme (UNDP) as an economic diplomat and policy advisor, with postings in London, New York, Kathmandu, Brasilla and Bangkok. He had been the director of Asia Pacific Regional Centre, UNDP, Bangkok, and the director, International Policy Centre for Inclusive Growth (IPC-IG), UNDP, Brazil. The focus was mainly on emerging economies. He has also served as economic adviser with the 13th Finance Commission and as a member, Seventh Central Pay Commission, Government of India. Roy has worked in over 80 countries and is a well-known figure in the world of applied macroeconomic and fiscal policy. Roy is member, United Nations Environment Programme (UNEP) Inquiry into a Sustainable Financial System, member of the Meta Council on Inclusive Growth, World Economic Forum, Geneva, member on the FRBM Review Committee, Government of India.”