Overall Assessment of the Indian Economy:
India’s economic growth rate of 7% in the current fiscal year is impressive, but the slowdown in the later part of the year and the impact of the slowing global economy are concerns. The growth rate needs to be higher to create sufficient jobs for the country’s population.

Concerns about the Lower Middle Class:
The lower middle class has been disproportionately affected by the pandemic, with many losing jobs and small and medium enterprises struggling. The recovery of this segment is lagging, with two-wheeler sales, an indicator of their economic well-being, still below pre-pandemic levels.

Government’s Handling of the Pandemic:
Dr. Rajan believes that the government could have done more to support the lower middle class during the pandemic, such as providing more handouts or transferring payments from other budget items. He argues that the government’s assessment of its handling of the pandemic is too complacent, as India’s economic growth has not fully recovered to its pre-pandemic baseline.

Effectiveness of Production-Linked Incentive (PLI) Schemes:
Dr. Rajan questions the effectiveness of the government’s PLI schemes in attracting international investment and creating jobs. He emphasizes the need for a detailed calculation of the number of jobs created for the subsidies provided under these schemes. He suggests that the government should focus on augmenting India’s advantages, such as its large size and potential, rather than relying solely on subsidies.

India’s Potential in the Reorganization of Global Supply Chains:
India has the potential to be a major beneficiary of the reorganization of global supply chains, but it needs to improve its logistics, power infrastructure, and regulatory stability. The government’s steady increase in tariffs without clear communication about future plans creates uncertainty for businesses and may hinder the attraction of the entire supply chain.

Criticism of Government Policies:
Dr. Rajan has been a consistent critic of various governments, including the Manmohan Singh government, when he served as an advisor. He believes that criticism is essential for governments to course-correct and avoid going off track. He emphasizes the importance of democracy, national integrity, communal harmony, peace, and democracy for India’s progress.

Participation in the Bharat Jodo Yatra:
Dr. Rajan’s participation in the Bharat Jodo Yatra was a statement of his belief in the principles of national integrity, communal harmony, and peace and democracy. He clarified that he is not joining any political party immediately and that the march was a way to express his support for these values.

Economic Direction:
Rajan believes that the world is moving towards services and that India should focus on this sector. He suggests that India can demand recognition of its degrees in other countries, allowing professionals like doctors and accountants to offer their services globally.

Importance of Human Capital:
Rajan emphasizes the need to invest in human capital, particularly in education and skilling. He calls for the revitalization of schools and programs to bring students back to school and help them catch up after the disruptions caused by the pandemic.

Assessment of Modi Government’s Economic Handling:
Rajan commends the government’s efforts in infrastructure development, especially the construction of roads. However, he criticizes the government’s approach to tariffs, arguing that it hinders India’s potential as a global player and prevents exports.

Questioning Subsidies for Manufacturing:
Rajan questions the effectiveness of government subsidies for manufacturing, arguing that they may not be the best use of resources. He suggests that investing in education and creating world-class universities would be more beneficial in the long run.

Comparison with China:
Rajan acknowledges China’s progress in technological capabilities and the strength of its private sector in innovation. He believes that India’s democracy gives it an advantage in terms of innovation, but that it needs to spend more on human capital to fully harness this potential.

Rahul Gandhi’s Bharat Yoga Yatra:
Rajan believes that the image of Rahul Gandhi as a “pappu” or incompetent politician is unfortunate. He suggests that Gandhi’s Bharat Yoga Yatra is an attempt to change this image and engage with the public on a personal level.

Raghuram Rajan’s Opinion on Rahul Gandhi:
Rajan does not agree with the assessment of Rahul Gandhi as a “pappu” (a derogatory term for a foolish person). He describes Gandhi as a smart and curious individual, although he does not believe Gandhi possesses Nobel-laureate-level economic knowledge.

Raghuram Rajan’s Views on the Indian Political System:
Rajan expresses concern over attempts to undermine India’s democratic institutions, such as the press and the judiciary. He emphasizes the importance of preserving the system that allows for the flourishing of all Indians, regardless of religion or beliefs.

Assessment of the RBI’s Current Leadership:
Rajan declines to comment on the performance of current RBI Governor Shaktikanta Das. He highlights the RBI’s strong track record and the importance of cooperation between the RBI and the government. Rajan clarifies that interest rates were not raised during the BJP regime but were cut instead.

Raghuram Rajan’s Outlook on Interest Rates:
Rajan predicts that interest rates will remain elevated for an extended period, both internationally and in emerging markets like India. He emphasizes the need for monetary policy coordination to prevent excessive divergence from international trends.

Raghuram Rajan’s Perspective on Inflation Targeting in India:
Rajan explains the rationale behind the inflation targets set by the RBI in 2016, which were intended to maintain rupee stability. He acknowledges the growing sentiment that the targets may be too tight for a developing country like India. Rajan believes that moving away from the inflation target would necessitate accepting a depreciating rupee against the dollar and other currencies.

Raghuram Rajan’s Concerns about Pakistan’s Economic Situation:
Rajan expresses concern over Pakistan’s heavy indebtedness and the impact of recent floods on its agricultural sector. He recognizes the risk of Pakistan defaulting on its debts and emphasizes the negative consequences for its citizens. Rajan hopes that Pakistan can secure sufficient funding to avoid default and maintain its ability to import necessary goods.

Raghuram Rajan’s Outlook on China’s Economic Trajectory:
Rajan believes that China’s rapid economic growth rates of the early 21st century are unlikely to continue due to demographic and policy factors. He highlights the slowdown in China’s labor force growth and the challenges faced by the private sector and the real estate industry. Rajan emphasizes the importance of the private sector in driving innovation and economic growth in China.

Raghuram Rajan’s Assessment of the Future of Globalization:
Rajan recognizes the benefits that China has reaped from globalization and believes that the country will continue to pursue a globalized world. He acknowledges the shift towards anti-globalization sentiments in the United States, which may complicate China’s efforts to re-engage with the global economy.

Raghuram Rajan’s Advice for the Indian Government in the Upcoming Budget:
Rajan emphasizes the need to focus on revitalizing economic growth in the upcoming budget, given the challenges of the upcoming election year. He suggests exploring reforms that can generate new growth opportunities, such as simplifying the process of starting businesses. Rajan acknowledges that privatization efforts may be met with resistance due to concerns about their potential impact on individuals.

Challenges in Implementing Reforms:
Despite the government’s power, pushing through reforms can face political backlash, as seen with Prime Minister Modi’s farm law reform and land acquisition in his first term.

The Importance of Consultation:
Consultation with stakeholders can help build confidence and increase receptivity to reforms, even if the elements of the reform remain the same.

Low-Lying Fruit for Improvement:
Raghuram Rajan emphasizes the need to make business easier to start and operate by simplifying processes and reducing the burden of taxation and compliance.

Demonetization’s Impact:
The Supreme Court’s decision focused on the process of demonetization, not its benefits or disadvantages. The initial aims of demonetization, such as rooting out black money and counterfeit notes, were not achieved. The cost-benefit analysis of demonetization needs to consider the economic losses and suffering caused to small and medium enterprises. While demonetization may have accelerated the formalization of the economy, it was done through a “jatka” (harsh) process rather than a gradual and carrot-based approach. The boost to digital payments during demonetization may have been temporary, and it’s uncertain if it would not have happened eventually.

GST Implementation:
GST was important, and its implementation by the BJP was positive. However, the manner of implementation was problematic, and there was a lack of experimentation to find the best approach. GST creates a tax burden on informal businesses that previously didn’t pay taxes, raising the question of whether they are seeing sufficient benefits. The potential negative impact on small and medium enterprises due to the removal of implicit subsidies needs to be considered.

Raghuram Rajan’s Abstention from Ranking Vimala Sitharaman:
Raghuram Rajan declined to rank Vimala Sitharaman’s handling of the Indian economy as finance minister.

Growth and Investment:
India’s economic growth has decelerated to a 5% growth rate, which is too low for the country’s needs. Businesses in India are not investing despite the government’s efforts to create incentives, such as reducing corporate tax and providing incentives for banks.

Government’s Role in Promoting Growth:
The government should focus on infrastructure investment and work with states to encourage growth. The government should improve the business environment to incentivize businesses to grow. The government should address issues such as land acquisition to facilitate infrastructure development and business expansion.

Infrastructure Development:
Land acquisition is a significant challenge in India, hindering infrastructure projects such as the Mumbai-Ahmedabad high-speed rail. Simplifying land acquisition processes would boost growth by enabling infrastructure and business development.

Finance Minister’s Role:
Raghuram Rajan declined to comment on his potential interest in becoming Finance Minister, stating his contentment with his current position as a professor at the University of Chicago.