0:00 There are 100,000 sundar pichai in India. Why are they not building Google in India and one of the most important reasons is the incentive structure of the Indian state and the Indian state creates fear in the minds of Indian people. Then people say look don't build something big and visible and powerful and the Indian state will come after you. Dr. Aesha you have a PhD in economics. You worked with the ministry of finance. You are also behind the making of the nifty50 index. Let's talk about the current income tax laws. We are approaching Indra Gandhi levels of taxation. It's all adding up to way too much taxation. It's a failure of the GST reform. I say this as a co-author of GST. >> So if you propose this to the current finance minister Nirmala Sid Rahan, what would she say to you? >> She would say that uh one economic concept that every Indian should
0:45 understand but they don't. >> Freedom >> but we are freedom. We are free country. >> We look at the government as a Mayba. We give moral legitimacy to the government to interfere in our likes. >> The last 3 years inflation has been really high for India. >> Not not true. RBI must focus on the overall Indian average. >> But what about people who are watching this? The 3 crore taxpayers who are running this country. What about us? Would love to start with your background. Uh how does somebody who is an aeronautical engineer from IIT Bombay uh end up becoming a PhD in economics? Can you please talk about your illustrious career? >> Sure. uh modern economics is very quantitative. Economics is also a great
1:30 humanity subject. Economics is about politics. It's about philosophy. It's about how the country works, about how the world makes progress. You need all that also. So I love economics that you have to think about the world. You have to bring all this together and you have to understand what is going on. So that's sort of where I started from that I attended IIT Bombay and I just felt charmed by the concepts and principles of economics. I did a PhD in economics. I came back to India and I was very lucky. Uh in July 1991, Manmahan Singh did the great speech, the budget speech that was you know an important turning point in India's history. I showed up in India in August 1993 and uh I walked up to the key persons of the National Stock
2:17 Exchange and Sebi at the time and said guys I menthu about this stuff can I get involved and they took me into their work and I was given an opportunity to participate in just some of the great events of India's history which was the building of NSE. >> So you were in your 20s? >> I was in my 30s. So late 20s was when I moved back to India >> but still >> in 1996 I was 30. >> Yeah. Late 20s early 30s to do all of these things. >> Correct. It was just greatest privilege of life. >> So let me ask you this question. You worked with the ministry of finance. You worked with finance ministers. >> Yes. >> So let's talk about the current income tax laws. >> Yes. >> What is your opinion on it? And what would be the income tax structure if you had the decision to make changes, power
3:02 to make changes? >> Yeah. So I think the income tax rates in India are unconscionably high. We would be much better off with much lower rates. Okay, this is just turned into madness. When you add up the take that the government charges a GST on your consumption, the government charges an income tax on the person, the government charges an income tax on the company. It's all adding up to way too much taxation. We are approaching Indra Gandhi levels of taxation and that is not wise for the country. Can you can you go a little bit double tap on that because uh a lot of people might not have context of Indra Gandhi levels of taxation. >> So uh Indra Gandhi was a populist. Populism the word populism means the people who harness the anger of poor people and hurl it against the elite of
3:48 the country. So hatred of the elite is the essence of populism. When people are hostile to success, when people are hostile to prosperity, when people are hostile to intellectual excellence, hatred of the elite is the essential cult of populism and Indra Gandhi was an example of a populist. A lot of modern uh social media culture is hatred of the elite and that is full populism. So then you try to hit at rich people and grab their money and you do Robin Hoodism. So the peak income tax rate of Indra Gandhi was 98%. >> Okay. Okay. So you're basically you're working for the government. You're not working for yourself. >> Okay. >> And I'm saying that that destroys the incentive. Then why will you build a business? >> Okay. So again you got to go to foundations. Earlier I was saying to you that Sundar Pichai is first class by
4:35 world standards and there are 100,000 Sundar Pichai in India. Why are they not building Google in India? And one of the most important reasons is the incentive structure of the Indian state. that the Indian state interferes in the lives of people and the Indian state creates fear in the minds of Indian people then people say look choir be careful lead a happy life don't build something big and visible and powerful and the Indian state will come after you be careful be cautious those kinds of things that the lack of rule of law is a fundamental hindrance to creativity and imagination and there's low freedom there's thousand things you do there's a government rule on this there's a government rule on that >> and the government can make and break your business model. They can come tomorrow and just say we're shutting you down. This has happened to so many people in India.
5:20 >> But back to taxation. So the first is that when you add up corporation tax and then personal income tax and then GST. >> Okay, it is an unconscionable level of taxation and we need to be at much lower tax rates. Then second, >> how how do you how do you uh measure that like have you observed any uptrend in number of tax rates in India? So corporation tax has gone down but the personal income tax has gone up and the GST at 18% mostly is just it's a very very high level. Uh also a lot of GST blockage happens and in theory imagine that stage one sells to stage two. Okay, you're supposed to get a GST refund at stage two. In many many many many places the government has blocked off the GST refund. So the overall levels of taxation have really gone up. Okay, so
6:07 it's a failure of the GST reform. I say this as a co-author of GST. >> Yeah. Oh, you co-authored the GST. >> Yes. So Vijay Kelkar, Arbin Modi and I designed the first GST of India and this is absolutely not what we intended. Arbin Modi and I recently wrote a paper on this subject identifying all the GST blockage that is happening. That is the very antithesis of GST. If you're going to block the GST refunds, then it's not GST. Then it's an old style excise and that's just ridiculous. >> Okay, so all this is on tax policy that we would do much better with lower tax rates. I have a short video on this. I can give you the URL. Okay. But now turning to tax administration, I want to tell you one great story. Okay. Jaswan Singh became finance minister and Jaswan Singh said to the income tax department that income tax raids are univilized.
6:54 Okay. In a civilized country, you want information from a person, write to that person. The person will reply to you by sending an envelope of the information back to the person. So in just one sing's time, all income tax rates were stopped. >> Wow. >> Okay. Think of what that does to confidence in the country. Think of what that does to private sector optimism. >> Loving hearing that only >> the very concept seems unbelievable in modern India. But that is how the growth of that period happened. Okay. India got incredible growth from 91 to 2011. It was not done by populism. It was not done by being hostile to the elites. You have to create wealth. You have to support the private sector. And yeah, there will always be some amount of tax evasion. But the overall tax GDP ratio of India is commensurate with other countries at the present Indian per capita GDP. Like there is a mythology
7:41 around corruption which is a populist idea. The idea that people are not paying tax and rich people in India need to be investigated. This is part of the populist leftist idea and we need to get out of that. >> To make progress as a country, we need to support success. We need to support excellence. We need to create conditions of safety for the elite because only the elite will build the country. >> Interesting. Interesting. So what would you do? You would abol if you abolish GST income tax. What would >> abolish just get the rates lower? >> What would what would the rates be according to you? >> So so step one I would fix all the GST blockage that input credits should flow deeply inside the GST. My dream is a single rate of 10%. >> All goods. Okay. Whether it is wheat or
8:28 chapati or ceramic mug or cell phone just one single rate 10%. Okay. So there should be no argument debate that classification disputes everything just one single rate 10%. >> So if you propose this to the current finance minister >> uh Nirmala Sid Raman ma'am >> what would she say to you? >> She would say that Indian politics does not allow us to have common rates on everything that we what does that mean rich people that food has to be at low rate and cell phones have to be at high rate. That is their rating of Indian politics. >> Basically, this is what gets them the votes if they do this. >> Oh, they believe it's dangerous if you do it differently. >> Okay. >> But as an economist, you're saying this is the right thing to >> Yes. As an economist, it's crystal clear to every public finance expert in the world that GST should be a single low rate. You should not have different
9:13 different rates. Also, there should be no GST blockages. >> Can you elaborate on that? Why that's important? Why >> low rate or blockage? >> Um like right now we have different rates 18%, 5% and all of that. You're saying make it 10% flat everywhere. You're saying right now that's not what the Indian politics will like. >> Yes. >> But as per the numbers and the mathematics and what's working in the world. Can you elaborate on that? >> Yeah. The moment you have heterogeneous rates first you get into classification disputes. Okay. So there will be a category called mugs. There'll be a category called cups. Okay. So you would have seen famous stories about Nirmala Sithan that if some product is cooked in ghee then it's a different rate. If the same product is cooked in palm oil, then it's a different rate. So the moment you have many rates, the private sector is endlessly creative and they will start
10:00 mclassifying. Then you'll need a raid to come into the factory and check which did you use ghee or did you use palm oil? So it just opens up that whole jamela of private versus government warfare in the whole country which is not good for the health of a country. >> A healthy country is harmonious. We are all happy. We're doing things together. We're not getting into this warfare between the state and the people. So that is the first reason that you eliminate classification disputes. Second, it doesn't end there. Now the private sector will start lobbying the government. They'll start bribing the government saying no no no no just for my product put it into this classification not that classification. Again it creates a dysfunctionality in the political economy. >> What we want for Indian success is that the private sector should be focused only on business.
10:47 >> They should be looking at customers saying how can I serve the customer better? They should be looking at technology saying how can I adopt AI in my business better. They should be looking at their organization saying how can I design my organization for higher productivity. We don't want top management thinking how will I meet this bureaucrat. No no my nephew is good friends with this bureaucrat. Let's go meet that person. Let's ask. very eye opening thing for me that the very fact that there is heterogenous GST rates >> gives the incentive for corporates to come to me as a politician >> correct >> to negotiate on their behalf and then that's when I can ask what I want >> for my correct >> and this is old Indian socialism this is the genesis of Indian failure >> where license Raj was also there >> this is back to that so effectively you have to go to some bureaucrat and take permission can I do this can I not do
11:33 this I want to change this rate to that rate and you're a supplicant and think of the mental bandwidth We want firms in India to be passionate about building their business. Instead, too often in India, winning firm is one that >> does some amount of cheating of mclassification, then does management of government relationships, a raid comes, then he calls his buddy, says get this raider out of my business, >> okay? And then he goes and lobbies that my product is used by poor people. >> Now cell phones are a jantaa item. So you should take cell phones into a 5% rate or a 0% rate. >> Okay? And then you get this GST blockage because a 5% rate at the customer uses raw materials that are 18%. So the government will now have to refund to the guy. So the government no I will never refund. So I'll get GST blockage. If you start doing GST blockage you're
12:18 back to preGST. So then you've actually destroyed the GST reform. >> And you're saying this is happening a lot in India right now. >> So I'm confused if because I'm sure the finance ministry is smart. They obviously know all of these things. There are people like you advising them on all of these things. They were >> they were >> meaning I left the ministry of finance a long time ago. I I exited in 2005. >> You're saying right now I'm sure there are PhD people working there still. >> Not particularly. >> No. >> But nobody has given this kind of an advice to the finance ministry. >> Oh, I mean Vijay Kelkar Arbin Modi and I >> are the self-appointed crusaders, unpaid crusaders of a good GST. We keep writing about this all the time. But you know finally policy makers have many considerations. They are busy. They're listening to many problems and they're
13:03 making up their own mind. This is my view. This is my opinion. There are many thoughts that play on the minds of policy makers. As I said, Arbin Modi and I recently wrote a research paper documenting identifying the sources of GST blockage >> saying that a GST without input tax credit flows is the very antithesis of GST. And then you're back to an old style excise, you've actually undermined the fundamentals of the GST reform. This is our view. What do we do? We just write a paper. >> Okay. Beyond that, this is a great country of 1.4 billion people and many people have to talk, many people have to argue, people like you have to carry these messages to your audience. That is how a country will change. >> So essentially what you're saying is that the current system has a lot of friction in it. >> Yes. >> Which is actually not growing the pie fast enough. >> Correct. It is not creating conditions
13:49 for economic growth. >> So if the government actually lowers the friction, lowers the rates, the growth can be much faster and eventually government will itself end up making more money. >> Correct? So let's also keep it fair and um talk about some good things that the finance ministry has done or the current ruling government has done because obviously there might have been some good things that they've done. >> The three great achievements of the BJP period are inflation targeting the formal mandate for RBI to deliver a predictable inflation. >> Okay. >> The bankruptcy code. >> Now why is that important? The first one >> because for all of us we don't want to think about inflation. You don't want a world where inflation fluctuates randomly where sometimes there can be high periods of inflation. It can destroy your bank assets and bond
14:35 assets. >> The last three years inflation has been really high for India. >> No, not true. Not true. >> No. Last three years inflation has been excellent. >> No. But the cost of living has considerably increased in cities. >> Inflation is measured as CPI. >> Huh. >> Okay. So now you can open an argument about the CPI. I think the CPI is broadly well measured. >> No, let's talk about the people who are watching this broadcast. people who are people who are taxpayers, people who earn 10 LPA plus living in a top five metro city. >> So here I will say that RBI must focus on the overall Indian average and the overall Indian average is the CPI and I believe it is correctly measured. Okay. And this reform was introduced in 2015 and by and large RBI has delivered. >> But what about people like um people who are watching this the 3 crore taxpayers who are running this country? What about us? See, you can't ask RBI to manage two
15:23 numbers. He can only manage one number >> and that one number has to be the overall average of India. That is only fair arrangement. >> But don't you think that we will feel cheated like we are the ones paying the tax and then the inflation is really high for us and we're getting nothing back. >> That's a separate debate. >> But how would you answer that? >> That no central bank in the world can deliver two numbers. He can only deliver one number. So if you can have an inflation measure for top desile, you can have an inflation measure for bottom desile. Once you give me two numbers, I'm stuck. Will I achieve this? Will I achieve that? So you have to take the overall average inflation of the country. And I believe that the Indian CPI does that correctly. >> Got it. Okay, that's number one. What else? >> So the second was the bankruptcy code. Okay. The insolveny and the bankruptcy code. The third was the GST. I think these are the three big achievements. >> The GST was a big achievement but not
16:09 implemented properly. So a lot of the fundamental concepts and ideas of the GST weren't carried through. So it sort of carries the label of GST, but when you open the box, it still looks like an old X size. >> H interesting. So let's talk about the current situation. >> Okay. >> I recently saw a meme on Instagram >> which said that and World War II. So for an average Indian looking at the current situation so confused like how do I make wealth? Is it even worth it? Is my job going to be taken over by AI? World War II is going to happen. Should I just sit on gold and cash? But as somebody who has studied for lacks of hours about the entire
16:55 history of the economy for not just this decade probably for centuries of our history, >> how would you analyze today's situation? >> So let me break it into two parts. Okay. So one part is everything about your life other than your wealth. Okay, just push finance aside for now. I'm on everything else about your life. Okay, so here my story will be like this that we live in a turbulent world. Knowledge, intellectual power, skill will always be precious. Okay. So the world is not going to change. The AI is not going to replace the cleverness, the creativity, the brilliance of human beings. the world will change. So we need to be nimble. We need to keep on learning new things. We cannot afford to
17:40 become complacent. We need to think and the world will reward depth. The world will not reward superficiality. So the AI will do all the work. So you know there's this famous book by David Greyber called jobs. A lot of work a lot of jobs in the world involve very mechanical processing type work, follow-up type work. >> And 80% of the people just do that. And a lot of people just do that. So a lot of those things will be eaten up by the AI. We have to of course use the AI. We have to constantly ask ourselves what are the AI able to do? What are they good at doing? What are they bad at doing? And what are they not able to do? And that is what we humans should do. >> And I feel this is a lifetime battle for all of us. >> So let's go into one of the use cases. Let's look at making money,
18:26 >> right? Because making money has a lot of uh u you know it's it's both creative plus repetitive work combined and needs to be constantly evolved. So it's a very complicated problem statement making money right what worked 10 years back is not going to work now. >> Yes. >> So let us look at one of the >> simplest ways to make money which is investing right which is uh you know what is our area of expertise as well. >> Yes. So there was an experiment conducted where they gave multiple you know LLMs you know they asked you know Chad GPT Claude um uh you know X all of these different Grock all of these different different LLMs that you make money I'm going to give you the money please make it grow >> and at the end of I think one or two
19:12 months they saw which you know AI model made the most amount of money and they saw that one or two models actually beat the index So don't you think if AI can do this which is making investment decisions which is not a fairly simple task to do and I mean it's not a reputable task. If it is a reputable task then everybody would have made money. >> Yes. >> Right. The ability to make money is essentially finding arbitragees in the world and finding that is about understanding the information uh putting past context into perspective and making predictions about the future. >> Yes. >> And AI was able to do that. So don't you think if AI is able to do this a lot of people's jobs are at risk now because such a complicated task has been completed by AI now making money. >> So let me respond in two parts. First not quite what you said but you will
19:58 readily appreciate is relevant is the work of a wealth adviser. Okay. Of a family lifetime wealth planner wealth adviser. >> Okay. >> That job in my mind is fully AIable. >> Okay. Because frankly honestly if you ask me the job of that wealth advisor is really very extremely simple. It is codifiable into a finite set of rules and there is no great creativity there and that part can be done a lot by AI. But there is a second part where the wealth planner for a family the wealth adviser is like a bedside manner of a doctor dealing with the anxiety and the fear and the mistakes of a household. That's a deeply emotional relationship of trust. Okay. So, every family will
20:43 come up with some crazy, stupid, speculative ideas and it is a job of a responsible wealth advisor to put that down and say, you know, really, are you sure you want to do it? It's not very wise or don't bet more than 1% of your wealth on this surefire profit opportunity that you have. Okay. That is something AI will never replace because it is an environment of trust and emotional management of the relationship with the client. Yeah. >> And similarly part two there is a stock market drop of 30%. Okay. People will panic, people will want to exit. It is the wise trusted wealth manager, wealth adviser who will be guiding the family saying relax, control your fear, become more Buddhist, okay, be more detached that only a human will do. Okay. So that's a good way to think that frankly
21:29 if you ask me, I could codify all the rules of wealth management and they are not very complex. they're not very difficult. That part is easy. That's what the AI can do. But what the AI cannot do is handle emotions is handle a relationship. >> Now let's come to individual security selection within assets. So let us say the AI says that hey you need to put 50% in equity, 50% in debt because your risk appetite suggests. So now within 50% equity I have hundreds and thousands of options. I have 4,000 plus mutual funds. I have 6,000 7,000 plus stocks. So within that universe, EI has already proven that I can now pick stocks better than the index. I would not say better than the best human probably we're not there yet, but better than I can
22:16 definitely beat the index, which majority of average investors are not able to do. So how would you sort of evaluate that aspect of investments? >> Color me skeptical. A, if I was your wealth manager, I'd be saying mostly just be in index funds. Okay, I'm a skeptic on stock picking even by professional investors. B, we should think about the way markets work and market efficiency that if today people are doing these experiments and finding that the AI is good at stock picking within 3 months there'll be 50,000 AI traders operating on the market right because it's too good an opportunity and everybody will rush into it and after that the opportunity for stock picking by AI will go away that >> why can you explain that >> because that's the nature of markets markets are competitive so you know intuitively imagine that uh I'm able to
23:03 use satellite ate imagery. Okay, here's a hard example. People in America started using satellite imagery to look at the parking lot of Walmart and count the cars. So then you could get a forecast of the Walmart quarterly earnings before the quarterly earnings was released because you could count how many customers was Walmart getting. Okay? So the first guy who figured it out made serious money. The second guy who figured it out made little less money. By the time everybody knows it, then you're trading against each other with equal information and there is no edge. has the same information. >> So once everybody has the same tools, there is no edge. You only make supernormal profits. You only beat the index. When you have some edge and that's an intellectual challenge, the AI will never get an edge. You and I will get an edge. It's a human act to invent
23:50 the black shaws formula. The AI cannot invent anything new. So the AI knows everything that is there on the internet. He's not creating. Okay? So he's not yet a creative player who imagines something new. M >> so that will always come from humans. >> So now let's talk about something which could happen in India. You are an economist. You are somebody who's been studying the markets, the geopolitical uh events, you know, for decades now. My fear is that in the next 2 or 3 years there will be massive layoffs in the Indian white collar job ecosystem because people are just not having enough time to reskill themselves and corporates are not going to wait for people to reskill themselves if 80% of the work can be replaced but I feel like
24:37 this is just the beginning and there is going to be a lot of disruptions which most people are not able to see right now because most people are like I will believe it when I see But I'm somebody who likes to predict that okay I think the leading indicators are clear enough for me now that lot of things are going to be disrupted in India and a lot of uh chaos is around the corner. What is your opinion? >> This is one of the most important questions about India today. Okay. So we get $400 billion of export revenues out of uh IT service export and business processing export and it is just the single magic of India. So if I may be a little more mean uh we in India have
25:24 mostly failed at almost everything else. There are a few pockets of excellence like for example in the petrol engine two-wheelers the Indian industry stood up to Chinese competition and won and triumphed on a global scale but that's the exceptionally farmer also >> in drugs exports India is doing great like that but these are isolated examples generally India has fared poorly in many many things the one subject where India has been a star pupil has been services exports both technology and non-technology ology and these are generating $400 billion a year of revenue for India which is keeping the entire Indian >> out of the total of 3.8 8 trillion that's how to that's how you look at it so 10% is coming from this >> something absolutely great this is the single biggest achievement of India's
26:11 history >> so your question is supremely important if the AI revolution is going to damage that cash flow it's a catastrophe for India so you know ask what is so different between India and Pakistan and Bangladesh and Sri Lanka Bangladesh Sri Lanka Pakistan all had economic crisis in the postcoid period we didn't what is different about India I say one most important thing is this cash flow this cash keeps India going but year after year it's like there's some crude oil coming out from the ground which is this money and this money keeps us aloft so this money is very important okay now will there be an AI apocalypse for India or not I am relatively optimistic and here is my list of reasons so I will ask you to look around in your friends and family and wonder how many businesses
26:57 are there where even proper spreadsheet use and spreadsheet modeling could yield a material gain Indian productivity and you will agree there are a lot. Okay. Now spreadsheets Dan Bricklin Lotus 123 all these things are 70s. Spreadsheets are 70s technology and Abita they have not transformed the world. So my first claim is that what you see as the hot cutting edge of AI technology that is written about in the New York Times today will take 40 years to fully play out in the world. So things don't change as dramatically. You know we kind of get a little hoo-ha. so hot and exciting. You see cute demos, you know, somebody puts it up on Twitter, but the actual process of how firms, organizations change tends to be relatively slow.
27:43 >> Cool. So, I think now let's get to the rapid fire round. I'm going to ask you quick questions for which I want quick answers. >> Okay. >> If you had to invest in only one Indian index for the next 10 years, which would it be? >> The NSE has some uh expansive index. I think they've got a 250 stock index. Nifty, Nifty Junior and the next 150. So by 250 stocks market cap weighted broad index fund would be the one I would do. >> The biggest economic shock the world could face in the next decade. >> Chinese invasion of Taiwan. >> What? Can you elaborate on that? What is >> all hell will break loose? If China invades Taiwan, first of all, Taiwan is a key node of the world economy. They make 60% of the world semiconductors. Second of all, it will be war of a scale you have never imagined. You think
28:28 that's they have their eyes on it? >> Yeah. So I mean like Putin invaded Ukraine. >> Uh China wants to invade Taiwan and Taiwan is a first world country. They are a brilliant successful country. They will fight back. They will not take it lying down like Ukraine. They will fight back. And Japan will support Taiwan. South Korea will support Taiwan. America will support Taiwan. Australia will support Taiwan. It's a war of a scale. I don't know what India will do. uh it's a war of a scale you have never imagined and it will just be a catastrophe for the world economy. >> So then let me ask you the next question fresh question for you. >> What is the probability of World War II right now as we speak? >> Low. So you have to carefully define World War II. That is a world where Russia is fighting a war with the West
29:14 in Ukraine and Israel, America are destroying the offensive capabilities of the Iranian state and Pakistan has invaded Afghanistan. Okay. Is this a world war? No, this is not yet a world war. In a world war, there are all these entanglements that get drawn together in some sense. >> So that is not the definition of world war. Ukraine and Russia and US and Iran. So if you look back at World War I, World War II. Okay. In fact, only in 1941 we understood that the Second World War was a Second World War. Some people say its beginning is 1936, not 1939, even though most people will count at 39. But in 39, we did not know it was world war. It was just Hitler invading Poland. Okay? More and more people got dragged in gradually as it grew and grew. And in uh December 1941,
30:02 Japan attacked America and Germany declared war on America. And at that point it was full world war that Germany was at war with Britain with the Soviet Union and Japan was at war with America and Hitler declared war on America. At that point it was full world war. In hindsight we know it actually began maybe in 36 37 certainly by 39 but at the time we didn't know it. So you know imagine if Putin sends an army into Iran to support Iran in fighting with America that significantly changes things. If China starts supporting Iran >> okay that changes things. >> So you're saying likelihood of those things happening is very low because they also know that it can result >> also somewhere in our brains world war is nuclear weapons. No I don't think nuclear weapons will come up.
30:47 >> Nobody is that crazy. >> These yeah people are not that crazy. Meaning other than North Korea nobody's crazy enough to use nuclear weapons. Okay. All right. That's good to hear. >> Which country apart from India has the most interesting economic growth trajectory according to you? >> Israel. >> Yeah. >> Can you explain why? >> Just the best brain power in the world. There's there's the country that the way they have cultivated science, technology finance business they're fully globalized. >> But the history of Jews has always been that. No, they are always really good at numbers and money and technology and brains. It goes further back into history that because the Jews, the Ashkenazi Jews were persecuted and every one or two generations there would be a pogram they would have to leave. Then the culture emphasized learning. So it
31:33 became a culture that emphasizes knowledge learning. >> Yeah. The most overregulated sector in India today. >> The most over >> regulated sector in India today. >> Banking. >> Banking. Finance sector. Right. >> Banking in the class of finance. Banking. >> Okay. One economic idea you think India should completely abandon. >> Industrial policy. >> What is that industrial policy? The >> idea that the government can pick winners that the government can decide that should cars have electric or uh petrol engines. The idea that the government can choose some persons, some companies, some industries, some technologies. The idea that a civil servant knows more than a venture capitalist about which technology is
32:18 better. Mhm. But their picks on uh EV has been and solar all of that is not good. >> So would the free market have done it by themselves? Okay. So carbon is a pollutant. The job of the government is to have a carbon tax. >> After that the private sector would figure that do I want to make cars using petrol? Do I want to make a car using a battery? So the government's focus should be you are emitting pollution. I will tax that. >> They didn't do that. >> Okay. One person dead or alive you would love to have dinner with >> Javaral Neu. >> Why? >> Just such an interesting guy. What a great life. It's so interesting. >> Can you like elaborate? >> He spent 9 years in jail. Was jailed by the British. Didn't hate them. Was comfortable with him with happy with them. I just like to ask him how how did
33:05 you manage to not become angry? He smiled to the end of his life. He wrote Discovery of India, one of the greatest books in inventing the very concept of India. He was a great first prime minister, founding father of the country. Just what a life, what a remarkable life. >> U maybe a tricky question, but do you think there is any kind of partnership that India and Pakistan could arrive at which both which benefits both of them? >> Oh, plenty. Uh did you know that uh they have a crisis in Pakistan because they don't have the leaves which are used to make pan. Okay. They're just like us. They love pan. Okay. I love pan. I'm sure you love pan. But the leaves where you make the pan grow only in India. They don't grow there. >> The is it the battle nut leaf? >> The balnut leaf. >> So the trade is that the leaves are sent
33:52 from India to Dubai and Dubai to Pakistan. >> Okay. >> Okay. And so on. So there's plenty to do. Finally, you know, we are all the same. >> One economic concept that every Indian should understand but they don't. >> Freedom. >> But we are freedom. We are free country. >> We are we look at the government as a mayb. When >> mayab >> Yeah. We want the government to support us. We want the government to protect us. We are comfortable. We give moral legitimacy to the government to interfere in our lives. What we need to learn is to stand on our own two feet. >> That I am here. I will work with you. You and I will cooperate and find good ways of creating value and the government has nothing to do with it and you keep your distance. >> So the idea of freedom is dimly understood in India. We are always that
34:39 society has a right to tell me how to live or the government has a right to tell me how to live. >> So can you suggest three books for somebody who's an absolute beginner >> to begin the journey towards understanding economy because see a lot of people hear news but they are all interested in sensationalized news about the war and make some quick decision. They are unable to sort of connect the dots in the grander scheme of things because they don't know how it works. Right? They don't know how to connect the dots. So for somebody who's an absolute beginner who's interested in economy investing finance macroeconomics, any books that you recommend? >> So there are two finance books that are core that I believe everybody should read. Okay. >> Uh one is Burton Mal, a random walk down wall street. >> Okay. >> Okay. So it's a old classic American book, >> not one upon wall street. No, a random
35:26 walk up >> a random walk down wall street. >> Down wall street. >> Okay. By burton mal. It's a fundamental book and it really opens your eyes on how markets work and how we should be cautious and skeptical about our own self optimism and conviction that I know more than the market and my speculative trade will work better. >> Okay. The second fundamental book is uh stocks for the long run by Jeremy Seagull which in a way is about the 500 years of history and the case for equity investing. >> And there is something absolutely powerful by long-term sustained equity investing. I'm 100% in favor of equity investing. And yet you need to understand the case for equity investing. It's not a get-richqu. It's
36:12 not that I'll start equity investing today and next week I'll become rich. M >> that's not going to happen to most people >> and instead you have to doggedly swallow the poison of the risk you have to accept draw downs you have to accept rough times not panic not sell in a hurry >> find the financial resilience to be able to absorb losses hang in there for long periods of time all that is stocks for the long run is my suggested book number two >> book number three I don't have a perfect book but can I please plug my book this is a book about India it's a little more policy oriented But for an Indian audience, I feel this is a fundamental book that we should be using to just understand what is India, what is the Indian state, what is the great Indian journey. The book is called in service of the republic by Vijay Kelkar and myself and it's a foundational book to
36:59 make sense of India and the Indian journey to growth and prosperity. Dr. Raj, thank you so much for spending a couple of hours with us. I think u this could have gone on for 10 hours 20 hours as well but I'm sure I will be calling you back to keep um feeding more and more knowledge to me because I think uh the brain that you have built in the last 60 years is an asset to India by itself and I'm sure people who've been watching for us for this long would agree with me. >> U guys if you've been watching for this long I know you loved it. Please drop in the comment section below um any future topics that you want me to discuss on with Dr. AJ Sur on any topic that you want and I will bring him back to the
37:45 podcast and any future guest recommendations that you may have please drop them down below and Dr. Dr. Raj, before letting you go, I would like you only to suggest my next guest who you think I should bring on this channel. Any one person. >> A Patnak. >> Yeah. Who is she? >> She's the chief economist of the Adita BLA group. >> Okay. And what should be my topic of discussion with her? According to you, >> she's the chief economist of a large complex Indian firm. How does she see the life of that group? How does she see the challenges of large complex firms in India? >> Amazing. I think uh the average IQ of this room is around 200 right now. Let's let's close this. Thank you so much sir.
38:32 I think I learned a lot of things and very very honored to have you once again and I look forward to calling you back very very soon to have another round of two discussion over coffee. >> Thank you. >> Thank you so much. Before you go, guys, if this episode gave you even one insight that made you think differently about money, don't just keep it to yourself. Share it with your friend or family member who could use it too. And if it sparked a new thought or even made you disagree with me, drop a comment below and tell me why. Your critic helps me make these conversations sharper and more useful for you. As long as you have me subscribed, I'll make sure that you walk away with at least one new thing every Wednesday.
