Interview with Sanjeev Sanyal, Member, Prime Minister’s Economic Advisory Council

You often emphasize the role of ‘narratives’ in economics. How can India shape a compelling economic narrative for the coming decade, towards a Viksit Bharat, an Atmanirbhar Bharat?

To get a large number of people to pull in the same direction, you need them to accept a common vision and work together. This is why “narratives” are key to leadership. Terms like “Viksit Bharat” and “Atmanirbhar Bharat” provide the pegs for building a coherent national narrative that pushes for a modern, developed India that takes its rightful place as a world power. By the way, the power of narratives is also understood by those who do not want the rise of India. This is why one sees the systematic effort to run down India, its democracy and its emerging economic clout. Certain foreign media platforms, and think-tanks have tried for years to create an impression that India is close to failure. Indian media used to take them seriously. Thankfully, these agenda driven efforts have been systematically exposed in recent years by Indian researchers. Global indices and rankings are now widely mocked in India whereas they used to be given front page coverage earlier.

India today is navigating a world of shifting trade alignments and protectionist policies. How do you see India balancing strategic autonomy with economic integration in this new order?

It is important that we are clear about our interests and stand up for them. No one else will do it for us. As you all saw in the recent US tariff debate, India did not escalate matters but we also did not back down. India needs to be a part of global supply chains – Atmanirbhar Bharat is not about an isolationist India – but we have to be able to engage on our terms.

India’s manufacturing ambitions are now anchored in initiatives like Make in India and China+1. What structural shifts do we need to sustain momentum?

Indian policy-makers need to focus on process reforms that ease the pain-points of doing business in India. We have made a lot of progress on the quality of infrastructure, but still have too much bureaucratic friction, and too many legal delays. We also need a culture of risk taking that encourages innovation. Much of Indian business is focused on getting protection rather than on building scale or research and development of cutting edge products. Family offices in Dubai and feel-good CSR projects cannot compensate for factory-floor effort and experimentation. We need our entrepreneurial class to aggressively take up the challenge.

How do you assess GST 2.0 as a reform in terms of efficiency and long-term productivity gains for India’s economy?

When GST was introduced in 2017, the focus was on shifting from a complex system of sales and excise taxes to a unified system. The tax brackets were not worked out from first principles. Instead, products were put into the nearest bucket to avoid too much change. The system took two years to stabilise, and then faced the Covid shock. After Covid, it was decided to allow the revival for a couple of years. So, it is only now that we are rationalising the tax brackets down to two (plus the one for sin goods), and putting items in buckets that are logically consistent. This way, we hope not to get caught in debates on whether or not salted and caramel popcorn should be taxed at different rates. In addition, the process of registration and refunds have also been smoothened.

What, in your view, are the biggest hurdle on the path of Viksit Bharat?

The biggest hurdles to becoming Viksit Bharat are – the judicial system and municipal governance. It is telling that India’s Supreme Court needs to be involved in a municipal activity like managing stray animals. This is an utterly routine activity in most other countries but here we have turned it into a major constitutional and philosophical debate.

You have spoken of the importance of ‘adaptive governance.’ How does this principle apply in India’s policy-making today?

Adaptive government means that we change and adapt according to actual outcomes that a observed. As mentioned earlier, we convert all issues to ex-ante debates of grand principle. This leads to a peculiar Indian problem – all too often, things must either be mandatory or be banned, nothing in-between. Either we have alcohol prohibition in a state or a wine shop on every street corner; either Diwali crackers are fully banned or being subjected to crackers exploding all day for a full week. This same approach means that 99% of regulatory complexity is deployed to stop 1% of misuse. I am always suspicious when officials claim that they have introduced regulations that are the “gold standard”. It usually signifies some maximalist position. Policy-makers need to adapt to observed reality and make reasonable trade-offs.

India’s trade ties with Russia and China have drawn global attention. Do you see these partnerships as tactical hedges or long-term recalibrations?

Russia is an old and trusted friend and geo-political ally. There is no direct conflict between India and Russia even if we may not approve of some of their decisions with regard to Ukraine. China is a different case where we historically have had friction on a number of issues. Nonetheless, we cannot wish away China as a major economic and geo-political power. We need to have a good working relationship with China on issues of mutual interest. The recent thaw in relations is a good first step towards building a stable long-term relationship.

How resilient is India’s growth model in the face of global financial shocks, given our relatively low external debt exposure?

Not only is India currently the world’s fastest growing economy (Q1 growth rate came in at 7.8% yoy) but this has been achieved with low inflation (2%), a very small current account deficit (0.2% of GDP), foreign exchange reserves at almost USD700bn and a healthy banking system. In other words, macro-stability indicators are in rude health and provide a buffer to external shocks. We recently got a sovereign ratings upgrade, but I think that India is still under-rated by one notch.

You have written extensively about India’s civilizational economic wisdom. How can that heritage shape modern economic policymaking?

We Indians are very proud of our ancient heritage when India was a global economic and cultural superpower. However, it is also important to remember that our place in the world was based on a culture of risk-taking: maritime exploration, intellectual innovation, entrepreneurship, heroic resistance and so on. Sadly, we came to think of our history as one of passive acceptance of foreign rulers and influences. You get the impression as if we had no agency. Thankfully, this colonial view of our heritage and history is now changing.

In your view, what role will Indian entrepreneurship play in scripting India’s economic destiny?

As already mentioned, risk-taking by Indian entrepreneurs is critical to India’s destiny. This is what leads to innovation in products and processes, investment and job creation, exports and tax collection. However, we must ensure that government and social support for entrepreneurship includes the churn of “creative destruction” so that the entrepreneurial class is constantly refreshed with new talent and new technologies. We cannot become Viksit Bharat and Atmanirbhar by protecting and perpetuating the old Ambassador car.