Interview with Mint

India needs to remain flex­ible, cre­ate stra­tegic buf­fers and build option­al­ity or stra­tegic flex­ib­il­ity as the global rules-based sys­tem faces dis­rup­tion, San­jeev San­yal, a full-time mem­ber of the eco­nomic advis­ory coun­cil to the Prime Min­is­ter (EAC-PM), said in an inter­view with Mint.

He added that while India is an emer­ging power in the global arena it can­not yet claim to be a rule-set­ter, mak­ing it neces­sary to build global alli­ances to pro­tect the coun­try’s interests.

On trad­ing with China, San­yal said India has to recog­nize both the stra­tegic risks and the eco­nomic real­it­ies. While China remains “an import­ant trad­ing part­ner for almost every­one”, India should con­tinue redu­cing its stra­tegic vul­ner­ab­il­it­ies, he said. “That is where Atmanirbhar Bharat (the Union gov­ern­ment’s vis­ion of a self-reli­ant India) becomes import­ant. But self-reli­ance does not mean that we stop being prag­matic in our com­mer­cial engage­ment.”

The eco­nom­ist also said if India’s con­sumer price infla­tion crosses the Reserve Bank of India’s (RBI’s) 2–6% range, the Mon­et­ary Policy Com­mit­tee (MPC) will be within its right to tighten mon­et­ary con­di­tions. “I think the infla­tion-tar­get­ing frame­work is the appro­pri­ate anchor,” he said. “I think the frame­work has served us well.”

Dur­ing the inter­view, San­yal spoke on a wide range of top­ics, includ­ing free­bies, the coun­try’s crypto­cur­rency policy, the impact of this year’s defi­cit mon­soon and India’s pre­pared­ness, and why the gov­ern­ment should look to phase out some of the “out­dated pop­u­la­tion-con­trol pro­grammes”.

Edited excerpts:

In a world where the rules-based order is under strain, what should India do?

The world and his­tory are com­plex adapt­ive sys­tems, and they always change in utterly unpre­dict­able ways. At turn­ing points like ours, it becomes espe­cially unpre­dict­able because the nor­mal anchors have been broken and a new arrange­ment has not yet been arrived at

Under those cir­cum­stances, the best one can do is, first of all, be flex­ible. Cre­ate buf­fers where you can. Cre­ate bilat­eral alli­ances with people you think will, at least in some fields, be on the same page and will­ing to go on the jour­ney with you. Basic­ally, you have to cre­ate option­al­ity.

How is India try­ing to cre­ate that option­al­ity?

We are nego­ti­at­ing trade agree­ments with a bunch of coun­tries. We are also try­ing to diver­sify our energy sources. We are try­ing to build internal capa­city wherever we can.

Is the cur­rent global insti­tu­tional frame­work still adequate?

In an ideal world, you would want a set of global rules, and that set of global rules would run the sys­tem. That global sys­tem is severely dis­rup­ted, and has been in a state of break­down for a while. Even dur­ing the Covid-19 pan­demic, for example, the World Health Organ­iz­a­tion did not provide lead­er­ship. So there are now ser­i­ous issues about global gov­ernance. Although India is an emer­ging power, we can’t claim to be rule-set­ters yet. What we can do is try to find for­ums where we can build alli­ances on a spe­cific issue, and pro­tect our interests.

India is part of sev­eral inter­na­tional group­ings. What is the think­ing behind this approach?

We oper­ate in a very com­plex mix-andmatch of organ­iz­a­tions and rela­tion­ships. We are in Brics, we are also in the Quad, we are in G20, we are quite often invited to G7. We have also tried to pro­mote the Indian Ocean Rim Asso­ci­ation (Iora). Why are we doing all of these things? Because we under­stand the exist­ing global sys­tems are not reli­able. The G20 itself seems to have lost momentum. What we are try­ing to do, there­fore, is cre­ate vari­ous rela­tion­ships in dif­fer­ent spaces—mul­ti­align­ment—as a sub­sti­tute for an over­arch­ing global sys­tem. We need to build domestic cap­ab­il­it­ies and cut depend­ence in stra­tegic­ally import­ant areas, but that doesn’t mean pre­tend­ing eco­nomic real­it­ies don’t exist, San­yal said.

You have also spoken about the need to build domestic capa­city in stra­tegic areas. Why is this import­ant?

Atmanirbhar Bharat (the Union gov­ern­ment’s vis­ion for a self-reli­ant India) is not a 1950s view of import sub­sti­tu­tion and indus­trial licenses. This is a neces­sity of our time because of tech­no­logy and resource depend­ence. We want to build our capa­cit­ies as part of global sup­ply chains, to encour­age private Indian entre­pren­eur­ship and build in scale.

How should India approach China, given stra­tegic con­cerns and the eco­nomic rela­tion­ship between the two coun­tries?

China can­not be wished away, whether we like it or not. We have to recog­nize both the stra­tegic risks and the eco­nomic real­it­ies. China remains an import­ant trad­ing part­ner for almost every­one, a major sup­plier of indus­trial inputs and a sig­ni­fic­ant source of global for­eign dir­ect invest­ment. At the same time, we have to con­tinue redu­cing our stra­tegic vul­ner­ab­il­it­ies. That is where Atmanirbhar Bharat becomes import­ant. But self-reli­ance does not mean that we stop being prag­matic in our com­mer­cial engage­ment.

India recently relaxed some restric­tions under Press Note-3 (gov­ern­ing invest­ments from coun­tries shar­ing land bor­ders with India). How do you view the need to bal­ance stra­tegic con­cerns with attract­ing invest­ment?

There is no point in ban­ning Chinese com­pan­ies from pro­du­cing something in India when we are actu­ally import­ing it from the same com­pany out­side in China or Viet­nam. You might as well let them do it here. The object­ive should be to reduce stra­tegic vul­ner­ab­il­it­ies while also encour­aging domestic pro­duc­tion where pos­sible. If a com­pany is going to sup­ply the Indian mar­ket any­way, there can be an argu­ment for pro­du­cing within India, sub­ject to appro­pri­ate safe­guards. So the approach has to be prag­matic. We need to build domestic cap­ab­il­it­ies and reduce depend­ence in stra­tegic­ally import­ant areas, but that does not mean pre­tend­ing that eco­nomic real­it­ies do not exist.

Con­sumer infla­tion has star­ted rising after fall­ing close to 2%. How do you view the infla­tion tra­ject­ory and the mon­et­ary policy response?

Con­sumer price infla­tion is head­ing towards 5% but still within the 2–6% range. But if it goes out­side the range, then the Mon­et­ary Policy Com­mit­tee will be entirely within its right to tighten mon­et­ary con­di­tions. I think the infla­tion-tar­get­ing frame­work is the appro­pri­ate anchor. If you look at the his­tory of infla­tion in India, we have had far more stable infla­tion under the infla­tion-tar­get­ing regime than we had in earlier dec­ades. So, I think the frame­work has served us well. It also means you have to allow the exchange rate to adjust rather than try­ing to defend a par­tic­u­lar cur­rency level. With an open cap­ital account, a coun­try can­not sim­ul­tan­eously tar­get both mon­et­ary policy and the exchange rate. This is called the “impossible trin­ity” prob­lem in eco­nom­ics. In my view, the infla­tion tar­get should remain the anchor for mon­et­ary policy.

What are the main risks of a defi­cit mon­soon, par­tic­u­larly as rain­fall has star­ted below nor­mal this year?

June was dif­fi­cult due to El Niño, but rain­fall improved in July. The import­ant thing is that we had advance warn­ing. The India Met­eor­o­lo­gical Depart­ment and inter­na­tional agen­cies had already provided fore­casts, so gov­ern­ments and farm­ers had some abil­ity to pre­pare.

The rain­fall short­fall has now nar­rowed to around 16% till end July, which I would describe as being in the tol­er­able range, provided pre­par­a­tions have been made. But we should not look only at the aggreg­ate num­ber. The spa­tial and tem­poral dis­tri­bu­tion of rain­fall is equally import­ant. So, there will be some impact but not as much as feared.

Kharif sow­ing is still lag­ging behind last year’s pace des­pite improved rain­fall. Is that a con­cern?

There is clearly some lag. Kharif sow­ing was about 2.65 mil­lion hec­tares below last year’s level, at around 89.4 mil­lion hec­tares as of 31 July. But again, one needs to look at the rain­fall dis­tri­bu­tion and the crop-wise and region-wise pic­ture rather than simply the aggreg­ate num­ber. The fact that rain­fall has improved is encour­aging. The ques­tion is how it is dis­trib­uted over time and space, and whether farm­ers can take advant­age of the improved con­di­tions.

You have spoken about India’s demo­graphic trans­ition. What is the emer­ging chal­lenge?

The emer­ging demo­graphic chal­lenge is not excess­ive pop­u­la­tion growth. It is sharply declin­ing fer­til­ity. Our highest num­ber of births came in 2001, when around 29 mil­lion babies were born. In 2025, it was about 22.5 mil­lion. That is a very sig­ni­fic­ant change. Sev­eral states already have par­tic­u­larly low fer­til­ity rates, includ­ing Ker­ala, Andhra Pra­desh, West Bengal, Sikkim, and Pun­jab. So we need to start think­ing about the con­sequences of this trans­ition. We will have to deal with school con­sol­id­a­tion, age­ing pop­u­la­tions, internal migra­tion, and poten­tially the exten­sion of work­ing lives. We also need to phase out some of the out­dated pop­u­la­tion-con­trol pro­grammes that con­tinue in many states.

What is your view on the debate around free­bies and their fiscal bur­den?

First of all, not everything labelled a free­bie is actu­ally one. We do need to provide cer­tain kinds of safety nets and other trans­fers. So in that sense, I am not against any and every kind of trans­fer to the poor. You do need to cre­ate safety nets. For instance, I’m very much in favour of pub­lic health insur­ance. Hav­ing said that, there is always pres­sure for ever more pop­u­list spend­ing, espe­cially at the state level. It is very easy to blame politi­cians, but remem­ber that we are a demo­cracy. We can’t blame politi­cians for doing what they have been elec­ted to do. Voters have to make informed choices. There­fore, it is the respons­ib­il­ity of the intel­lec­tual class—eco­nom­ists, media, aca­demia—to make the case for sens­ible eco­nomic policy.

What is your view on crypto­cur­ren­cies and India’s approach to treat­ing them as assets rather than cur­ren­cies?

I think the Indian approach is broadly cor­rect. Block­chain itself is a use­ful dis­trib­uted ledger tech­no­logy, with many poten­tial applic­a­tions. But I am less con­vinced about some of the claims around algorith­mic­ally issued tokens. I am not con­vinced that algorithmic token issu­ance is as bul­let­proof as some of its advoc­ates make it out to be. So, I think crypto should be treated under asset-tax­a­tion rules rather than giv­ing crypto­cur­ren­cies the status of money. There is a dis­tinc­tion between using a tech­no­logy such as Block­chain and treat­ing privately issued tokens as a form of cur­rency.