Speaking to CNN-News18's Marya Shakil, Abhijit Banerjee -- who recently won the Nobel Prize in Economics, along with two others for experimental approach to alleviating global poverty -- said voters endorsed Prime Minister Narendra Modi as a “whole package”.
Banerjee added that PM Modi is “genuinely popular” and people supported him as they decided no other opposition leader was worth voting for.
Banerjee touched upon multiple issues during the interview. Here’s the full text:
Marya: India is the birthplace of two Nobel laureates in Economics. I have not had the chance to meet Amartya Sen yet, but I am honoured to meet Professor Abhijit Banerjee who is in Delhi to unveil this book. Good economics for hard times. Professor Banerjee, first of all congratulations. Has it sunk in that you are a Nobel laureate?
Abhijit: I don’t know what is supposed to happen. It has sunk in and a lot of people want to email me and want responses. I spend all my time responding to emails, texts and WhatsApp messages. There is a sense where people are extraordinarily generous. I am spending lot of time answering one after another.
Marya: Who told you that you have won the Nobel Prize?
Abhijit: They (Nobel Prize committee) call you at ungodly hours and wake you up and tell you.
Marya: When did you get the call?
Abhijit: 4.45 am in the morning
Marya: How did you break it to Professor Esther?
Abhijit: She got the call. She picked up and it was her call first and then she passed it to me. We both got the call simultaneously.
Marya: How did you break this news to you mother who was in Kolkata -- and I have read in interviews -- in which she has said that it came too soon. You are still in your 50s.
Abhijit: Maybe she was saying it as a revenge for not having broken it to her. My brother broke it to her. My mother has hearing-aid which she prefers not to wear. So when she says she did not hear from me. It’s right. Not because I did not call her.
Marya: You along with Esther Duflo and Michael Kremer will be sharing this Economics Nobel Prize. You and Esther are married. To Nobels at the same time in the same family. Does it make it very special?
Abhijit: I guess it makes it easier. You do not have to worry about over shadowing the other person. Its straight forward and we do not overshadow each other.
Marya: Given the kind of headlines you saw that it was Professor Abhijit Banerjee and his wife winning the award.
Abhijit: I felt very bad about it till the day I discovered in France. In India it said prof. Abhijit Banerjee and his wife Esther Duflo. In France it said Prof. Esther Duflo and her spouse unspecified.
Marya: So, that was worse.
Abhijit: Yeah. I felt a level playing ground of nationalistic abuse.
Marya: You are the sixth husband and wife couple to win the Nobel Prize. Some have won it together and other have won it separately over different years. This kind of response and the kind of feeling one person can over shadow the other or credit should be equally distributed. Did it come at some stage? Did you guys talk about it?
Abhijit: No. We were not exactly sitting up every night and waiting for our prize. It was not at all meant to happen. This particular issue had not quite come into our life.
Marya: Professor Duflo is the youngest ever and is the second woman to win an economics Nobel. How are you taking this?
Abhijit: It is great. I wish there were more women in economics. Economics is a field that suffers from too few women. It is wonderful and it is wonderful that it started with younger women. Now there are many more women in that cohort. If you look for women close to over 70s there were many women at the time. There are relatively few prominent women. If you look at women under 50s Esther is not the only prominent women economist. And they could find some more to give it to and that would be great to the field of economics.
Marya: Since you love cooking did you cook on that day or found time to cook after that?
Abhijit: The day after we had a small celebratory dinner. Some friends threw a party for us but the next day we ate at home and since then I cook every day. I cooked dinner and it was little bit more special than normal.
Marya: From Presidency to JNU, to Harvard, it has been a phenomenal journey. Did at some point in your career, did you feel at some stage that you are on track to a possible Nobel?
Abhijit: At some point... But when at any of those institutions... But may be in the last five years people would ask me the question sometimes that are not you going to get a Nobel and I would say whatever. Who knows? I do not know what determines a Nobel Prize. It is not that I spent a long time pondering this question.
Marya: What role did Tihar play? Those 10 days in Tihar? And after winning a Nobel and what thought came to your mind when you were spending those 10 days?
Abhijit: Nothing. I think those were great days. It was a 10 day vacation with a lot of friends. For me it was... I used to be a sleeper and I could sleep under all conditions. It was like going to a camp. Other than the fact that we could not leave it was not particularly painful.
Marya: This book is coming at a most apt time because of the economic slowdown that we are witnessing. The world economy is slowing down at the same time. What is in store for us?
Abhijit: It depends on what we do i think. This is a time when I think in a short run there is a tendency to take stabilizing macro policies. And then its luck I think in the longer run. In the shorter run, we could take stabilizing policies. It will depend on how much demand stimulus we put in. I think this is a good time to be aware of that there is a big problem and we should do something about it. I think the government is increasingly aware of the economic slowing and more increasingly concerned about it.
Marya: Indian government?
Abhijit: Indian govt... I think the finance minister said 5 percent and may be 5 percent will turn out to be a good outcome if it happens.
Marya: Nirmala Sitharaman is also from JNU. What will you tell the finance minister? What’s one piece of advice you will give her in terms of policy intervention?
Abhijit: Not sure that anybody is asking me and to be honest I am first off not a macro-economist. This is not what I do for a living. But if she asks me I’d probably say to get some more money in the hands of the poor and they will spend it.
Marya: You have talked about put some money on the hands of the poor don’t you think the govt's current grass roots schemes such as Jan Dhan Yojana, Ujjwala Yojya, Swachh Bharat Abhiyan, Ayushman Bharat. Aren’t these steps in the right direction in empowering the poor in terms of money?
Abhijit: In terms of the long run they are probably good ideas. Other than Ujjwala others are not putting cash in the hands of anybody. In long run Ayushman Bharat will save people form selling their house to pay for medicine. In short term they are not highly simulating policies. They are long term policies. May be Jan Dhan will get people to save money over the long term. But it’s not about increasing consumption. We don’t increase consumption by increasing the bank account.
Marya: But Jan Dhan scheme is going to meet the similar objective of poverty alleviation?
Abhijit: Jan Dhan scheme is an opportunity to save. It doesn’t do anything else. It is a matter of bank account and I can put money into it. But if I don’t put money into it I will not get richer and if I put money into it I am going to get richer. It is not going to make me richer immediately. We see small amounts of money in the Jan Dhan accounts. Most people don’t save a lot and that’s not going to make the rich. I want people to have money to spend in a relatively short order which is different from thought behind Jan Dhan.
Marya: direct benefit transfer is something you have talked in the past. This is essentially to plug the leakages. The kind of link being established between Aadhaar card and bank account its helping in MNREGA and also in the LPG subsidy. Govt's estimates state that these leakages have reduced by some amount as much as 20 billion dollars.
Abhijit: I am with you on this, i am saying that. There are two questions. What is the efficient way to get money to the people who you want to give money to. I am fully with you. These are good steps in that direction. Second question is if suppose in a Keynesian downturn and I want to get money quickly into it. Do any of these schemes get money per say into people's hands? No. Whereas if you if PM Kisan was let’s say doubled that's going to get cash in hands of the people. Those are just different types of things. Long term policies or I would say the characterise the Jan Dhan and Aadhaar being creating a pipeline which allows the government to connect to individuals and give them money in a way that doesn’t get lost. That doesn’t mean the money is getting there. That means if I send the money to get there but the government is only sending Rs 6,000 and not even necessarily all of that to some kisans.
Marya: you have said in this book that economists are like plumbers. We solve problems for the combination of intuition, grounded in science, some guest work aided by experience and a bunch of pure trial and error. This means economists often get things wrong. Going by that, would you say NYAY was an idea whose time had not come?
Abhijit: NYAY as it was designed was not particularly well designed. I do not take responsibility for it. Nobody asked me whether that’s how it should be designed and I don’t think it was necessarily well designed. So I do not think it’s a question of whether time had come or not come. I think it was an idea that was potentially, even if there was politically supported, it may not have been the best design scheme. Maybe afterwards if the UPA had won they would have to adjust the scheme because it would be political pressures or economic pressures to change the scheme. My role in all of that was not to design the scheme but to provide information that you could use to make choices.
Marya: Did the Congress fail to communicate effectively or were they not sincere about the scheme? Because had they been then it would have been implemented in the states where they are currently in govt. MP, Rajasthan, Chhattisgarh, Punjab.
Abhijit: I don’t think so. I think they were sincere in the sense that I think they wanted to have a game changer. They wanted to put their mark on policy. So I think they were sincere in the very real sense that they wanted to actually stamp a congress view of policy and that's what would sustain them in the future. So they were willing to embrace it. I just don't think they had the money.
Marya: Yes, exactly the finance.
Abhijit: The central government chooses tax rates. The finance commission decides how much money the states have to send and Punjab is bankrupt. Punjab has faced all these, past governments have spent lots of money. Punjab is extremely financially strained. It’s not about to be a state which is going to roll out a very generous transfer scheme.
Marya: So in that case this was a scheme which had not been completely thought out because questions were asked about financial viability?
Abhijit: You are misunderstanding me. Federal government has the choice of choosing the tax rate. Therefore it can actually make something viable by raising taxes. The state governments do not have the option. You asked why MP doesn’t implement it? MP is subjective to the money it gets form the finance commission. This is decided based on federal government's tax choices. As long as federal government doesn’t raise tax revenues... MP cannot do anything different. Only government that can run a scheme like NYAY is the federal government... I am not saying they should have run it...federal government is the only one who has money for it. Think of NREGA... It is funded by the central government.
That is the only government that has provision for large welcome schemes.
Marya: Is NREGA successful according to you?
Abhijit: Yes. NREGA is hugely successful. It has raised incomes of the poor. One of the reasons why poverty has fallen after 2009-10 especially in very poor states like UP, Bihar, etc is because of NREGA. I think good evidence showing NREGA has increase earnings by 7-10 percent in these areas. So I think it was successful and was a good use of money.
Marya: One alternative view is instead of schemes such as NYAY don't you think self-help groups and income generating skill development programs, micro financing schemes such as Mudra Yojna are more effective?
Abhijit: I don’t think so. I think there is one of the evidence is that we have shown some pain that micro finance does nothing for the incomes of average people. We have shown that by a bunch of randomised control trials. Seven were published together. Each of the found zero effect of micro finance on earnings. Self-help groups like wise very little evidence that they raise incomes by a lot. I think this is a story where the evidence is very much against the claim. I don’t think it is going to be. I think that skill development also very little evidence that it does anything. Very hard to deliver skills. There is a lots of randomized control trials in these things and this is what I do for a living and know these results. None of these things are clear slam dunks. Most of them don’t work.
Marya: Universal basic income requires significant increase in tax rates. You have clearly said that if UBI does not provide reasonable living and it will again lead to increase in UBI and its almost like a vicious cycle?
Abhijit: I think...this not a debate I want get into. Other people have done these numbers. You can decide what you are going to cut. You decide you are going to replace for example you can take out NREGA, all the power subsidies. If you start to take out a lot of subsidies then there is a lot of money you could spend on UBI. But it’s a matter of political decision the government takes the argument for UBI is precisely there is less distortionary and leads to less leakage. I don’t see a reason why. I am in favour of raising taxes and that is a separate question
Marya: Don’t you think it is a very traditional module to tax the rich for funding the poor, essentially giving sops to the poor?
Abhijit: I hate the word sop. The poor are often poor because we have run an economy where we have created no jobs. We create any number of distortionary policies. Then we say poor are undeserving and we should give the sops. I must say I have no sympathy for it. Most of the poor are poor because of a bunch of policy choices we made with land, labour, credit and every market in India we have it distorted to make large transfers to the rich. And we give small amount of money to the poor and we call it a sop. I absolutely have zero sympathy for it.
Marya: You have often said that India is under taxed.
Abhijit: Yes.
Marya: But how can taxing the rich result in poverty reduction?
Taxing the rich has very little to do with growth. We look at evidence it is quite clear. That you could tax the rich. More or less the growth rate is not affected. Let me give you an example of the US....US was growing the fastest ever between 1945-75. US tax rates under Republican admin...The highest margin of taxes was 95 percent was taxed by Eisenhower who was a republican president. US was growing as fast as ever in this period. I just think there is no evidence that high taxes discourage growth. On the other hand if you had more revenues you got to distribute it to the poor and there is no evidence that re-distribution makes the poor lazy either. On both sides I think this is a bunch of crap people have bought into. I don’t think there is any real evidence for either of these views.
Marya: You have been critical of the state of Indian economy? There are several measures taken by the government of India. One of those is corporate tax cuts. IMF has welcomed it saying it is a step in the right direction.
Abhijit: That’s their problem. I have not welcomed it. I was actually going to praise the government for raising the corporate taxes. I was going to write a piece saying please don’t cut taxes. This is what every country does when their growth slows down. Nothing happens to growth and rich get richer. I was going to write that but they already cut the taxes. So I didn’t bother to write that piece. I was going to write an op-ed saying don't cut taxes. I was very happy when government raised corporate tax in the current budget. I will be public about it. I thought this was a great positive step that it really needs to balance the budget. We are eating 9 percent of GDP throughout our consolidate deficit. We don’t have enough savings.
Marya: At the same time you say that economy is in a tailspin and if these taxes are not given the corporates won’t invest in India?
Abhijit: Taxes have nothing to do with investment. There is nice studies of the US where different states do different tax cuts at different times. You see what happens to growth... Nothing happens to growth. It does nothing for investment. Tax cuts put money in the hands of the rich and they keep it the rich are sitting on 9 lakh crores of cash. Some very large number in India right now. The corporate sector is not investing or spending because there is no demand.
Marya: What is your estimation and definition of poverty in India?
Abhijit: This is not what I do for a living. There are people who specialise in it. If you take the dollar 90 per capita of 2016 prices... I think you get some number like 17-18 percent of the economy.
Marya: Does democracy guarantee better steps towards removing poverty?
Abhijit: No. I think there is no particular evidence. Some democracies have very well. Some not so well. Some autocracies have done very well and some have been bloody disastrous. It’s all of the above.
Marya: I have the statistics which says India bought out 271 million out of poverty in last 10 years and emerged from a country on the verge of bankruptcy to 2.8 trillion dollar economy in less than 30 years. This is being seen as part of India's economic growth story. One part which is often quoted...which is your statement is nobody know why or who and how growth happens so let’s focus on other things. Which are these other things?
Abhijit: Welfare. Good schooling, healthcare, environment these are things we know how to do. Growth - we don't know how to make it. We know how to destroy it by doing 1970s style policy. We could destroy growth by being heavily centralised, controlling everything, taking every decision out of the people, having high tariffs but within the normal economic space....the countries which have perfectly reasonable policies which don't grow and countries which don’t have perfectly reasonable policies don’t grow and we don’t know why.
Marya: One statement made by union minister recently is that while he congratulated you for your achievement he also said you’re a left-leaning professor whose idea (NYAY scheme) was rejected in the elections. Don’t you think the endorsement of government's policies is electoral victory?
Abhijit: Alas, no. I think any government does 100 things and people have to vote on all of them. It is one one. They have mostly voted for Mr Modi who I think is genuinely popular and they decided no other opposition leader is worth voting for and I am totally willing to give him that. I don’t think that means every single decision they have taken was voted for.... They have voted for. People had to make one choice. They didn’t have a choice between... I am going to vote for Modi for this scheme and not for that scheme that’s not the choice they were given..... Given that choice they would have made different choices on different issue. They had one choice. Mr Modi or not.
Marya: It was a success of his schemes as well...endorsement or not?
Abhijit: Endorsement of him the whole package...which might be like they like some of the things and did not like some of the other things. I don’t think there is any way to tell.
Marya: You have worked closely with Rahul Gandhi. You have interacted with him...do you think India needs stronger opposition and congress party is failing to emerge as one?
Abhijit: Right now... India definitely needs a stronger opposition...this would be good for democracy in India. I think right now I feel people don’t feel that congress is ready to take that burden. It doesn’t have a present right now. Whoever is the president they need to make that person powerful and give him the right to run the party the way they want?
Marya: Your parents have been economists...did inclination towards economics come naturally to you?
Abhijit: I guess so.
Marya: Thank you so much for your time.
(To be updated)
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