Friday, 14 November
India’s economic momentum is reshaping the global landscape. From rapid growth and expanding trade ties to digital innovation and a multi-alignment foreign policy, India is emerging as a central player in the world economy. In this episode, Udaibir S. Das joins host Emily Slater to unpack what’s fueling India’s rise, how its strategic choices are landing on the global stage, and what this means for the future of global economic governance.
Udaibir S. Das is the former General Manager of the Reserve Bank of India. He has held senior roles at the IMF and the Bank for International Settlements, including leading Basel III implementation at the BIS. He currently serves as a non-resident fellow at the National Council of Applied Economic Research and as a non-resident adviser to the Bank of England and the Toronto Centre.
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Transcript:
Emily Slater: Well, welcome everyone, all of our listeners, to this latest episode of the Macro Matters podcast, and I’m very delighted to have our guest with us today. We’re going to be speaking about India’s role in the global economy and on the global stage. And I’m just delighted to have with us today Udaibir Das, who is a Bretton Woods Committee member and has held many, many policymaker positions both in India at the IMF, Reserve Bank of India. So just well positioned and an expert on all things India. And he’s going to share with us today a little bit about India’s growth trajectory over the past couple of decades, where India is at now, their position in the global economy as one of the fastest growing countries, and how they’re positioning themselves on the global stage in terms of foreign policy and being really a global player.
So with that, I’m going to just open up and kind of turn it over to you and ask you to tell me about India’s growth story. How did it get here? What’s its trajectory? What has been a very successful story? What have been the ingredients for success?
Udaibir Das: So first of all, Emily, fantastic to be here with you on this platform. And I must compliment the committee for outstanding work being done to keep the dialogue on the international financial institutions and multilateralism alive. I think it’s very important. And the reason I say that is, since we’re discussing India, you may know this and some of your listeners may know this as well, that India was present in the room in 1944 when the Bretton Woods agreement was being discussed and drafted. The only point was that India at that time was not a sovereign state. It was a colony of the British, and the Indian delegation was part of Lord Keynes’s British delegation. But it was there, and it is one of the signatories of the 44 who signed the Bretton Woods agreement. So the reason I bring this is because just to say that India’s connection on the international fora and multilateralism really goes back to the time that Bretton Woods came about. And I hope that that helps to really give the context of what I have to say on the growth story.
So I, I mean, I have always been of the view that it is— when you look at growth and growth number, it’s one of the most researched and written about topic on India. It’s a debate in itself, but I feel that it is essential to explain that by first going back into the past, its history. If you turn the pages of economic history, you will find that somewhere around 1700, India was contributing almost a quarter of the global GDP. Then came the colonization and the extractive economy kicked in. And the result was that in 1947, when India became independent, then that growth had fallen to around 4%. So this is the transformation. I believe that what India is trying to do now is not to miraculously appear in the global arena, but really to go back and resurface.
You asked about the sources of growth. I think I’d like to put it in 3 ways. The first is really the transformation that India has been trying for quite a while, structural transformation. I’ve already told you the historical part. The transformation part is very, very interesting. Up to now it used to be very much a top down story, but now it’s become real and structural. I remember John Lipsky, the vice chair of Bretton Woods Committee, had travelled to India last year, I believe. And he had he was pretty positive about how he saw India and he treated India as a promising case. And at the same time, he also said that reforms remain imperfect but promising. So 2 truths come together here to explain: one is the momentum and the constraint. For me, the real test is in growth rates. The question that you asked, it’s really whether the reform is translating into job creation, productivity and institutional depth. Emily, we are talking about close to 1.4 to 1.5 billion people, which is by no means a small amount, a small number.
Emily Slater: Yeah, massive.
Udaibir Das: And when India became independent in ‘47, it was one of the poorest economies in the world. And as you yourself said in the introduction that today it is not just a large economy, it is, I think I was reading the other day that it’s the 4th largest economy at the moment, and is all set to become the 3rd largest economy very, very soon. So it’s a good question that where is all this coming from?
And that’s why the best explanation I have is that there is momentum. I mean, 2.1 trillion dollars was the GDP in 2014. Today we are sitting at 4.2 trillion. It’s a doubling in a decade. The IMF and the world Bank both call it the fastest growing large economy. And the world Bank actually is right in identifying 2 sources of growth. One has been the domestic demand, obviously with 1.4 billion. Emily. You have a huge domestic market, right? And it’s shades of the market. I mean, you have you have the low end of demand and you have the very sophisticated demand. So there is the spectrum. And then comes public investment. India has been using public investment as a tool to try to reform and change. And another driver of late has been financial repair. After cleaning up bad loans India’s banks are now recapitalized lending again. And my last point is really that these aren’t 1-off cycles. I think they are reflecting a stronger economic base that India has had in decades. And now it’s being refreshed, reformed, and it’s coming out.
Emily Slater: So I want to pick up on a few of the kind of structural changes. I mean, technology and innovation and digitization has been a large part of this growth story, right? I mean, India’s digital public infrastructure model is really at the forefront. Really kind of a global model that’s being talked about, how do we export this now to other low and middle income countries as an ingredient for successful growth? So, tell me a little bit about you mentioned the public investment. I mean, this has been a large piece of it, right? So tell me a little bit about what that model looks like, how it’s different than some other models that are out there. Singapore, Brazil, maybe, for example, and why you think it’s been such a key to India’s successful growth.
Udaibir Das: So I think again, this shows a little bit of my own bias that whenever I have to give you answers to complex questions, I have to go back and see where it’s coming from. And what we find here is that India’s innovation story has a long arc. It’s decades of problem solving under constraint, whether it’s financial or skills. In the 60’s and 70’s, actually, India saw space and atomic programs run on minimal budgets. ISRO, which is India’s NASA, actually, just a couple of years back, succeeded in sending a probe to Mars for about 74 million dollars, which is, I think, NASA takes about 600 million for each of its rockets going up. It’s now supplying 60% of global vaccine market. And during the Covid 19 pandemic, the world’s largest vaccine manufacturer was coming from India. There are 1,600 global capability centers operating in India in product engineering, chip design, AI, and research. And across all these sectors, Emily, I see a single thread that is running through from the 60’s to today, which is what I call frugal innovation: Achieving world class outcomes under resource constraints. And that mindset explains why India’s digital public infrastructure that you mentioned has been successful in the last couple of years, I think a decade.
Emily Slater: Yeah, it’s really within the fabric of the culture.
Udaibir Das: If you take Aadhaar, which is India’s digital ID system, sort of the Social Security number that we all get, it has enrolled 1.3 billion people in a decade. The UPI, which is very highly talked about instant payment network, is processing about 18 billion transactions a month. And what makes this distinctive is that it’s not a product. It’s a protocol. It’s open, interoperable, and inclusive. This is institutional innovation and not just technological progress. IMF actually has called the Indian model, a UPI interoperability driving scale, and it has a study showing that the cost of verifying identity has fallen from, I think, about 12 or 15 dollars to just a few cents. The bank, the World Bank, on the other hand, believes that this is a catalyst for private sector innovation and a rare case where public money, you mentioned about public investment that public infrastructure crowds in entrepreneurship rather than replaces. So the results are staggering. Look, in 2011, only 1 in 3 adults had a bank account in India. 2011, around the time of the global crisis. By 2021, access is almost universal and over 1,500 million new bank accounts were opened in a single decade. This is what institutional design looks like when it scales up.
So I mean, these are obviously raising other issues as well. I don’t want to sound as if it’s all perfect. There are issues concerning privacy and data and surveillance. But the reality is, and that tension is actually healthy because the way I’m reading and monitoring it is that each of these tensions is actually leading to some adjustment and some reform. But one strong commitment that India has at the moment is that all that it is developing is first and foremost also applicable to its own domestic market, because that’s where the big reach is needed, and that’s where the big transformation is needed.
Now India is also digitally connecting beyond its borders. UPI has linkages with Singapore, the UAE, South Asia, many, many African countries are adapting the design. Of course, they’re taking this open, interoperable platform and adapting it to their needs, but even advanced economies. And I mention here France, for example, they are exploring cross-border interoperability. So this is technology as a public good, not as a private privilege. And I think internationalization isn’t just about exporting platform, it is also about co-developing open standards and governance. So the way I see this is that it’s slightly bigger than just UPI or Aadhaar that you read about from an economic policy point of view, from a temperament point of view, India is not just exporting software or platforms. I think this is becoming an architecture of global trust that India is trying to build, and the rest of the world is trying to come to India and use it.
Emily Slater: And maybe that’s a good segue into sort of the the global economy and connectedness. We’ve talked a lot about sort of the domestic demand and domestic reform, structural reform in India. But globally, we are moving a little bit away from integration. And I think India’s story is a little bit unique and it sort of has moved in the opposite direction where it has historically been a little more closed, and then has slowly opened perhaps, and now it finds itself in this global economy that is becoming more protectionist. So, how do you view India’s trajectory in terms of moving from sort of closed to open and more integrated, and how do you see it moving through this current moment and moving forward into the future?
Udaibir Das: Well, you use the word closed a couple of times, and I think it all depends on how you want to define it. To me, again, India’s trade behavior today makes sense only when you go back again to its historical context. For over a millennium, India anchored the silk and spice routes linking Asia, Africa, Europe and China. This is just, this is not that far off Emily. It was just unfortunate that it had a very big break that came with the colonial rule, and that changed the arc entirely. But India at that time was the biggest exporter of cotton, spices. And, today what’s happening is that I think that that has not gone because India is actively setting up trade corridors. One of the biggest things that has come about is what is called the India middle East Europe corridor, which will be from Mumbai to Hamburg. Imagine that you can just move your goods and people. It is one example of reinvesting in world trade. India is embedding in world trade on its own terms. So it’s one way to look at this is that it is. I see it as a long deferred re-entry into global commerce. It was not a choice of being closed as much as a situation.
And the priorities that India has on trade posture are also very clear. At least I see 5 of them. One is the competitiveness in labour intensive exports, textiles, footwear, which employ millions, including women. The second that you and I have spoken about is digital. On digital, the whole issue of digital sovereignty with open cooperation. India’s committed on protection of data and privacy while engaging with global frameworks. So India knows that these global centers that are coming about or India is exporting a lot of technology, it cannot happen without proper global frameworks. Supply chain diversification is also taking place. You may know that on semiconductors, India has got a very aggressive and ambitious agenda as it has on AI. Also, on critical minerals and green technologies. You can see that I see these things coming about as a part of India’s supply chain diversification, which is again linking it up more closely with global trade. And then, of course, we should not forget the professional mobility. I mean, India’s diaspora is everywhere. And the visa pathways for skilled workers and service exporters. And this story of India really began in the first decade of its independence, or second decade, when India actually exported a lot of its doctors and engineers and accountants out to the rest of the world. And I called it that: while the East Asian example was to go through trade, tangible exports—goods—India was exporting at the same time people and knowledge. So I think there is a hybrid strategy, balancing openness and resilience in trade.
One other point that is less acknowledged that since 2000, India has been signing comprehensive trade agreements with partners across Asia, Gulf, Europe and Africa. It’s covering nearly 2/3 of global GDP. So right now, India’s trade agreements with different countries collectively are linking it up, apart from its own contribution to global GDP, 2/3. And recent milestones are the ones India has signed with the UAE, with Australia, United Kingdom. So it’s not just about tariffs. I know the tariffs are much in news these days. I think historically it’s been about connectivity logistics. And as you go along you’re trying to bring in spices and silk and cotton other goods back. Now it’s getting into digital and stuff like that. So there are frictions, Emily, in all this. I think India’s partners push for broader IP rights and freer data flows. India defends its generic industry and insists on data localisation. There is the whole issue of carbon border tax. It remains contentious because India views it as a potential barrier for developing economies. But yet, the overall macro picture shows a fair amount of resilience, despite all these tensions, as I call it, and you can see it in India’s balance of payment because the current account deficit hovers around 1% of GDP, which is pretty good.
Emily Slater: Yeah. And of course, I mean, we will be waiting and watching to see how India and the US negotiations on trade and on an agreement continue to take shape. We saw some recent progress in the US-China trade agreements. So, I think that there, country by country now, we’re starting to see some progress on negotiations with the US. So, are you hopeful for progress for India, US negotiations?
Udaibir Das: I have no inside track on this, but my read in the fine print is that actually the two sides have been at work for quite a while. Yeah. And, for reasons that I think I have spoken in this podcast, it just shows that it’s a complex thing from India’s point of view, and I think it is so for the United States. I mean, we are talking about the biggest economy with the fastest growing economy, which is becoming the 3rd largest economy, and is in frontier areas of green space, AI, chips, and with a big market sitting there, more and more people are being, democratized more and more people are getting into the demand side of the economy, so this is not a discussion between a big player and a small player, and I think both sides know it. And I’m frankly very hopeful that something very, very tangible and who knows, Emily, we might just have a completely new approach that may come out, not just on tariffs, but something more long term and different. So let’s wait. I’m told that the newspapers at least say that it is fairly, fairly advanced. It might just be something that the year could end with that, but let’s see.
I mean, meanwhile what is typically happening is, with most countries, but in India’s case, it has become very explicit on the part of the government that they will find bridges while this is all going on for what is becoming probably tariff costly. So they are looking a lot inwards, it’s an opportunity. I think the World Bank has said so in one of the recent reports that the tariff issue is going to be probably beneficial for the deepening of Indian economy and the access part of the Indian economy, so that you’re going more in as you’re going to go out, and that has begun. I think India is actively looking at new partners. Which doesn’t mean that it is excluding by any means the United States. No, I think it’s just that as a part of its approach of trying to bring everybody along and trying to see where opportunities lie, it has struck a number of new deals. Supply chain is another thing on which India has recognized it’s a big oil importer, as you know. So I think that India is bridging this through multiple ways.
Emily Slater: You talked about this bridging kind of through multiple ways. And I think India’s maybe foreign policy approach has been coined as multi alignment. Right? On my last podcast episode, I was speaking to Joachim Levy about Brazil’s approach of non-alignment. So tell me a little bit more about how this multi alignment strategy is shaping up for India at the moment.
Udaibir Das: Oh boy. So I don’t know whether Joachim mentioned, but once upon a time I think this was around the time of the Cold War, that these smaller countries, India was a relatively small economy. I think so was Brazil at that time? The concept of emerging markets was still emerging, but there was a whole non-aligned movement that started at that time. I’m told that it still exists in some, defunct way, but it was there. The point here is not whether it exists today or not, but I think it just shows that there was a quest on the part of many countries, including India, to seek development, seek their own role in the global, political economy set up that doesn’t really make them dependent on anyone. In the case of India, and I think many countries, because of that extractive colonization 200 years or whatever, right that India went through, which was probably a very, very unfortunate chapter, India was not the only country many countries went through that. I mean, almost 80% of the globe at one time, Emily, was colonized under 1 country or the other. And coming out of that, I think the whole idea of independence was absolutely vital for India. But at no point in time has India, or Indian policy (both economic and commercial policy), been at the exclusion of the rest of the world, or India has rejected, or India has been a disruptor. India has never done any of the 3, if anything to the contrary, it has been seeking, partnerships, it’s been seeking to promote multilateral institutions. I think it’s developing, it’s been there in its approach, and we’ll just have to wait and see how this goes forward.
Emily Slater: And certainly, India had the G20 presidency a few years ago, and you really saw India’s kind of ascendancy, I think, on the global stage as a leader. And is that what you want to continue to see for India?
Udaibir Das: One problem that comes up with this pace of growth, Emily, and the potential, the promise, and people, that India brings along. The expectations are very high, extremely high, and they are high not only from the developing world, but also from the developed world, but from the developing countries, which are now sort of all clubbed under what’s called the global South, India has assumed some kind of leadership role there. That was one of the things that came about, in the G20 presidency of India, when the African Union became an observer member, India pushed very hard to bring Africa into the room. And that is continuing. I mentioned to you how Africa is trying to import a lot of Indian technology, on the digital side. There is an affordability issue for Africa. I mean, Africa needs a lot, but Africa cannot pay the market price. Therefore, it is looking for technology that is accessible and easily available, and India is obviously a good point for them to import that. There is also a grouping called the BRICs. I don’t want to belabor that one, but that also is an offshoot of 5 or 6 countries. Now, I believe it’s become bigger, more than 10, of trying to create some kind of homogeneity of issues. It’s clustering more around common issues. So G-20 is there, BRICs is there, and the global South leadership is there. I mentioned some of the countries in the region—Australia, Singapore, UAE—they all are becoming part of this Indian network, as you may call it.
And this has all just begun, Emily, so you won’t get good data on it yet, but I think they will all start kicking into external sector statistics or growth statistics I would say over the next decade, everything else remaining the same. So it could quite well be that by the time India inches towards becoming the 3rd largest economy, by the way, it also has another motive, or rather objective, that by 2047, India aspires to become a developed country, which is not that far. I think ‘47 will be when India is 100 years old, from the time it became independent. A lot of what’s going on right now is actually geared towards the fact that we actually remain on the trajectory towards the ‘47 goal. So apart from the fact that I can see, I envision, a lot of global data, start showing all these collaborations, networks, export import linkages on the technology side, the new technologies that India wants to take out as global public goods will come in. I think there is another agenda that India is being driven by, which is 2047.
Emily Slater: And you mentioned how the ascendancy of India in terms of leadership with BRICs countries and the global South. And I think it kind of remains to be seen as it ascends into the 3rd largest economy in the world. How it chooses to lead or engage with the other large G7 economies, right?
Udaibir Das: I mean, absolutely, and I think those terms will have to be re-examined by both sides we are talking about now in India, which is a systemically important part of the global economy. IMF’s World Economic Outlook projection for 2025-2026 is that India will be contributing a sizeable chunk of global GDP, and we are all worried about how the global GDP is going to look like right? Over the next medium term. But India is obviously a steady bet, and I think managing director of the IMF has been very generous in also saying that India has been defying the stereotypes up to now, and a lot of skepticism that came along with India.
So, look, I mean, if you go back, Emily, global growth really followed 3 patterns, no? There was the Atlantic model that was the East Asian development state model. Then you had the Chinese state capitalism. I argue that India is now probably demonstrating a 4th path, 4th model, mindful of the fact that it inverts the standard development sequence because India took on democracy before it had institutional and state capacity. If you look at the literature, it’s just the other way around. The second thing is there’s no prior example, no prior example of democratic development at this scale. The scale is very, very important. I mean, if I go to the policy textbooks, or the rule book or whatever, the best practices, Emily, they have all been developed and I have been myself. When I was in the IMF, we were developing a small base. Now, if you take that and put it on 1.4 or 5 billion people, it just has to be calibrated. And the Atlantic model treats democracy as protecting markets. The East Asian model defers democracy for growth. India is treating expanding democratic participation in the country as a growth mechanism in itself. And it must do, mindful of the plurality and the complexity of the Indian political system.
So, I think it’s important to also recognize that probably India is coming around with a model that can hopefully it can show if it all succeeds, that you can grow with dignity at a what I would call a civilizational scale, which is India, through an orderly democratization, social, political and economic processes. I’ll give you one example. Emily, no single policy can be fitted in India and run through India instantly. It has to go through what I call 28: These are the number of states, simultaneous experiments. So even if there’s 1 policy at the federal level, its permutations and applications will not be one, but many. That’s also the reason why there is no one economy similar to the US model. That’s the reason why I think it’s always good not to look at 1 economy. India’s case is it’s probably 3 economies or a 3-speed economy, which are driving growth through adaptive layering. And to expect that it’ll all be even across India… No, that’s not going to happen.
At the same time, you are trying to bring more and more people, and who knows what will happen. 60-70% of people had access to electricity, water, roadways and telecom until a decade back or a decade and a half back. Today, electricity, water, telecom is almost universal in India. So, you can imagine that close to 1.4 billion people now have all these things, many for the first time, and many have got this simultaneously. And there is enough empirical work to show that as societies have evolved, economies have grown, each time we have had these basic necessities being made available: clean water, reliable energy, reliable electricity. It completely changes what you are capable of doing. I think in the case of India, we are really not talking about thousands, we are talking about at least 100 million or more who, over the next 10 years, are going to get into this system.
I think a lot of people write about productivity issues being a problem. Yes it is. A lot needs to be done there. Talking about jobs shortfall. But as all these changes take place, I think it will automatically start growing a lot of things. Of course, with good policy and good capacity and good institutions. But I think it could come together. It could come together, and I think it will be good for the global economy as well.
Emily Slater: I think it’s certainly a unique case study as you have outlined here. And as you said, I mean, significant progress, at scale, rapidly, but, I think it’s to be seen whether it really does all come together into a 4th model, I think for growth, we’re still we’re still in the experiment. I would argue.
Udaibir Das: I mean, just to add that I think, among… I’m sure that everybody on the podcast who is listening or watching, we all are believers in democracy. We want prosperity. We want to coexist. What India brings is that you have to coexist at scale, because we are bringing more people into the vortex of all this. And India’s trajectory matters to everyone. It’s not a choice, but I think it’s a compulsion to start understanding, as you were trying to do from your questions in this podcast, that it is a case study that has to be understood not by any choice and optionality, but as a compulsion, because it is a case study. If it succeeds, then I think it will be very beneficial.
Emily Slater: Agreed. I want to wrap up with 1 more question and kind of end where we began, in terms of the Bretton Woods system, and you mentioned that, India was there at Bretton Woods 1944, but in a much different capacity. So, I want to ask you how do you think the Bretton Woods system needs to evolve and how the institutions need to evolve going forward to better reflect the economic and geopolitical realities of today?
Udaibir Das: I’m a very strong believer that the setup that came about in 1944 has to be preserved. But in that preservation, there has to be the capacity to be able to change and reform as the world order is changing. I think India’s story, and probably a couple of other emerging markets, is showing that there are more countries now in this space, and many of them were not there in 1944. I mean, India was there, but as a vassal state.
Emily Slater: The private sector is also significantly different.
Udaibir Das: Very different. So private sector is different, markets are different, number of countries are different. There is a huge convergence of aspiration, and the need for better in life. That’s happening universally. And so there is this whole problem of inequality. I think when you go back from 1944 to today, global inequality statistically is looking a little better, but when you look at the distribution it’s really widened. I mean, even in the advanced economies, even in the United States, that remains a big problem. And that is impacting development, that’s impacting job creation, that’s impacting so many things that the development side of the Bretton Woods charter or protocol has been struggling to do for quite a while. And each time the system thinks that it is getting a grip on some issue that has been nagging the planet Earth, you find something else coming in. Covid came right. That was unexpected. Then came the whole climate issue, which was also festering, but now it’s become a reality. Now the thing is that the whole sort of development paradigm has to re-examine how these things fit in. And then, of course, you have technology moving around in different forms and shapes in a way that it’s accelerating so many aspects of human life, of economies, of finance, of markets.
So, the question is really to what extent are these 2 institutions and the broader framework representative of what’s going on today? I strongly believe in this, for example, that the international monetary system, that the architecture needs to be rethought, not to be demolished, but to accept the new realities that have come about. There is always the clamoring for governance, “I need more representation on the board, I need more countries on the board.” That’s okay. That will never end, but it should. I mean, it should be proportional, to what’s going on. But I think on a more fundamental side in terms of frameworks, I think the international monetary system would be my first candidate for reform, or rather examination. I know that there are a number of G20 groups that are looking into this issue, but I think it has to now be brought out in the public domain, and there has to be a very healthy discussion through all stakeholders on what is really going to be good for all of us going forward.
The only problem, Emily, and this is my last point, that I do recognize that if we were to start doing it today, there is a problem of trying to see how much can we look out for what duration? 2 years? 5 years? 10 years? I think in ‘44, it was easier because it was coming out of an event, and then you were trying to rebuild all that stuff. Variables were probably fewer than today. The story is that you need to really reckon with many, many more factors, but this is also the time.This is also the time when leadership will be key. Economic leadership, policy leadership, to bring about the transformation. So, all in all, they are needed. They will remain, it’s the change element that we are talking about and change not in the increments, but something more fundamental.
Emily Slater: Something more quantum. Yeah, I agree. Well, Udaibir, we have covered a lot of ground. Thank you so much for joining and for sharing your views on India’s story. As we said, I think it’s a really interesting case study that will want to continue to track, and as you pointed out, it’s become a systemically important part of the global economy and will continue to be so. So, thank you very much for joining us. Thank you for your involvement with the Bretton Woods Committee and being a member and appreciate you sharing your views with us today.
Udaibir Das: Thank you very much, Emily, and all the best as you go through your work program. Thank you.
Emily Slater: Thank you.