Meghna, from our team, recently had an insightful conversation with Dr. Arvind Virmani, Former Executive Director of the IMF. He has been an advisor to the Indian Government at the highest levels, including as Principal Advisor, Planning Commission and Chief Economic Advisor, Ministry of Finance. Here’s what we learnt…
You were a Physics undergrad at St Stephens and went on to do a B.S. in Engineering and Economics. What about Economics fascinated you then?
You know, I was actually admitted to IIT Madras for Electronics Engineering, but I decided to stay in Delhi. After Physics at St. Stephens, I went for Electronics Engineering at CalTech. There, I switched to a double major, in Engineering and Physics. I was not interested enough in research or a PhD in science or engineering, and economics made much more sense, based more on social interaction and on policies for society. That was really the attraction behind shifting from engineering, which was more of doing research in a lab. Economics dealt with people.
In an age where we are promised quick results like jobs, better lives and better future for the next generation, how important do you think that we, as youth, should know basic economic concepts so that we can approach these promises and their feasibility with a critical mind?
Everything requires a lot of patience and study, so it all depends. Out of a hundred people, 5-10 may be very lucky and another 5-10 may be very unlucky. For the remaining 80%, it’s a lot of hard work. I think it was Edison who said that genius is one percent inspiration and 99% perspiration. So I would suggest that we have patience and understand these things through study, I don’t think there’s an easier way.
How do you think students, like the engineering students here, and other students who do not major in economics, should go about learning the basic concepts and the Indian economy at large?
You know, I have met a lot of IAS aspirants, who tell me that they have watched my discussions on Rajya Sabha TV. (Laughs)
But really, to learn about macroeconomics, the best way is to read some economics newspapers and such other material. There are a lot of economics papers now, and I think this is the best way to go about this.
Brain Drain is an issue, when it comes to the educated youth. But among the people who went abroad, are very successful CEOs and CFOs and so on. This gives India significant soft power when it comes to the business area. But since Brain Drain is still considered a problem, how important do you think it is that they remain here and contribute directly to India?
I don’t really believe in this concept. The reason is – I’m an economist, and it all depends on demand and supply. If the demand is not here, I don’t see any reason why a trained person would remain here because it would be a waste. I had a boss who once said, ‘brain drain is better than brain down the drain’. And as you said, it provides a base, which in the future, becomes accessible to the country.
How important is it, for the Indian economy, that the youth turn to the agriculture sector in the corporate or the cooperative manner?
Generally, as the economy develops, the share of agriculture in the GDP goes down with time. But the problem with the Indian agricultural sector is that the productivity is very low. So, definitely, people with the right skills and interest in modernizing agriculture would be very helpful in transitioning to developed agriculture. The problem now is that given the low productivity, you have a declining GDP coming from agriculture, but still too many people dependent on it. Its low productivity means low wages and low incomes. When it becomes high productivity, the wages of those involved in agriculture rise and then they create a demand for other types of services and skills. So, yes, if qualified people can do something about raising the productivity of agriculture, then that would surely be a good thing.
How did your time at Harvard, doing your PhD, help you in your field of economics, and the experience there, as a person?
I think one of the things about Harvard and places like that is the quality of the other students. To get the best out of this, you have really got to interact with them. The more you interact with other students, whether they are in your own field or, even better, other areas, the more you’ll be able to equip yourself with knowledge and understanding. So, it’s not just a matter of the courses, or even the teachers, I feel. Of course, there are some outstanding teachers, but often, the people who have the Nobel Prizes and such don’t teach. So, to people who go to these universities, I’d say, take the opportunities to meet and interact with people and discuss with them all sorts of things. That’s how you make the best use of going there.
There’s a start-up and entrepreneurship culture being promoted all over India. Aside from the leadership experience and technology part, how significantly do start-ups and entrepreneurs help and contribute to the growing economy of India?
Historically, India’s economy is mostly informal and the formal part of the economy has been very small. The formalized service sector is expanding, but still, a large part of the economy is self-employment. So, the whole point of having start-ups is that instead of having self-employment – I mean, you have self-employment, you have small entrepreneurs – the start-ups really mean upping that game. It’s more modern, and rather than having a traditional enterprise, which is self-employed, like a caterer and such, start-ups mean there are new things like IT and other aspects coming into the picture. It’s a way of modernizing the generation system. For this reason, I think it’s a good change that has happened in the last 5-10 years.
With technology becoming more important and advanced every day, a career in it seems very promising. But aside from engineering and other mainstream career options, do you think that the Indian economy needs some other profession that people could consider and would contribute to the economy greatly?
There are two questions here- one is, what are the professions in which there’s a demand. There’s the Skill Development Organization, which has looked at the demand and supply picture of skills, by profession and by regions of the country. I’m not that familiar with the exact details in various fields, but, the one I recall is in areas like nursing and health. There are a lot of gaps in specialization. We think in terms of broad things like engineering or medicine, but in order to identify the opportunities, one has to go deeper into it, into the special skills- that’s one thing. The other part is- like we discussed earlier, one has to also start thinking, especially people in engineering, about this whole start-up issue. There are a lot of new technology areas and there is the application of technology through companies, which I think this is a very important area. I was very happy to hear that around 5% of IIT Madras students have gone into start-ups. So, this self-employment and what are the fields that are good for self-employment – it’s a mix of different things. Technology is one, but some aspects of psychology and marketing and a way of thinking about what is it that people want and that we can produce requires a certain level of analytical and other skills.
In conclusion, could you briefly tell us, how we, as students, now in the institute, and in the future, outside, can contribute to the empowerment of the country and the economy?
The part which we haven’t discussed is public service. Unfortunately, the government systems have become very rigid over time. There have been some efforts made in the NITI Aayog in the Union Government to induct people with various types of expertise into the policy making system. That’s something to consider. One should look at where there are large gaps, whether one fills them oneself or not. As an example, let’s say physical therapy. I remember one case where the family couldn’t find a specialized therapist and they had to take their special needs child to the U.S.; they had to shift to another country. There are many areas like that, and it doesn’t matter whether one does it oneself or one sets up an organization or company that provides such services. As an economist, what I’d say is that you have to look for where there is a gap between demand and supply and then you can choose to directly fill it or go the start-up or entrepreneur route.
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