‘Everyone in the world should have an equal carbon footprint. Pollution per person should be equalised’

• The weather’s what’s been getting you excited these days.

That’s true. Climate, rather than the weather.

• What has been happening? Montek Singh Ahluwalia ko gussa kyun aata hai? You are known to be one of the coolest, calmest customers in the policy machine.

Well, if you are referring to the news reports on my views on the UNDP report, actually I think maybe the press exaggerated the extent of my anger.

• When was the last time you had a headline saying ‘Montek rubbishes something’.

Well, that’s true. That was the first time I got that. I guess because they were a little surprised that on an important issue like that, I was releasing the report but I did tell them in advance that I did not agree on one of the key elements. I think I also said that it was a good report. It has a lot of very interesting things but, of course, the press only picked up the things that are different and newsy.

• But why?

Well, the key issue I raised was basically that climate change is a very important issue. Let’s be clear about that. It’s not a conspiracy that someone else is thrusting on us. There is a huge amount of empirical evidence now that all the carbon burning that has been going on for 200 years, mainly in the western world, has led to an accumulation of greenhouse gases, and that raises the temperature. What is now becoming clear is the extent to which that has happened and the continuing rate at which we are adding to these emissions is going to raise temperature around the world maybe by two degrees Centigrade, maybe more. And actually that can have very disastrous consequences. Glaciers can melt, we have seen some of that in the Himalayas, sea levels rise, monsoons become uncertain, crops go down. It’s a very important issue.

• We’ve all been educated by Mr Al Gore.

Not only Mr Gore but also Mr R.K. Pachauri and all his 2500 scientists. So there’s now a change. Here’s what I objected to. The report makes a very sensible suggestion that you have to reduce the rate of emissions. My problem with the report is that it throws out a number: if industrialised countries can reduce emissions by 80 per cent up to 2050 and if developing countries can cut it down by only 20 per cent, things will be all right. Now, the issue is how much should they cut and how much should we cut. My feeling is that they have produced a totally arbitrary combination, which is not actually equal, because even after these cuts, industrialised countries will have emissions per capita that are four times as high as that of developing countries. My point was, if you first want to decide what we should cut, I don’t think that’s the problem.

• So even 20 per cent of what they are emitting now will be more than 80 per cent of what we will be emitting in future.

No, no.

• Because we reduce by 20 per cent and they reduce by 80 per cent, and yet they are four times higher (in emission rates per capita).

Yes, that’s because at the moment, for example, if you look at the United States, the carbon emission per capita in tonnes of carbon dioxide is roughly 20. In Europe it’s about 12, in China about four, and India about one. Take the average of the United States and Europe as, say, 15. If they reduce that by 80 per cent, they will be at three, assuming population remains the same. If we reduce by 20 per cent, we will be 0.8 tonnes per capita. And that’s 45 years later. My point was that it cannot be fair that you are projecting a reduction that leaves us on a per capita basis much below the rest of the world.

• And maybe to get there, we have to almost de-industrialise.

That we won’t. Let’s put it this way. How effectively you can cut down emissions can’t be predicted now with the present technology. With present technology, it will definitely mean de-industrialisation. But the assumption is that if the industrialised nations were to decide that we are going to reduce emissions, billions of dollars would go into new research, new technologies, and we would be able to benefit from them, though there is an issue of how much it would cost us. My point really was that you should all start with a principle, and the principle is that we are all on one planet and the world needs to cut emission. You should first ask, what’s a fair way of deciding the cuts? My point is that deciding cuts from a base level is not a fair way. One way is that everybody in the world should have an equal carbon footprint: how much pollution there is per person should be equalised. I mean there is a kind of simplicity about that. You could think of other principles. You could say, for example, that the West has done most of the emissions for the last 140 years and the problem that we have is because of the total emissions that have been done in the last 140 years, so actually it shouldn’t be per capita. We should be a little higher and they should be a little low because of all the damage that they have done. Another view could be that richer people should be put under greater stress than poorer people. And let me say that this is relevant even within the country. I mean, within India, if we have to cut emissions, the burden should be more on the rich and less on the poor, and indeed in any normal society that would happen. So my point is that if it’s a global society and you want a global decision, you have got to reflect that in the principle. The UNDP report does not mention any reason why . . .

• Now why does that happen? Is it motivated? Is it in haste?

No, I wouldn’t attribute. They didn’t do the study themselves; they quoted a study. It’s quite possible that the study thinks that if we cut by 20 per cent and they cut by 80 per cent, that’s fair. It’s certainly fairer than if they cut by 50 per cent and we cut by 50 per cent. But it’s not really fair because 45 years later, when we will be a developed country almost, it is not acceptable that we have a global regime.

• So you think it would have been better if they would have consulted experts on this side as well?

Well, they didn’t have to consult experts even. Our own Prime Minister, Dr Manmohan Singh, at the G8 meeting in Halligandam had made a proposal. Let me step back a little. When the first Kyoto protocol was negotiated, everybody knew that industrialised countries bear the major burden, so it was decided that they will cut and the developing countries will not cut at all. Actually what happened was, in the industrialised world, some countries didn’t join. The United States didn’t join, Australia didn’t join. The countries that did, the United Kingdom and Europe, they never actually delivered on the cuts they promised. Of course, we didn’t promise anything and nothing was imposed on us. So it’s an arrangement that doesn’t seem to have a very good background. Now, what has happened is that, first of all, we know that this hasn’t worked well and secondly we know that the problem is more serious than we thought it was. I mean, all this work that Dr Pachauri and his 2500 colleagues have done suggests that in 20 years you could be running into real problems, so everybody has to do something. Now what Dr Manmohan Singh said was that we cannot say that because we weren’t responsible in the past, we have no obligations. He said we must decide what is a reasonable obligation and in that context he made a suggestion this July, I think in the first week of July, that developing countries could agree never to exceed the per capita emissions of the industrialised countries and that’s a kind of a challenge to them. What we are saying is, look, we’ll never be worse than you per capita.

• So you set the benchmark.

You set the benchmark, you do what has to be done, you cut down your per capita emissions, and we’ll stay within that. What I said to UNDP was, why didn’t they adopt the per capita approach, why didn’t they adopt the approach that, suppose the world were to accept this offer, how much per capita would the industrialised world have to cut in order to reach a sensible equilibrium?

• But you are not saying that they are exaggerating the threat or the crisis?

No, I believe that there’s a crisis. (But) . . . there’s never certainty and all scientists will tell you there’s a range. I think the UNDP report correctly summarises the range of outcomes. What I think that most people don’t realise is if we have a two degrees Centigrade rise in temperature, what does it do? Now the facts are, Himalayan glaciers melting faster, sea levels rising because of the melting of icebergs and so on, monsoons could be seriously affected, the water flow in our rivers initially would go up and then dry out.

• Yes, because glaciers would melt and then disappear.

Now, on the other hand, you have technology. Maybe, our water conservation technology would improve, maybe we’ll be able to discover the kind of wheat that can tolerate temperature stress. But actually, when faced with this, there are two things that you have to do. One is adaptation, you accept.

• You prepare for climate change.

Yes, now whether you can reduce it or not? I mean, if you make some assumption, we have to do a lot of those things. I think it would be foolish if we thought that we don’t (have to). And actually we are doing things. The prime minister’s advisory council on climate change met only four days ago, and it was decided that we will prepare an action plan on climate change. What would we have to do, given that this thing is likely to happen? Second thing is, can we mitigate it? I mean, instead of the worst outcome, can we have the best outcome? The problem with that is that it cannot be done by one country; it has to be a collaborative game.

• Yes, so if we de-industrialise completely, glaciers will still melt.

Correct. You see, the thing is that there’s a big difference between, let us say, urban overcrowding — I mean if you have a public transportation system, and you reduce overcrowding, the benefits come to your city. But that’s not true of climate change, because if you can do whatever you like and the rest of the world doesn’t change . . .

• You talked about wheat, the need to find a variety of wheat that is more weather-resistant. Do you rebut this idea that we are heading into a big food crisis, that there’s an inevitability to global food shortage, food grain shortage?

No, no. I think what’s going to happen, and there’s general agreement that the net effect of all this climate change is going to be a rise in food prices. One of the important reasons for that is that in the West what they were doing is overproducing wheat. Now they will shift all that into bio-fuels. So basically there won’t be that much production. Taking a longer period, 10-12 years, there’s a feeling that perhaps some of the production capacity of the developing world might go down. But over the next few years, which has nothing to do with climate change, most people think that food prices in the world are going to be high. This affects your price situation. It may not affect production, because actually higher prices also lead to higher production, higher incomes. So, I won’t call it . . .

• You don’t see food grain shortages?

I don’t see food grain shortages, but I do see pressure on food grain prices, which, quite frankly, in certain respects may even help farmers. After all, if you look at the National Sample Survey, what is it telling you? It’s saying that 49 per cent of the farmers do not find farming profitable. So an upward push in prices will mean that they are less likely to be in debt. Farming will become more profitable; they will do some investments.

• So in your four years at the Planning Commission, what has been your experience trying to evangelise this economic change?

I think we have got quite a bit (done). You know you never get everything that you are trying to achieve. But there’s no doubt in my mind that the economy today is in a much stronger position than it was four years back. I am not saying that it’s because of the Planning Commission.

• Even the agricultural economy?

Yes, because if you count this year, then the three-year average growth rate in agriculture is four per cent, when four years ago the dominant news in agriculture was farmer suicides and agrarian distress. We are just about to present the plan to the National Development Council and we see an upturn. Now, people might say, this is only two years, you need another 5-6 years before you can be sure, and I think that’s right.

• Where has this change come from? Four per cent growth is very healthy for agriculture. Where has this change come from, and what has caused it to happen?

I think two things are very important. One is that public investment has increased. You know the analysis of everybody, and certainly of the government, was that if you want to get good farm production, you’ve got to put more investment in rural areas and we’ve done that, be it in irrigation, in work done by the National Horticulture Mission, in the food security programme that was launched last year, in rural roads. I mean, I think people tend to forget that all the available research says that the best impact on agricultural productivity is through rural roads — the Pradhan Mantri Gram Sadak Yojna — and actually we do a lot of research on this. I mean the rural development ministry, you know, and this is one program that virtually everyone tells me is going well. The quality of roads being built is much better.

• And I’m surprised you are not mentioning the new seeds, as for cotton.

Well, I think, on the seed front, two kinds of things have happened. One is that agriculture is diversifying. I mean, we’ve been stagnant in food grains, but non-food grain agriculture has been growing and that is all the result of seeds. Policies have encouraged a lot of private activities. Bt cotton, I think, is one factor. Now the story there is a little mixed: in some areas Bt cotton has worked well, and in some it hasn’t.

• But cotton is a real revolution for India.

Yes, production of cotton across the country has gone up and there’s no doubt that genetic change has been a factor.

• Maybe it’s also awareness . . .

I think it generally shows that when you bring in a technology that makes an activity really profitable, farmers are smart and they take it and they run. The problem with Bt is that in certain areas, it wasn’t really suitable. I think (in these areas) people have lost money. But that is a failure of communication, a failure of extension. Could be bad luck, whatever . . .

• Tell me something. Now you deal with the political class from a vantage point, because you sit on tens of thousands of crores. Do you see our politicians, particularly CMs, who have the real power, learning the mantra of reform, economic change, growth? Is there a change from the past?

Very definitely. That doesn’t mean every CM reflects that, but I think that increasingly, a very large number of CMs know a few things. I think they recognise that the government is a small part of whether an economy booms or doesn’t boom.

• They do understand that?

I believe that several of them do. Otherwise they wouldn’t be attending all these meetings with industrialists and trying to attract investment and talk about infrastructure.

• We understand why they go to America to attract investments. Everything’s okay to justify a junket.

No, now there are meetings even here. Internal meetings. I think this is important. Secondly, I think deep down they know that you are not going to get development if you don’t have infrastructure, rural and urban.

• Would you say that now there’s a wide enough consensus on infrastructure? Maybe not on retailing, maybe not on FDI, maybe not on reforms as such, but infrastructure?

There’s wide consensus on two-three things. First, there’s wide enough consensus that this is important and that this will have a lot of spillover benefits. Second, there’s consensus that if you can do something innovative, experimental, or through private-public partnership, you should do it. In fact, one of the most interesting things is the number of different experiments that are being done in private infrastructure development. Some are very good, and some, quite frankly, are very dubious.

• Tell me the good ones and tell me the dubious ones?

Well, I won’t mention the dubious ones, but I’ll mention the good ones. A large number of states are now going in for the construction of toll roads through BOTs.

• In fact, Rajasthan and Madhya Pradesh are both doing a good job on that.

Yes, that’s true. And they’re not the only ones. Secondly, many states are inviting the private sector in the development of private-sector power, including states like Himachal Pradesh bringing these fellows in to do hydroelectric development.

• Yes. I was very impressed to see a state like Punjab, which is so conservative otherwise, putting out ads offering a postgraduate medical college in private-public partnership.

Yes. In education, even in health, they are beginning (to look at such options).

• I think every CM, except for that of Kerala, is knocking at your door for their big private-public partnership projects.

Well, the good thing is that they don’t have to knock on my door. PPP is entirely in their hands. If you look at what’s happening in ports, it’s extremely interesting. Minor ports are actually in the purview of the states. Some of the minor ports have actually become larger than the smaller major ports. So nowadays we don’t speak of major and minor ports; we speak of major ports and non-major ports. The major ports are the 12 ports under the Centre. There are two-three ports in India that have done extremely well in terms of expanding capacity, improving standards and so on. Of course, telecom is a very good example, where every five years there’s some controversy or the other, but if you ask a person if the volume of service . . . it’s always difficult when you make technological changes, but I don’t know, this is the method they’ve got, the GoM, and we’re trying to see what we can do. You know technology change disrupts a system, and it’s extremely difficult to know what the best way to take a system forward is. So one should recognise in any regulatory agency that whenever there’s technological change, there’ll be a possibility of controversy.

• Going back to where we were, do you think the politician has now understood all this?

I think yes.

• To the extent that your job has become easier?

Definitely.

• Do you remember anything that a CM or a politician said to you that warmed your heart?

I think deep down what is very interesting is that there is much greater awareness on their part that they are going to be accountable on a number of results that are now measured, and I think that they do care that those measurements come out good. Now, you know in the Eleventh Plan, we’ve introduced about 27 monitorable targets at the national level, and 13 monitorable targets at the state level. So, people are not going to be asking only if the economy grew at 8.5 per cent. I do think now that, by the way, CMs are now aware that they are going to be judged on a multiplicity of targets — gender balance, sex ratio.

• Maybe more equitable than HDI. Do you have issues with that (the Human Development Index), with India being pushed back?

You know, I think there’s some misinterpretation. It’s true that many people have said that India’s rank has slipped as compared to last year, but if you look at the UNDP report, they say that comparing ranks across reports is not actually valid. I mean for one reason, the country numbers are not the same; secondly, if a few more countries got added, your rank may or may not have changed. The other thing is that the system of measurement changes. What the UNDP report says is: “Please compare across time in the same report.” And if you look at that data, India’s HDI index has improved. It’s just that there are more countries and I am not sure, by the way, that any country has actually overtaken us. There are some countries that weren’t there before, so it may not actually mean very much. I think what’s more important is: Has the index improved or has it deteriorated? It’s quite clear that it has improved.

• Tell me something else. It’s a question I ask all my economist friends. Now, we all agree that Indian politicians have changed. But have Indian economists changed? Why are Indian economists so conservative? I have a little test. If I check out the newspaper clippings on growth rate predictions by Indian economists and Indian establishments, also by the RBI, Ministry of Finance, and even the Planning Commission, I always add half a per cent to it. Why is the Indian economic establishment so conservative?

Well, I’m not sure that’s correct. It’s true that the government, the RBI certainly, should be conservative. I mean all over the world, a good central bank is a conservative bank.

• I add half per cent to what the government says and I add one per cent to what economist Roach says.

Stephen Roach, of course, goes around the world saying that he has got a brand equity of being pessimistic. Not about India, but the entire world.

• Yes, he is always wrong. Always consistently wrong.

Yes, but I would say that today, I mean, my impression incidentally is that economists never just predict. I mean economists say that if you do this you will get this result. There are many Indian economists today who say that if we were bold enough to do what they want to do, we could do better. I think what has gone is the old-fashioned notion that India can’t do it.

• So what are we expecting this year? Not a prediction now, we are three-fourths of the way down.

Well, we may be three-fourths of the way down but we don’t have the facts for more than six months. But my guess is that we’ll do better than 8.5 per cent.

• So closer to nine? Maybe nine per cent?

Let’s say 8.75 per cent

• I can add half a per cent to that, so 9.25 per cent it is. Before we conclude, what are the things — if you had a run of the place — we need to do to reach 10 per cent. Then we’ll have the next Walk the Talk when we have actually hit 10 per cent.

If you ask me the three most important things, the trouble is that each one of them is an area. There is no doubt infrastructure is the biggest thing. I’d like to believe that the things we are talking about are the right things. We just have to keep looking and make sure the actual thing gets implemented on the ground. I think agriculture is and remains very important. It has turned up but it does need sustained attention. Now the reason is that it’s no longer just a matter of food grain. The new agriculture growth is going to be diversified — milk, horticulture, poultry, fishery. This requires cold chains, logistics, marketing, linkages with infrastructure, as it requires highways and modern retailing. People need to appreciate that it’s the totality of these things that will trigger a change. And frankly education. I think today, in the Eleventh Plan, the most important quantitative signal that we are doing something different is that education in the Tenth Plan got about 7.8 per cent or something like that of the total expenditure. Now it is getting 19.4 per cent. Now that is a huge increase in government expenditure.

• Do we see some of that going into higher education as well?

Absolutely. Continuous effort in the primary sector, start with the secondary, because now the primary graduates are going into secondary schools, and major efforts in higher education, because I think that skill shortages have emerged. The role of the private sector is going to be very important. Certainly in skill development, there are many ways you could allow private initiative to have its way.

• I know that you are conservative but you are also optimistic, whatever your dissatisfaction with the HDI.

Reasonable optimist.

• So I suspect that the 10 per cent growth will happen soon enough and the next Walk the Talk will happen soon. Thank you so much.