‘India has to stop being satisfied with its own performance’

Economist Meghnad Desai, Emeritus Professor of Economics at the London School of Economics and Political Science, says economics is all about people’s lives and livelihoods. So, the economy should serve the people and not vice versa

- MANDAR DEODHAR

Meghnad Desai, known for his frank views on the state of the economy, says the world is looking at tough times. An Emeritus Professor of Economics at the London School of Economics and Political Science (LSE), Desai believes that India should concentrate on its creamy layer of 200 million people as the growth of these wealthy individuals will propel the economy and lift the bottom 40 per cent out of poverty. The 82-year-old, who sits on the board of Elara Capital, says that economics is all about people's lives and livelihoods, and not about debt-to-GDP ratios or deficit finance. In an interaction with Business Today's Anand Adhikari, Desai speaks on a host of issues confronting India. Edited excerpts:

Q: What impact do you see of historically high global inflation and high interest rates on emerging markets, including India?

A: I hold a somewhat unorthodox view. I lived through the previous stagflation crisis of the 1970s. It was very similar because oil prices had quadrupled in 1973. The OPEC countries, which had not changed the price of oil since 1918, after 55 years decided to increase prices. At that time, many people said that this monopoly would never last, and that there would be competition. It, however, totally changed the whole paradigm of economics and of the global economy. The oil price rise didn't end for 20 years. Inflation went up to 22 per cent in England. Margaret Thatcher [became PM] in 1979, and she let all the pain be inflicted. She had a simple view: inflation cannot go unless you inflict pain on the public. This is what monetary policy is all about. It was about deflating the economy until the economy stopped growing and people stopped buying or bought the [bare] minimum. And that’s how inflation gets out of the system.