India should not underestimate West Asia crisis; energy security key priority: Former Niti Aayog VC Rajiv Kumar

Economist and former vice chairman of Niti Aayog Rajiv Kumar said India should not underestimate the West Asia crisis and step up on the gas as far as energy security and energy transition are concerned.

“The crisis should not be underestimated. It is better to be prepared more for the consequences than to be underprepared because we do not know how long this crisis will last. We do not know how many Gulf nations will be involved because a lot of unknown unknowns are there,” Kumar, who is now the chairman of Pahle India foundation, told Fortune India in an exclusive interview.

Energy security top priority

"Therefore, I think we should be preparing much more for our energy security and also for fertilizers. The government should be now doing whatever it can to ensure adequate supply of fertilizers for Kharif crop,” he said.

Kumar said the West Asia crisis has taken India by surprise and for the future we need to make sure that such surprises are met with greater resilience. “The government now should accelerate the generation of the renewable energy in our country. Energy security is the key going forward,” Kumar said.

India a large market is a myth

Kumar called for an urgent need to introspect why the foreign investors have turned bearish on India. “Current account deficit (CAD) has to be covered by foreign direct investment, foreign portfolio investment or remittances. But that is not been happening. The net FDI is very minimal. There is a need to introspect on what is taking the foreign investors away from us,” Kumar said.

“There is a sentiment generally in our country, especially also in the government that India is a large market and everybody will come here willy-nilly. It is a myth. We are not a large market. We are a large population. We will become a large market but at per capita income of $2800, you are not yet there,” Kumar said.  

Kumar said this complacency needs to change and we need to go out and woo the investors and make them stay rather than leaving the country.

Being asked whether this is a factor only of taxation given the recent concerns on high long term capital gains tax on equity investments, Kumar said India story is very strong and its marketing is very weak.

Quick fixes won't work for consumption

On consumption, Kumar pointed out that it contingent on employment growth and quick fixes are not going to work. “Real constraint on consumption is employment. Consumption demand comes from your income hypothesis, which is when the individual is certain about her income. It is only then that he or she consumes more and borrows etc,” he said.

“But if the educated unemployment is high. If the unemployment among the youth, as the PLFS data shows, is between 15%-17%, and then people will be more inclined to save for the rainy day rather than consume. Short term fix won’t work for consumption. There is no such thing,” he added.