Prannoy Roy Speaks To IMF Chief Kristalina Georgieva: Full Transcript

NDTV: Thank you very, very, very much for joining us. I really mean that. Not just because you have a soft spot for India, but also because this is the toughest, busiest time in anybody's life. And you're at the centre of it. Did you ever think when you joined and took over that you would face a crisis like this?

Kristalina Georgieva: I have not expected that my first year would be a year like no other. But I can tell you, I'm very proud of what the IMF has done. We leaned forward early in the crisis. We have provided massive support to our members in need, over a hundred billion dollars so far. For 81 countries, never in the history of the IMF have we done so much, so fast. And beyond the money, what we strive to do is to help countries understand what must be done in this crisis and learn as quickly as possible from each others via transmission line for our membership in this difficult time.

NDTV: You of course know this, but the countries that have done better have got women at the top. That's also for institutions with women at the top. And you've even got Gita Gopinath with you. So, you can't fail, you've got the right genes, right?

Kristalina Georgieva: Well, it is sure that in this crisis, women stepped up. There is a famous saying of Eleanor Roosevelt that women are like tea bags. We don't know how strong we are until we are put in hot water. And in hot water, women do well.

NDTV: Right. And the longer you are, the stronger you get. Yes. That's a lovely one. But, you know, you've also had a background and training for difficult situations. You had it tough growing up. You're the first IMF leader to have a childhood in a developing country, Bulgaria. And pretty tough times you went through. So, tell us a little bit about that, because I think people should know you're made of sterner stuff.

Kristalina Georgieva: It is true that I had the life experience of many of the countries in difficulties that the IMF is helping. In the nineties when Bulgaria was going through a transition from central planning to markets, I remember getting up at four o'clock in the morning to queue for milk for my daughter. I saw my mother's life savings evaporate because of hyper-inflation, and all of this taught me two very important lessons. One, to recognize the difference between bad policies and good policies. It matters to have good policies in place. And two, that macro decisions have micro consequences. And we always have to think about how the decisions we make impact the lives of people, especially people who have no access in the high corridors of power.

NDTV: Exactly. Exactly. I must say this it is so important to have somebody empathetic with the tough situations with developing countries, with the poor, is very important at a time like this. And your background will come in great use now. Don't you think?

Kristalina Georgieva: Yes, indeed. There are two other things that help enormously. One is that I was, for five years, Humanitarian Commissioner in the European Union. I had a front seat in the most dramatic crises, like the Haiti earthquake, the floods in Pakistan, the triple disaster in Japan, or the war in Syria and the refugees that had to leave their homes because of it. And all of this is extremely helpful when you are in a position that deals with crisis, because what it teaches you is one, anticipate crisis. We are in more shock from the world. Two, act decisively. Three, care about the most vulnerable people. And in this crisis, I truly benefit from having lived through this experience.

NDTV: I've met many heads of the IMF and the World Bank, and not many have focused on these key factors that you just mentioned, inequality and environment. I'm so glad that you focused on those. Before I go into some of the work we've done with you, I must congratulate you on a fantastic set of reports. They're really comprehensive. They're really open. They're really strong on data and analysis. Many, many congratulations. But before I go into some of the questions that they raise, I just wanted to ask you, why do you have a soft spot for India, and what started it?

Kristalina Georgieva: Well, my small country, Bulgaria, has always been fascinated with India. And in the days of Indira Gandhi, there has been friendship between the two countries. And it so happens that my cousin was the Bulgarian journalist assigned in India. So, she would come and tell us these fascinating stories about the country. So, I developed a huge interest in the culture, history and the people of India. And when I was able to travel, India was one of the first destinations. And what I saw in India is this incredible dynamism of the nation. Such a fantastic place to feel that there are values on which we can all unite.

NDTV: Great. That's lovely to hear. And it's so true. We have our heart in the right place. Now, coming to some of the IMF data, I wanted to ask you, how long is this pandemic going to last? And in how long are we going to come out of it? Your data tends to show for the global economy, that two years from now, or end of 2021 start of 2022, the global economy will have got back to 2019 levels, maybe 1% higher. Normally it would have been about 8% higher. It's only 1%. So, we've lost 7%. To get back to the no-loss period, that's going to take a much longer time, right, even though the bounce back is very clear in your IMF forecast?

Kristalina Georgieva: It is true and it is applicable to the whole world. By 2025, we will have lost 28 trillion dollars. It is a huge loss. What we are seeing is a tremendous shock caused by the pandemic. And let me stress, first and foremost, this is the human tragedy. We have lost more than a million lives already. A hundred thousand in India. But also an economic shock that we have not experienced since the Great Depression. For the first time we brought the economy to a standstill on purpose. We asked producers not to produce, consumers not to consume, and that has taken a portion of potential growth that we would never get back. More importantly, what next? So, we acted very decisively in the first months of the crisis. Central banks and finance ministries together put a sound floor under the world economy. The IMF did its own part. We contributed to the stabilisation. However, until there is a durable exit from the health crisis everywhere, we expect an uneven, partial, uncertain recovery. In our projections, we put our trust in our scientists and we expect that there will be vaccine available sometime between the beginning and middle of next year. And then it will take some time for this vaccine to be applied everywhere. Only then we can talk about sustained recovery from the pandemic. And as you can see, in many places, there is a surge of a second wave. That means we will retreat somewhat from economic activities again.

NDTV: I wanted to ask you about that, that when you wrote this report, even the scientists didn't really expect such a huge second spike in Europe, and a third spike in America. So, the report would have gone with the information at that time. We are learning every day. Even the scientists are learning. In fact, the two great uncertainties, uncertainty of COVID and the uncertainty of economics. I'm an economist and we know nothing about the future. So, you applied two uncertainties and you're in deep trouble. So now the second spike and the third spike may affect your forecast. Will you update them?

Kristalina Georgieva: In our forecast, we actually are calibrating different scenarios. One in which we have accelerated the delivery of vaccines. And the recovery is faster. And another one in which we do not have vaccines and we have to continue with containment measures. But let me make two points. One, today we know much more about this pandemic that we knew in February, March. We know that there are measures we can take without a full lockdown to restrict the spread of the virus. What is key is whether our health system can handle the number of cases, the number of people that are getting sick. And we have expanded in practically almost everywhere the capacity of the health system. And then we added the very important protection, testing. And I want to give credit to India. India is one of the countries that has taken a very aggressive step to making testing more available. Why is testing important? Because when you test, you can allocate potential sources of the pandemic and then isolate people rapidly. Rather than closing down the whole economy, you only close down places where there are spikes. And then we also know today that wearing a mask, social distancing, washing hands, being sure to self-isolate. If I know that I have been in contact with somebody who is sick, stay home for 14 days. All of this is helping us weather the second wave. Hopefully from an economic standpoint, significantly better than the first one. Nonetheless, confidence would not return until we get out of the pandemic. It would not fully return.

NDTV: Just like the rest of the world, India is also facing a major dip in its economy. Comparing India versus the world, according to the IMF data, India's decline is the worst but India's bounce back is better. The IMF report says the India's economy will plummet by just over 10% this year and then it will bounce back by almost 9%. While the economy's decline is 4% of the world and the bounce back is 5% in the world. India's decline of 10% is worse than the global decline of 4%. But India's bounce back of 9% is much stronger than the global recovery of 5%. According to the IMF report, despite the bounce back, India will face a GDP shortfall. India's GDP will not get back to the pre-pandemic levels even by March 2022 because of  this base effect. In fact in 21-22, India's economy will still be 2% less than it was in the preceding two years before the pandemic. The loss to India is even worse. India will actually lose 12% of its GDP compared to normal growth times. If there had been no pandemic, India's economy would have normally grown by about 10% at least. But the impact of the pandemic is that India's economy will end, after two years, at 12% less than what our economy would normally have been in 2022. So in many ways India will bounce back but not enough. It's a long road to the levels we even were. We are way behind our target. That's a big loss for our country.

Kristalina Georgieva:  What can I suggest to India based on what we are learning in this crisis? One, do not withdraw support measures prematurely. On the contrary, India could do more in a targeted manner for the most vulnerable people and also for the smaller, medium size enterprises to prevent massive bankruptcies. Two, continue with the reforms. And there we ought to give credit to India. We have a farm bill. There is a labour market reform. Very important for countries to pursue structural reforms, to be more resilient in the future. And India is choosing to do that.

NDTV: One of the things that you do mention in your report is that India did 2% of GDP above the line, a stimulus. And we are way down the list compared to other countries. Would you like to see that a little higher? Although we've done not badly on the below the line, you know, liquidity factor. But on actually direct stimulus you just said, you'd like to see India do a little more. So, from 2% what? 5%, 10%?

Kristalina Georgieva: It is up to every country. These are sovereign decisions, but I can just give you the numbers, right. What we see in emerging markets, countries that are compatible to India, is indeed a different share of direct versus below-the-line contributions. In India, it is 2% above-the-line, 4% below-the-line. So, moving this further and increasing support somewhat definitely is going to help India. You're going to have a festival season coming. We know this is a good time to give a boost to the economy. I hope it would be used.

NDTV: But I hope it also doesn't give, too many gatherings and a second spike. That is also a worry.

Kristalina Georgieva: But this is where India is remarkable because you are a leader in IT. Way before anybody else, you got into the digital space. So, you can shop from home.

NDTV: We have digital minds, not old-fashioned, analogue minds.

Kristalina Georgieva: Yes, indeed.

NDTV: Another very worrying thing, and I'll probably end with this because of your time factor, is that your report shows the poverty level going up in India to over 120 million people, when, if there wasn't a pandemic, it would have been about 80 million. These are just rough figures. So, you're saying 40 million extra people in extreme poverty as a result of this. What to do about them? Your direct measures, your over the line should increase, right?

Kristalina Georgieva: You have a very good digital ID system that allows you to direct targeted support to the most vulnerable. And it is a very good time to use this to the fullest, to reduce the number of people falling into extreme poverty, and also to expand opportunities for entrepreneurship, especially of women. We see in this crisis that women act responsibly for their families. So, empower the Indian women even more.

NDTV: I have to tell you, 70% of the NDTV leaders are women and our founder is a woman, too. Final thing is that all the Asian countries have spent much more than us above the line and their growth rate at the end of 2021 will be 6% up and we are 2% down. Is there a lesson to be learned, that we should be spending more? I think you mentioned it, but I'd love you to stress on that. And as you say, direct targeting, give the money in the hands of women. That really helps, right?

Kristalina Georgieva: Yes, definitely. This is the advice we give to the core membership, now is the time to support the economy. And you want to get out of this crisis faster, put more money in the hands of women. But in addition to that, I have this unique qualification for the crisis of tomorrow. I'm a trained environmental economist. My PhD is in environmental economics, and I know that the pandemic is a very dramatic shock for the world. But similarly, the climate crisis already is devastating in many places. You see it in India. And it can be even more devastating unless we act, unless we shift to low-carbon, climate-resilient development. And I have this privilege to lead the firm at the time when preventing the climate crisis is becoming a global imperative.

NDTV: I think that's really important that you mentioned that because in India, of course, the environment situation is very bad and this lockdown showed us it can be so much better. Our children were breathing fresh air, the birds were out, you could see the sky. How do we make sure we don't go back to the bad old times? We've learned, but how do we make sure it doesn't go backwards?

Kristalina Georgieva: We are now in a unique place in our history. We have a chance, by getting out of the pandemic, to shape up an economy of the future that is greener, digital and a fairer economy. Why? Because we are going to deploy, we are already deploying and we will deploy more resources, to move the economy out of the damage caused by the Corona crisis. As we do that, it is just common sense not to build the economy of yesterday. But of tomorrow. And the good thing is that there are many actions we can take that are good for growth, good for jobs, and good for an environmentally and socially sustainable future. For example, if we are to direct the fiscal stimulus towards bringing down carbon emissions, in other words, something that India is actually in the lead, moving to renewable energy away from carbon generating industries. If we concentrate on restoring land, a lot can be done that is labour intensive reforestation, mangrove restoration, all these are activities that generate jobs. And at the same time, they put us on a more sustainable path. And in addition, something that this crisis has accelerated, we are moving in a digital economy. If there is one silver lining of the pandemic, it is accelerating that transformation. Well, if we are to be successful, we have to concentrate on skills, on education. And of course, when we do that, we create a more equitable world of tomorrow. So, take this crisis as a sobering call to prevent the world of crisis. We know that we can have a more resilient economy, more resilient society if it is greener, smarter, more inclusive.

NDTV: Dr Kristalina Georgieva, thank you very, very much for spending this time. You had a really hectic week and you still have a lot to do. But for spending this time for all of us in India, thank you very much.

Kristalina Georgieva: Thank you. Thank you. Thank you. Thank you.