India's polarised politics eroding transparency investors look for: Nobel laureate economist

Nobel laureate economist Abhijit Banerjee has said that growing political polarisation in India is eroding transparency and making the country a "mystery" for the world, even as headline growth numbers remain strong.

"I think India is going through a politically polarised phase in the sense that there are many conflicts that have existed for a long time and we have to decide, as a nation, to what extent we want to be seen as open and reliable. I think the real issues have to do with media freedom," he told PTI in an interview.

"The most important issues are media freedom and transparency. Do we really know what the numbers are? That's what investors care about," Banerjee said.

While India continues to attract foreign investment, Banerjee described the inflows as unstable and highly sensitive to uncertainty.

"We have done reasonably well on foreign investment, but it's flighty. The Indian Rupee is depreciating because money isn't coming in fast enough," he said, linking currency weakness to the absence of sustained capital inflows.

He cautioned that policy unpredictability, combined with internal polarisation, was undermining India's credibility as a long-term investment destination.

"Unless we have a very predictable and transparent policy regime and a transparent media, India will remain a mystery to the world," he added.

Banerjee said that if India wanted to deepen its capital markets and attract long-term global capital, transparency needed to be institutional rather than episodic.

"I think our internal polarisation is undermining our commitment to transparency. And that, I think, is the key point. If we want to be the kind of place where people always want to invest, we need transparency at all levels," the 64-year-old economist said.

He also warned that headline GDP growth could not indefinitely mask deeper social distress.

"GDP can grow, but if most people don't have decent education, growth will slow and misery will increase. Distributional questions still need to be addressed," Banerjee said.

Banerjee dismissed the term "dole politics" to describe welfare, arguing that large public transfers to the middle and upper classes were rarely acknowledged.

"We have not managed to create a Chinese-style vibrant labour market so that people can get jobs and benefit from growth. If you have jobless growth, the only way we can include people in the national growth process is through transfers, and that makes sense to me," he added.