PBM: Mr Gates, you have made a case for the fact that India needs to pay attention to the development of its human capital. India has also been a second career for you. So if you were to look back, what would you count as the most promising thing about India in this journey of human capital?

BG: India’s at a pretty exciting point with huge potential. If you look at the world and say, “What can we do to raise people up to middle-income levels or reduce poverty”? India’s it! Not only because it has 1.3 billion people, but because it has a dynamic democracy and a lot of native talent.

China for the last 20 years was the economic miracle. It is a middle-income country and, of course, we don’t just want to look at economic figures, but equity as well. Though in terms of democracy, China scores poorly, their focus on poverty reduction on equity issues has been impressive. They have a plan to take the final 43 million that are very poor and use income policies and cash payments to solve that.

If India, over the next 20 years, can achieve a 7 per cent average growth and do that in an equitable way, that’s a miracle for the country and for the world. The question of what are the enabling factors that might hold that back is something that should be talked about. The two most prominent factors, I think, are education and health (including nutrition).

The Indian health picture is a glass half-full. There have been improvements over the last 15 years—such as adopting new vaccines, thus bringing down the mortality rates substantially—but the health levels relative to the income levels already achieved are far lower than they should be. Perhaps we made a mistake that we always talk about deaths. Many children die too and that is a very important issue, but maybe we should have always considered with that the health of the living, because 94 per cent of kids do survive into adulthood and a lot of these disease episodes and lack of nutrition are determinant in terms of their capacity.

PBM: Jawaharlal Nehru would say there are three conditions under which the formation of human capital can take place. First, you need a capable state. Second, you need some commitment to equality. Third, you need an enlightened public culture, where the joy over jumping 30 ranks in the ease of doing business is matched by the joy of jumping up in the HDI index by 5 points. What India is doing is a Band-Aid job in the absence of political conditions that make for successful human capital formation. How do you respond to that scepticism?

BG: I’m more optimistic now. The primary healthcare system has improved substantially. We do a lot of work in Uttar Pradesh and Bihar. When we started, Bihar had less than 20 per cent vaccine coverage. We haven’t achieved perfection, but we’re up over 75 per cent. That maps directly to lives saved and to the health of the survivors being a lot better. Today 18 per cent of India’s GDP is collected in tax, and as the economy grows, you get GDP to grow. So that’s more resources. Most countries go from 18 per cent to 30 per cent (GDP), so you get a huge set of resources. If the government is smart, then the education and health quality can grow fantastically. Nehru’s three conditions are absolutely right, and we can’t let the fact that those things are so imperfect today, make us pessimistic.

India has improved dramatically and some states have become serious about malnutrition and the standards on food fortification. It’s a little unfortunate that the health is mostly in the headlines where there’s a cluster of deaths or something similar, turning that into a systemic focus on why aren’t the jobs filled? Take the National Rural Health Mission. If they didn’t bring in that, the health spending would have fallen as a percentage of GDP. And you know some of that money actually was well spent—lives have been saved.

PBM: You mentioned there is a public perception that the state doesn’t function. In part that is due to the representation in the media, right? But when citizens see the state depending on philanthropy for its core functions, does it, in the long run, increase their confidence and whet their appetite to pay more tax to the state? Or is there a possibility that, under certain circumstances, it corrodes the legitimacy of the state or people’s confidence in it?

BG: Philanthropy in the US is 2 per cent of the economy. In India, it’s not even 0.2 per cent. The private sector isn’t going to focus on helping the poorest. We invested tens of millions of dollars in helping consultants come in and, hopefully,

that becomes an enabling element, encouraging a new rotavirus vaccine which we funded. Now Bharat Biotech makes it at a very low price. That is philanthropy. Yes, if governments were totally enlightened, they might have done those things, but departments of education don’t do much R&D and are stuck with the status quo. So philanthropists can shake things up. They can bring IQ and better measurement in, but philanthropy is never the long-term funder of the basic rights of the people. The thing that we wish philanthropy was good at, and sometimes it isn’t, is helping delivery systems work better, helping teacher training work better and helping healthcare worker tracking. And most of the money we spend in the country is to try and help these delivery systems work more effectively.

Indian philanthropy, I think, will grow by four or five times. And I’m not just speaking about billionaires, I’m talking very broadly. But it will still be very tiny, so the resources and legitimacy for the long-term behaviour in health and education—need to come from the state.

PBM: For a country like India, is there a critical choice to be made about the relationship between technology, education and employment that we are not thinking enough about?

BG: Well, the quality of the education system sometimes depends on whether you are optimising for the teachers or the students. It’s interesting that the US is not some wonderful exemplar—our education is good relative to what we put into it, but we should be a lot better. We have equity problems because the cost of tertiary education is going up. Technology has so far not had a broad impact on education—maybe 1 or 2 per cent of the smart kids really use these things, but it hasn’t hit the mainstream yet.

Getting the GST passed was a fantastic thing and the opportunity it creates over time as gets digitised to raise the compliance rate of tax in general. Digitisation, whether digital money or attributed digital money like the payment

bank structure, will be an ally in terms of broad tax collection. Therefore, the perception that the GST is fair and that people should pay their fair share, all those things will trend in a positive direction and give the government a chance. How quickly digital technology will get into K-12 and make a big difference is hard to predict, but I’m still very much a believer.

PBM: In your second career, what is the most remarkable execution story that you’ve seen in India, which makes you say ‘this gives you hope’?

BG: The first big project we did in India was called Avahan. It was to make sure that the HIV epidemic didn’t get into large numbers in India like it had in Thailand and in many places in Africa. Our primary measure was making sure that the commercial sex workers didn’t get highly infected. Our tactic was to create communities of health workers, so they could come talk to each other and then trust each other to insist on safe practices and so by getting a critical mass, it would make a difference. The project was very successful. The benefits were probably even larger in that the workers would talk about violence and exploitation as well. I cried every time I visited one of these communities. It’s also a story where the Indian government did quite well.

PBM: India’s tax GDP shows we’re still a low-income country, but one of the big debates is about the architecture of our health system. If you were to look 15-20 years ahead, what trajectory do you think India should follow in this regard?

BG: We (the US) spend about 18 per cent of our GDP on health and no one is even close to that. There are a lot of middle-income countries such as Turkey, Brazil and Thailand, and their basic architecture is pretty clear. There are basic things with vaccines and pregnancy that should be in the public health system and there the quality can go up. When you get to this growing burden of non-communicable diseases, the idea that it’s going to be purely the public sector is not the best approach. The best approach is that the government causes the insurance markets to get to critical mass and then a set of private providers come along, who compete on cost and quality of services they will provide.

Watch the complete conversation at https://www.youtube.com/watch?v=ZBoAs2lQx8Y