’Greatest mistake India can make...’: Former RBI Guv Raghuram Rajan cautions against believing ‘hype’ about growth
Raghuram Rajan said that the government that will be formed after 2024 Lok Sabha elections will grapple with improving the education and skills of the workforce.
Former Reserve Bank of India (RBI) Governor Raghuram Rajan called India believing the “hype” around its strong economic growth ‘the greatest mistake’ citing significant structural problems that need to be fixed to meet potential.
Ranjan, in an interview with Bloomberg, said that the biggest challenge a new government must grapple with after the 2024 Lok Sabha elections is improving the education and skills of the workforce. Without fixing that, he said, the country will struggle to reap the benefits of its young population. More than half of India's 1.4 billion population is below the age of 30.
“We’ve got many more years of hard work to do to ensure the hype is real. Believing the hype is something politicians want you to believe because they want you to believe that we have arrived.” But it would be a “serious mistake for India to succumb to that belief," he added.
The former RBI Governor also dismissed Prime Minister Narendra Modi’s ambition to make India a developed economy by 2047, saying it was “nonsense” to talk of that goal when “so many of your kids don’t have a high school education” and drop-out rates are high.
“We have a growing workforce, but it is a dividend only if they’re employed in good jobs,” he said. “And that’s, to my mind, the possible tragedy that we face.” India needs to firstly make the workforce more employable, and, secondly, create jobs for the workforce it has, he said.
Citing studies showing a drop in the learning ability of Indian school children to pre-2012 levels after the Covid pandemic and that only 20.5 per cent of grade three students could read a grade two text. Literacy rates in India also remain below other Asian peers like Vietnam, Rajan said, “That is the kind of number that should really worry us,” he said. “The lack of human capital will stay with us for decades.”
‘India needs to do a lot more work’
On the recent optimism about India's economic prospects, Raghuram Rajan said that the country needs to do a lot more work to get to the 8 per cent growth on a sustainable basis.
Foreign investors have been flocking to India to take advantage of the rapid expansion, which the government predicts will reach more than 7% in the coming fiscal year, making it the fastest-growing major economy in the world.
Policy choices made by Prime Minister Narendra Modi-led Centre to spend more on subsidies for chip manufacturing than the annual budget for higher education were misguided, said Rajan.
The subsidies to semi-conductor businesses to set up operations in India was an estimated $9.1 billion, compared with $5.71 billion allocated for higher education.
The Modi-government was too focused on high-profile projects like chip manufacturing instead of doing the work to fix the education system so it can produce well-trained engineers needed for those industries, he said.
“The ambition of the government is real, to become a great nation,” he said. “Whether they pay attention to what needs to be done is a different question. I worry that we’ve become more fixated on prestige projects, which suggest more great nation ambition, such as chip manufacturing, while leaving the underpinnings that will contribute to a sustainable chip manufacturing industry.”
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Business NewsNewsIndia’Greatest mistake India can make...’: Former RBI Guv Raghuram Rajan cautions against believing ‘hype’ about growth
First Published:26 Mar 2024, 06:33 PM IST
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