In a recent interview with PTI, former RBI Governor Raghuram Rajan shared his views on India's economic progress over the past decade. Acknowledging the country's achievements in infrastructure development he emphasized the need for further advancements in various other sectors to enhance local manufacturing and create more job opportunities.
India's progress in infrastructure
Rajan admitted the country has witnessed the construction of new roads, bridges, airports, and ports which have greatly improved connectivity and transportation across different regions. These infrastructural enhancements have played a crucial role in boosting economic growth and fostering development in various sectors.
Challenges in other sectors
Despite the positive growth in infrastructure, Rajan pointed out that India still faces challenges in other key sectors. The former RBI Governor stressed the need for reforms and investments in manufacturing, technology, and agriculture to drive sustainable economic growth. He emphasized the importance of creating a conducive environment for local industries to thrive and compete on a global scale.
Boosting local manufacturing
Rajan talked about the importance of promoting local manufacturing to reduce dependency on imports and strengthen the country's self-reliance. He suggested implementing policies that incentivize businesses to produce goods within India, thereby bolstering domestic manufacturing capabilities.
By encouraging the growth of local industries, India can create more job opportunities, enhance productivity, and stimulate economic progress.
Responding to a question on PM Modi’s flagship initiative 'Make in India', Rajan said, "I would say the intention is good. I think in some areas, we have done a lot, as I said, in infrastructure...we have done a lot that has been very useful".
The 'Make in India' initiative was launched 10 years ago on September 25, 2014. The initiative included measures such as the rollout of production-linked incentive (PLI) schemes for 14 sectors, ease of foreign direct investment (FDI) norms, reduction of compliance burden, single window approval system, and the national logistics policy.
"But we need to check the other places. And the best way to check is to ask critics, what do you think? What has happened? Has it happened the way you want it? Should we do more? You get feedback, and then you work along,” he added.
The veteran economist also pitched for more ease of doing business, especially about government policies and less fear of raids by inspectors or tax authorities, etc.
Mentioning a package that propels economic growth, he remarked, "If we focus on that, I think that would strengthen the concept of Make in India".
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Fostering job creation
Rajan further discussed the need for robust job creation initiatives to address unemployment and underemployment challenges in the country.
Asked whether 7 percent economic growth is enough for India to achieve the third largest economy status in this decade and become a developed nation by 2047, Rajan said, "If we grow at 7 percent, then we will be past Germany and Japan in 2-3 years. That is not something which is out of the realm of possibility, it will happen".
Despite production-linked incentive (PLI) schemes and the easing of foreign direct investment (FDI) norms, the eminent economist pointed out that India’s path to becoming a developed nation is still challenging.
The economist remarked: "What is more worrisome, however, is when we say a developed nation. Now, what does it mean to be developed now? That is also a changing metric".
Elaborating he said, "Let us say being developed is having a per capita GDP in today's dollars of about USD 15,000".
"If you see that, then you put a 7 per cent growth rate, and you find it is not enough to become USD 15,000 per capita GDP by 2047 we need to do better.”
However, Rajan wondered from where are "we going to generate that growth to become a developed nation by 2047".
PM Modi has set an ambitious target of making India a developed nation by 2047.
India’s future
Rajan expressed optimism about India's economic potential and its ability to overcome current challenges. He urged policymakers to adopt a holistic approach to development, encompassing infrastructure enhancements, sectoral reforms, and job creation strategies.
He mentioned that PV Narasimha Rao's government was the most reformist. Although it was not a super majority government it clubbed together supporting parties to push reform measures.
Rajan concluded the interview by saying that India still needs a big reform in education.
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