The former governor of the central bank of India, Raghuram Rajan, says that this South Asian country is making a mistake by giving excessive importance to expectations of economic growth since there are significant structural problems, the elimination of which is a prerequisite for realizing potential.
While talking to media representatives, Raghuram Rajan noted that the biggest problem the new government will face after the elections is the need to improve the education and skills of the workforce. According to him, without solving this problem, India will not be able to reap the benefits of the young population, which accounts for more than 50% of all residents of this state. Currently, the total population of the South Asian country is 1.4 billion people.
Also, Raghuram Rajan said that the biggest mistake New Delhi can make is to believe in hype regarding economic development prospects. It is worth noting that numerous statements about India’s significant potential are not lies. However, strength and power can bring minimal results in case of incorrect implementation. It is also necessary to create conditions for the full materialization of potential.
Raghuram Rajan says that New Delhi will have to work hard for many years to make sure that hype reflects reality and is not fiction. At the same time, he noted that politicians want the public to believe in hype. It is not known whether this statement is a kind of generalized reasoning of a partly philosophical nature about the essence of the principles of the functioning of power or an allusion to the plans of the Indian leadership. Raghuram Rajan says that it would be a serious mistake for New Delhi to believe in hype.
The current Indian Prime Minister Narendra Modi aims to transform the local economic system into a developed one by 2047. Raghuram Rajan says that nowadays it is pointless to discuss achieving the mentioned goal. In this context, he noted that too many children in India do not have a high school education.
The former governor of the central bank of the South Asian country says that the number of workers in this state is increasing, but this factor pays dividends only when the population is employed in good jobs. Raghuram Rajan says that the current state of affairs in the relevant area contains the risks of a tragedy that New Delhi could potentially face. He stated that India should make the workforce more employable. Also, in his opinion, the necessary measure is to create jobs for the existing workforce.
Raghuram Rajan separately mentioned the results of the study, according to which a decrease in the ability of Indian schoolchildren to learn was recorded to the level observed before 2012. The current situation took shape after the coronavirus pandemic. Nowadays, only 20.5% of third-grade students in Indian schools can read the text intended for the second grade. The literacy rate in India is lower than in many other Asian countries, such as Vietnam.
Raghuram Rajan says that the mentioned problem should bother New Delhi. According to him, the shortage of human capital will be observed for decades.
The former governor of the central bank of the South Asian country says that India has a lot of work to do to achieve economic growth of 8% permanently. He is not a proponent of being overly optimistic about New Delhi’s prospects in the area of the economy.
Currently, foreign investors are seeking to start operations in India as part of a drive to take advantage of rapid economic growth. This interest has so far shown no signs of abating. The Government of India predicts that the local economy will grow by more than 7% in the coming fiscal year. In the context of these expectations, investors’ interest is logical. If the government’s forecast is confirmed by reality, India will become the fastest-growing major economy in the world.
According to Raghuram Rajan, the political choice of the Indian leadership to spend more subsidies on the development of chip production than on education was wrong. Subsidies for makers of microcircuits amount to 760 billion rupees ($9.1 billion). The amount of state funding for the education system is 476 billion rupees.
Raghuram Rajan says that the Indian government has been too focused on high-profile projects such as chip manufacturing, instead of solving problems in the sphere of education. According to him, the ambitions of the leadership of the South Asian country are realistic, but in this case, the question is about the measures taken to achieve the goal. Chip manufacturing is a high-profile project that has significant strategic prospects, but sustainable development in this sphere of activity is possible provided that highly qualified personnel are available.
Raghuram Rajan, in the context of reflections on India’s economic potential, noted that it is also important for New Delhi to reduce inequality. Moreover, he stated the need to scale labor-intensive production. Besides, according to him, India’s governance system is too centralized, noting that transferring control to the regions would be the right decision in the context of improving the country’s development.
Raghuram Rajan says that New Delhi needs a pragmatic approach. He quoted former Chinese leader Deng Xiaoping, who spearheaded economic reforms in that country and is the author of the famous phrase that it doesn’t matter if a black cat is white, it’s important whether it catches mice.
As we have reported earlier, India Approves $15 Billion of Chip Plant Investments.
