Raghuram Rajan warns against India's hyped economic status vs reality

Renowned economist and former Reserve Bank of India Governor, Raghuram Rajan, urged citizens not to be swayed by the inflated economic status of the country touted by politicians, asserting that significant challenges lie ahead for the nation.

In a recent interview with Bloomberg News, Rajan delivered a sobering message regarding India's economic trajectory amidst the buzz surrounding India's robust economic growth.

Rajan stated that there were many more years of hard work lying ahead to ensure that the hype was real. He suggested that politicians wanted the populace to believe in the hype to convey the notion that the nation had arrived. The economist cautioned against India succumbing to this belief, considering it a serious mistake.

He expressed concern that India's growing labour force would only become a dividend if the workers secured good jobs. Rajan articulated this as a potential tragedy, emphasizing the necessity for India to prioritize making the workforce more employable and generating jobs for the existing workforce.

The economist's remarks come at a time when India is grappling with issues of educational attainment and job creation. Rajan pointed out the alarming reality of high dropout rates and inadequate access to quality education, asserting that India's ambition to become a developed economy by 2047 rings hollow without addressing these fundamental challenges.

Prime Minister Narendra Modi's vision of India as a developed economy by 2047 has been met with scepticism by Rajan, who labelled it as "nonsense" in light of persisting educational deficiencies and stagnant growth rates.

Rajan warned that without significant improvements in education and healthcare, India risks remaining trapped in a lower-middle-income bracket, failing to fully capitalize on its demographic potential.

Moreover, Rajan criticized the government's priorities, noting a disproportionate focus on high-profile projects like chip manufacturing over essential investments in education and skill development. He cautioned against fixating on prestige projects while neglecting the foundational elements necessary for sustainable economic growth.

The release of the India Employment Report 2024 further underscores the challenges facing the nation. The report revealed that India's labour force participation rate lags behind the global average, with a significant portion of unemployed youths, particularly those with higher education qualifications. Gender disparities were also evident, with a larger share of educated unemployed youths being women, highlighting the need for gender-inclusive policies.

Chief Economic Adviser V Anantha Nageswaran weighed in on the findings, emphasizing the role of the commercial sector in driving job creation. Nageswaran stressed the importance of moving away from a reliance on government intervention for every economic and social issue, advocating a more market-driven approach to employment generation.