India’s economy is exhibiting signs of stable expansion, but former Reserve Bank of India Governor Raghuram Rajan contends that growth must surpass 8% to adequately address the job needs of the world’s most populous nation.
Rajan, addressing a gathering in Beijing via video link on November 10, stated, “Given the needs of the population and the need for jobs, we should be aiming for growth of 8 to 8.5 percent.” He acknowledged that India’s growth has outpaced that of other major economies, but emphasized, “It’s still somewhat slow relative to our job needs, as we have a large number of young people who require employment.”
While India’s economic expansion has been notable, it is falling short in generating sufficient employment opportunities for the millions entering the workforce each year. The unemployment rate, as per data from Mumbai-based researcher Centre for Monitoring Indian Economy, rose to 10.05% in October, the highest in over two years.
HSBC estimates that India will need to create 70 million new jobs over the next decade, and with growth of 7.5 percent, only two-thirds of the job deficit will be addressed. The issue of high unemployment is also a concern for Prime Minister Narendra Modi as he seeks re-election for a third term in the upcoming elections. His administration has been attempting to tackle the problem and bolster its credentials by distributing job appointment letters, part of his promise to provide one million government jobs by the end of this year.
Rajan emphasized the need for India to train its workforce to compete with other efficient manufacturing nations, including China and Vietnam. He observed, “India is trying to move up the value chain, and you’re seeing some signs of that happening,” citing the production of iPhone components. However, he acknowledged, “There’s a long distance to go to actually manufacturing full cell phones” in India.
In addition to addressing job creation, Rajan offered insights on other aspects of India’s economy. He noted that “India is recovering from the pandemic and now finally we are seeing some steady growth.” He attributed the growth to factors such as increased government spending on infrastructure, balance sheet cleanups, and demand from the upper middle class.
Rajan also commented on China’s technological advancements, particularly in chip manufacturing, stating, “China has tremendous innovation in chip manufacturing, and India is still very far behind.”
Regarding the US economy, Rajan expressed his skepticism about a soft landing, stating, “A soft landing for the US economy is very difficult – there’s a greater than 50 percent probability that the economy will slow too much.”