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Former Reserve Bank of India Governor and globally renowned economist Raghuram Rajan has issued a stark warning about India's economic trajectory. He emphasizes that the nation is making a grave error by placing excessive reliance on inflated economic growth rates touted with much pomp and ceremony.
Rajan stressed the urgent need for India to address its underlying structural issues to ensure a sustainable emergence. In an interview with Bloomberg, Professor Rajan, from the University of Chicago, underscored that any incoming government post-elections in India must prioritise the critical aspects of education and skill development.
He asserted that with adequate investment in education and skill enhancement, India's vast youthful demographic, exceeding 1.4 billion, can be effectively leveraged. Rajan cautioned against placing blind trust in grandiose claims, emphasising the need for substantive actions over mere rhetoric. He critiqued Prime Minister Modi's developmental objectives, highlighting the significant challenges hindering their realisation.
Rajan debunked the notion of Modi's vision, citing the staggering number of Indian children deprived of higher education and the alarmingly high dropout rates. He stressed the imperative for India to generate meaningful employment opportunities to harness its expanding workforce and foster economic growth.
Furthermore, Rajan lamented India's lower literacy rates compared to nations like Vietnam, expressing concern over the qualitative deficit in human resources, which sets India back by decades.
Addressing the issue of demonetisation, Rajan cautioned that while foreign investors are increasingly eyeing India's rapid expansion, the Modi government's policy focus remains skewed. He pointed out the disproportionate allocation of subsidies towards chip manufacturing over higher education in the annual budget, deeming it a misguided approach.
Rajan advocated for a shift in focus towards nurturing a skilled workforce tailored for emerging industries rather than pursuing projects for mere prestige. He emphasised the need for a strategic balance between aspirational endeavours and foundational investments crucial for sustained growth.
As a distinguished commentator on global economics, Rajan has been vocal about India's policy landscape. Following the conclusion of his tenure as the RBI Governor in 2016, he returned to academia, co-authoring books and sharing insights on India's economic trajectory.
In addition to education reform, Rajan has advocated for policies aimed at reducing inequality and fostering labour-intensive production. He has also advocated for decentralisation to empower states, thereby enhancing governance and development outcomes.
Drawing parallels with the aphorisms of former Chinese leader Deng Xiaoping, Rajan underscored the importance of pragmatism over ideology. He cautioned that unchecked populism and bigotry could plunge India into darkness, echoing concerns about the sustainability of India's economic growth trajectory.
Rajan attributed the economic slowdown to policy decisions such as demonetisation and GST, lamenting the concentration of power within the government, which stifled meaningful reforms. He highlighted institutional weaknesses and the erosion of checks and balances, drawing parallels with historical precedents.
In response to Rajan's critiques, BJP's chief foreign affairs strategist, Vijay Chauthaiwale, defended the Modi government's record, contrasting it with the perceived stagnation during previous administrations.
In essence, Rajan's warnings underscore the imperative for India to recalibrate its economic priorities, placing greater emphasis on foundational investments and structural reforms to realize sustainable and inclusive growth. As India navigates its economic trajectory, the insights provided by Rajan serve as valuable guideposts for policymakers and stakeholders alike.