Investments key to ensure growth in the country: D Subbarao

Investment and growth rate have a strong correlation, he said.

"When we grew at nine plus per cent before the global financial crisis from 2003 to 2008, there was very high investment. Again after the crisis, growth dropped because investment dropped. Today, there is no investment taking place. So, unless investment is jacked up, it is difficult to accelerate growth," he said.

India holds great promise, at a time when advanced economies are struggling with low growth and deflation, but growth in the country is "not inevitable", he said.

"Today, we are growing at seven plus per cent. But, that growth has a very narrow base...There is no investment taking place. Exports are quite muted. Inflation is low. But, inflation is low because of low oil prices and low food prices. Low food prices because of the good monsoon. Rupee is steady of course.

"But, rupee is steady because of FII inflows. The most important worry for us today is that investment is not taking place," he said.

Some spoke highly about India's growth, before the global financial crisis when the country clocked a growth of nine per cent, but the high growth rate did not continue, he said.

Job creation on a large scale would happen in the manufacturing and not in agriculture or services sector, he added.

"…In order to get the elephant (Indian economy is often compared with an elephant) to dance..., the first thing we should do is invest in manufacturing. Because, manufacturing …is key to creating jobs," added the former RBI Governor.

The main thing "everybody pointed out" when the NDA government completed three years in office was its alleged failure to deliver on massive job creation though what was witnessed was "not a jobless growth", he said.

"Two things everybody has pointed out. Two things that the government has failed on or not delivered on. Two things.Jobs and (addressing) agriculture distress.

"So, creating jobs is something that the government has not done as well as it should have. It is not a jobless growth. But, the number of jobs created with seven per cent growth, I think has been less than adequate. That's the reason the Prime Minister talks about Make in India, Start Up India, Stand Up India etc," he said.

There is "nothing inevitable" about the country's demographic dividend as well unless job creation takes place on a large scale, Rao said.

"There is nothing inevitable about the demographic dividend. ...You cannot get the demographic dividend unless you are able to create jobs, provide jobs for all the people. Today, we have in the country a million people they are in the labour force. One million people join the labour force every month and we are not even creating one million jobs per year," he said.

Demonetisation is not the cause for low job creation as it is only a transient event and the causes are "structural", said Rao.

In order to generate a manufacturing revolution, he said, the country needs to do a lot of things, including skill development.

"We produce 400,000 engineers every year. 200,000 engineers are not employable," he quipped.

Investing in infrastructure is another important factor for growth. However, banks are not equipped to finance infrastructure and long term financial institutions like pension funds can do it, he said.

Among others, improving agriculture productivity, investing in irrigation, health and education outcomes, maintaining macro-economic stability, managing urbanisation and environment issues are the things that needs to be done to get the "elephant dance", said Rao.