Indian economy, dubbed the fastest growing major economy in the world, is faced with the single most important pressure point of job creation, says former RBI Governor Raghuram G Ranjan as he makes a strong case for improvement of human capital through skill development.
Talking about the book 'Breaking the mould: Reimagining India's economic future', written jointly by him and Rohit Lamba, assistant professor of economics at Pennsylvania State University, Rajan said one of the greatest strength of India is its human capital of 1.4 billion and the question is "how do you make it strong?" The nation needs to create jobs at every level going along the path of development, said Rajan, presently Katherine Dusak Miller Distinguished Service Professor of Finance at Chicago Booth, USA.
"Jobs is the single most important pressure point... If we had many more private sector jobs showing up, would there be so much pressure on reservations? Perhaps there'll be less so to some extent," he said, regretting that states are trying to reserve jobs for their residents, which is a worrisome trend.
"...that's a reflection of the fact that we're not providing jobs. And I would say that it is the primary concern. We are a united country. You can't reserve jobs in your state for people from the state. It has to be available for everybody. We've benefited so much from each other's migration," Rajan said in an interview to PTI.
Making a case for improvement of human capital, he said, "if we create well educated high school graduates, if we move some of them to vocational training", lots of jobs can be created in the next six months to a year and the nation will not have to wait for 10 years to generate employment.
Citing an example, he said, "one place where we are severely understaffed is local government, partly because they don't do very much. You need to improve the functions that they have to do." Rajan further said, "If we improve the human capital, the biggest problem of today, the jobs that we need, will come automatically...if you also improve the quality of the workforce, companies will come to India. We constantly hear from entrepreneurs (that they) can't find good workers." He said that by skilling the average level of jobs can be transformed into good jobs. "So it's really about how we do this by taking the long view. The longer view doesn't mean results only in the long term. It means results all along the way. It means that when we end there, we will come to 2047 with a population that can be upper middle income," he added.
Rajan also underlined the need for governance reforms with focus on decentralisation and improving democratic institutions.
"We need to have governance reform which means building on our democracy and focusing on decentralization...One example of good decentralization is the daily administration which has to focus on providing social services to the poor and the middle class, such as education, mobile app clinics etc," he said.
India, he added, "needs stronger democracy, not a weaker democracy besides strengthening distribution and becoming more inclusive, taking all our people with us...We need to create the opportunities for people, entrepreneurs".
According to the book, "our current growth is largely jobless, which means we need more growth to create necessary employment or else the demographic dividend will evaporate in front of our eyes... Another possibility is that our growth and GDP have been overestimated since 2013, when we changed the method of estimating the GDP."
India, the book concludes, "is at a cross road. We must embark on the Indian way, which builds on our strengths rather than our weaknesses. Our strengths include our spirit of inquiry and debate... Those not only make life in India more empowering and fulfilling for every citizen, they will also help us build the economy of the future."
Besides other things, the authors pointed out issues concerning data collection. For instance, they said India has not collected consumption data in the last six years, since the last report from 2017 was suppressed, perhaps because leaked versions suggested an increase in poverty and the latest census data is from 2011. The new decadal round has simply been shelved.
"The infrequently collected data on employment is noisy, often not square with the lived reality of the citizenry," they said.
The authors argued that they are not against manufacturing, they are against pouring enormous subsidies into attracting the lowest end of the manufacturing supply chain, assuming that will attract the rest.
They observed that India, for a variety of reasons, missed the manufacturing bus when China took it. "The China path of starting with low skilled assembly and moving up there will not work well for us because China and others are already there and have competed down the profits," they opined.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
