Paul Krugman warns mass unemployment may be a thorn in India’s growth story

Nobel-winning economist Paul Krugman has said India may be able ride the next wave of globalisation through export of services but has warned that the country may end up with mass unemployment.

“India's growth story is quite unique. Services propelling growth to an extent that hasn't been seen anywhere else in the world and the possibilities of service globalisation has only just begun. Globalisation of service trade has a huge potential. That's one reason to be especially hopeful of India’s progress. It has the first-mover's advantage here,” Krugman said at the News18 Rising India Summit.

"As the world’s economies took off because of growth in the manufacturing sector, India stood apart and unique. It exported services, which was unprecedented,” he added.

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India’s demographic dividend can help spur the economy only if the country can provide jobs for the working age population, Krugman said. He cautioned that lack in manufacturing sector may work against the country. “India’s lack in the manufacturing sector could work against it, as it doesn't have the jobs essential to sustain the projected growth in demography. You have to find jobs for people,” he added.

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Stressing on the need to utilise, engage and make best of the working age population that India has, Krugman said: “Japan is no longer a superpower because its working-age population declined, and China is looking the same. In Asia, India could take the lead but only if it also develops its manufacturing sector, not only the services one.”