Raghuram Rajan says economic achievements, not nationalism, must reunite India

Former RBI governor Raghuram Rajan

Former Reserve Bank of India (RBI) governor Raghuram Rajan has called for a "bolder national reunification programme" for India based on economic achievements rather than nationalism and identity politics.

In an article co-authored with fellow economist Rohit Lamba, Rajan wrote that while the current Indian government had the right idea with its $5-trillion-economy target, it was unachievable even if the pandemic had not occurred.

"...we should rearticulate the slogan with some modifications; 'A ten trillion dollar inclusive and sustainable economy by 2035' is an ambitious goal (requiring about 8 percent growth a year in real terms) but achievable." Rajan and Lamba wrote.

Rajan is currently the Katherine Dusak Miller Distinguished Service Professor of Finance at The University of Chicago's Booth School of Business. Lamba is an economist at The Pennsylvania State University.

The article (external link) also appeared in the Times of India newspaper on June 8. The article is the fifth in a series on why Rajan and Lamba think India's economic future can't be separated from its politics and sociology.

The government's target of becoming a $5 trillion economy by 2025 has taken a hit due to the coronavirus pandemic, with Chief Economic Adviser V Anantha Nageswaran saying in February that the achievement of the goal may be delayed by a couple of years.

More recently, on June 8, Nageswaran said India could even become a $20-trillion economy by 2040.

According to Rajan and Lamba, constitutionalism espoused by liberals may not offer a full answer to "the demagogue who brings people into the streets by reciting a litany of historic wrongs to be righted". As such, an economy-based national agenda was needed, such as one which targets making India into a sustainable and inclusive $10-trillion economy by 2035.

"To some, the pursuit of economic betterment is a low-level selfish goal. Yet it is a form of self-actualisation that offers our youth an attractive alternative to that of finding purpose in incendiary causes" Rajan and Lamba wrote.

The duo called on politicians to shout the target of making India a $10 trillion sustainable and inclusive economy by 2035 "from every roof top" and create a "popular imagery" around it such that it also becomes a cultural and political project. Further, states should also set their own goals along similar lines, with Tamil Nadu targeting to become a $1 trillion economy by 2030.

"Agencies like NITI Aayog could coordinate plans and be a forum for sharing best practices. Entrepreneurship, and the private sector more generally, should be free to flourish, not through subsidies and tariffs but through better regulation, innovation, and competition. That is where growth will eventually materialise," Rajan and Lamba wrote.