Raghuram Rajan says not enough jobs, India's growth not benefitting all

India has grown at a pace that very few countries do, but the growth has not been distributed evenly among all sectors and citizens, former RBI Governor  Raghuram Rajan said during a University of Chicago event here on Friday to outline India's economic agenda for the next five years. Rajan said that India's growth is not creating enough jobs, and there remains much to be done in regard to the macro-stability and fiscal deficit of the country. He emphasised that the growth rate of Indian economy has to be taken beyond the 7 per cent mark, while ensuring proper distribution of the benefits of economic growth.

"That means focussing on what is really distorted in our current approach and try and remove those distortions in order to enhance the job creating prospects of that sector. Not by the old strategy of reserving job intensive sectors and giving them additional sops, but how do we actually enhance sectors and make them create more jobs," Rajan said.

Referring to excessive applications coming for available jobs, Rajan said that India's growth "clearly is not generating enough jobs". "These aren't prized jobs, these are actually fairly low-level jobs. And so it does suggest an enormous demand for jobs," Rajan said.

Talking about the trends in Indian labour, Rajan expressed concern over declining participation of women in the country's workforce, which is opposite to what is seen in other developing countries, and pressed for creating talents with global competence.

"Why are people not looking for Indian labour? What is deficient in terms of education and skilling? What is deficient in terms of healthcare? We need to improve capabilities," Rajan said.

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"On the fiscal, if you add the Centre and the states' deficits we see no improvement over the last five years. In terms of the public sector borrowings, it still is as big as it was and that is a source of concern. Especially as state budgets are going increasingly out of balance," Rajan said.

"We see the trade deficit is large, even taking out the effect of oil. We do know oil price fluctuations change the trade deficit considerably, but even taking that out we haven't done as much as we need to do on exports," Rajan further added.

Bringing up the pertinent issue of agricultural distress, Rajan debated against the farm loan waivers citing the reason that it restricts investment. "After all there is only a subset of farmers who get those loans and so it often goes to the best connected rather than the most poorly off. And second, it obviously creates enormous problems for the fiscal of the state once those waivers are done. And unfortunately, it inhibits investment down the line," he said.

"Yes we can pat ourselves on the back for what we have done, but we also should ask the question is this growth path viable," Rajan said.

Edited by Vivek Punj