Ex-CEA Arvind Subramanian warns: 'AI, services won't drive inclusive growth for India'

Former Chief Economic Advisor Arvind Subramanian has warned that India's future growth will not be achieved through artificial intelligence (AI) and services alone. He said the need for a broader focus on low-skilled jobs if the country wanted inclusive growth. 

During a discussion with CNBC-TV 18 on his new book - A Sixth of Humanity, Subramanian pointed out that India's economic trajectory since its 1991 liberalisation has been marked by rapid growth, but this progress has not been accompanied by a sufficient structural transformation.

"The growth that we achieved between 1991 after we opened up and around 2012-2015, one of the paradox was that we had spectacular growth - even by international standards - something like 6-6.5% per capita over a long period of time and yet that period of rapid growth was accompanied without much structural transformation in the specific sense of not being able to provide formal jobs, reasonably well-paying jobs, reasonably productive jobs for a vast swathe of our population," he said.  

So while there was dynamism for long periods of time, we also didn't get the manufacturing jobs that could have made the growth more inclusive, the former CEA said. He further stressed that even though the country got a very rapid growth in that period, its fiscal situation had been quite fragile in the sense of having the highest deficits in a cross-country basis. 

"The period of growth that India needs going forward is again rapid economic growth...but we should not say, oh let's just focus on AI and services because those will not give us inclusive growth. We still have to make a concerted effort at getting low-skilled jobs in all parts of the economy," the economist said. 

Subramanian said that it was true that today there was a lot of macroeconomic stability, the banking sector was flushed with funds able to provide credit, there was also a lot of connectivity, and public investment had been built up. "But the major challenge has been private investment...it has remained weak for long periods of time. And in a nutshell, what I would say is that while the government has been very successful at increasing the returns to investment but the risks to investment have not gone away and still remain very high, and that's what we need the government needs to focus on going forward."