25 million applying for 90,000 railway vacancies shows we don't have enough jobs: Raghuram Rajan

For the second time in three days former RBI Governor Raghuram Rajan has said India is not producing enough jobs, which is big strike against the Modi government, especially after making it a key electoral promise back in 2014. "Lack of jobs is a very serious issue. This reflects the problems that even at 7% growth, it is not producing the jobs," Rajan told NDTV in an interview, adding that 25 million people applying for 90,000 railway jobs is "a reflection of the fact that we have a real job problem".

In a similar vein, at a University of Chicago event on Friday, he had emphasised that the growth rate of Indian economy has to be pushed up, 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," he had explained.

Today, he also put the spotlight on the gender gap in the country's labour force. "Lack of women participation in economy is very worrisome. We're not creating opportunities for women," he added.

Rajan's commentary on inadequate employment generation is at odds with what the government has been consistently saying. "If there was no job creation in the country, why do we not see the kind of social unrest which would have been there?" Finance Minister Arun Jaitley posed to The Economic Times last week, adding that in the past four-and-half years under the Modi regime there has been "no major agitation" in the country. Similarly, Niti Aayog Vice-Chairman Rajiv Kumar earlier this month termed the ongoing criticism of jobless growth as "spurious", citing EPFO data that 70 lakh jobs were created in the financial year 2017-18 alone.

Rajan further told the news channel that the three biggest problems for the Indian economy currently are the agrarian distress, the ailing power sector and the crisis in the banking system.

Significantly, he said that there were "early warning signs of the financial crisis in IL&FS, which should have been heeded. "The big issue there was certainly the big shift in ratings from AAA to D. If you looked at bond prices, these guys were trading at pretty high spreads. So it seems the markets were recognising that these guys were risky," said Rajan. "Once the rating agencies changed, the people who had invested just based on the ratings without looking at the spreads and (those who were) earlier saying we're getting all these wide spreads for the AAA rating, suddenly recognised that there's no free lunch." However, he does not think that the IL&FS debacle is India's Lehman moment.

Rajan further gave a thumbs-down to Prime Minister Narendra Modi's surprise demonetisation announcement in November 2016.  According to him, the note ban slowed down India's economic growth at a time when the world economy was growing and it impacted the GDP significantly. He added that he has seen studies which reaffirmed this point. "... The world (economy) was growing faster in 2017, we slowed down," Rajan told NDTV, adding that growth was also impacted by the implementation of Goods and Services Tax (GST). "And before anybody accuses (me) of being anti-GST, it's a good idea in the longer run, but it has short term teething effect," Rajan noted.

When asked if he was asked to implement demonetisation during his tenure as the RBI Governor, Rajan said he was asked for his opinion on the move and he had made it clear that it was a "bad idea". He also expressed that the reformist tax system could have been implemented in a much better manner.

In September this year, Rajan had claimed to have handed over a list of high-profile fraud cases of non-performing assets (NPAs) to the Prime Minister's Office for coordinated investigation in a note to a parliamentary committee. When asked about the status of that list, he said that he was "unaware of where those cases stand" and that his concern stemmed from the fact that "if one (fraudster) gets away with immunity then others may follow". But he also pointed out that a defaulter is different from a fraudster. "If you start putting defaulters in jail then nobody will take any risk," Rajan said, adding, "My worry is more that we can't bring fraudsters back to face justice in India."