The former governor of the Reserve Bank of India (RBI), Raghuram Rajan has pegged a services-led export model for India, instead of following China’s manufacturing-led export model. In a lecture on globalisation and climate change, Rajan explained that services can be distributed across the country and it can reduce pressure on megacities, The Economic Times reported.
What Is Services-Led Growth?
A services-led growth is a model that vouches for the creation of jobs in the service sector. It argues that the service sector holds the key to development. It points out that an economic expansion of any sector can be possible through the distribution of employment. Moreover, a portion of economists thinks that effective implementation of the services-led growth model can be instrumental in terms of poverty alleviation and balanced growth.
Many developing economies today export 68 services in 33 markets. Which has been a key to their economic development.
Multiple times, Rajan has advocated an increase in spending on education and skill-based training to serve the youth with employment and growth. He also points out that India needs to differentiate itself from blindly following the manufacturing-led growth, which has been a Chinese economic reality for a long period of time.
For the relevant economic growth in the country, the Narendra Modi-led NDA government has relied on production-linked incentive schemes (PLI Schemes). Rajan vouches for a careful analysis of the benefits of these schemes to bolster the manufacturing sector in the country. It can also be noted, during the time of the pandemic, the manufacturing sector witnessed a massive catastrophe and it now needs to be healed.
Rajan’s thought on the services-led growth model has also been seconded by noted economic commentator Swaminathan Aiyar. Writing for The Economic Times, Aiyar argues that India needs to focus on the services like education and health that have been grossly underfunded for years. In terms of uplifting the economy, these sectors need to be taken care of along with IT.
