Former Reserve Bank of India (RBI) Governor Raghuram Rajan, in an interview with Bloomberg, voiced concerns over India's economic trajectory, cautioning against blindly believing in the country's strong growth narrative.
Rajan labelled India's unwavering faith in its economic prowess as "the greatest mistake," emphasising the pressing need to address fundamental structural issues hindering its true potential.
One of the key challenges highlighted by Rajan is the imperative need to enhance the quality of education and skills among India's vast workforce. Stressing the significance of this issue, he underscored that without substantial improvements in education, India would struggle to harness the demographic dividend offered by its predominantly young population, with over half of its 1.4 billion citizens under the age of 30.
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Rajan dismissed Prime Minister Narendra Modi's ambitious vision of transforming India into a developed economy by 2047 as "nonsense," pointing to the stark reality of widespread educational deficiencies and high dropout rates plaguing the nation. He asserted that genuine progress could only be achieved by prioritising the employability of the workforce and fostering job creation, rather than merely aspiring for lofty economic goals.
Drawing attention to concerning statistics, Rajan cited studies revealing a decline in learning levels among Indian school children post-COVID, alongside alarmingly low literacy rates compared to regional peers like Vietnam. He warned that the dearth of human capital resulting from subpar education standards could have enduring repercussions for India's future prosperity.
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Despite recent optimism surrounding India's economic prospects, Rajan emphasised the necessity for sustained efforts to attain a sustainable growth rate of 8%. He cautioned against complacency, urging policymakers to focus on addressing underlying challenges rather than succumbing to short-term euphoria.
Rajan criticised the government's policy choices, particularly its emphasis on subsidising chip manufacturing over investing in higher education. He highlighted the significant disparity between the subsidies allocated to the semiconductor industry ($9.1 billion) and the budget for higher education ($5.71 billion), characterising such decisions as misguided and indicative of misplaced priorities.
Expressing concerns about the government's fixation on high-profile projects like chip manufacturing, Rajan emphasised the importance of bolstering foundational sectors such as education to foster long-term economic sustainability.
He warned against neglecting the essential groundwork required to support ambitious initiatives, cautioning that without adequate attention to fundamental reforms, India's aspirations for greatness could remain elusive.
