In a recent Beijing video call, Raghuram Rajan, the former governor of the Reserve Bank of India, highlighted the crucial need for India to surpass 8% economic growth to generate sufficient jobs for its burgeoning population. This statement comes as India experiences a steady recovery from the pandemic, marked by increased government spending on infrastructure and a cleanup of balance sheets. Despite these positive trends and India's robust growth compared to other major economies, Rajan pointed out that job creation is lagging behind the needs of the upper middle class, with unemployment reaching a two-year peak above 10%.
Rajan's comments underscored the challenges faced by Prime Minister Narendra Modi's administration as it strives to fulfill its campaign promise of creating one million government jobs by the end of the year. The Centre for Monitoring Indian Economy's October figures revealed an unemployment rate that has climbed to over 10%. Additionally, HSBC has projected that India will need to create 70 million new jobs in the next decade. However, with the current growth rate hovering around 7.5%, only about two-thirds of this employment demand is likely to be met.
The ex-central bank head also emphasized the importance of improving India's workforce skills to compete with manufacturing powerhouses like China and Vietnam. While acknowledging progress in areas such as iPhone parts production, he stressed that India should aim for comprehensive capabilities in cell phone manufacturing. Moreover, Rajan expressed concern over India's lag in chip manufacturing innovation when compared to China, which could be a critical factor in economic competition.
Rajan affirmed that India is on a path of economic resurgence post-pandemic, driven by demand from an affluent middle class. Yet, he warned of potential risks from an excessive slowdown in the US economy. The challenge of job scarcity remains a formidable obstacle for Modi's third-term ambitions and underscores the need for strategic planning to ensure India's economic acceleration aligns with its employment goals.
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