In a recent interview with CNBC-TV18, Raghuram Rajan, the former RBI governor who left the office in 2016, has said that 7.5% growth rate is not enough for employing 12 million people in the country. India had slumped to a three year low of 5.7% in the first quarter of FY18, but disruptions caused by demonetisation and the implementation of the GST are phasing out and India is expected to grow to 7.5% in next two years. But Raghuram Rajan has said it is not good enough. The World Bank also noted the same in a half-yearly report on India’s growth.
He said that India has the potential to grow at 10%, but that would require a lot of work. He said that reforms in India are happening but more slowly than one would wish. He added that India may move up to 10%, provided some kind of source of demand exists. He anticipated that reforms would be shelved till next general election. According to him, India is entering into a poll-bound financial year and it is a popular belief that with the impending General Election in 2019, there would be fewer reforms and more populist measures.
Another question which he raised in the interview is about the Chinese model of development which India is trying to replicate. The former RBI governor Rajan said that China’s economic growth boom on the back of its manufacturing industry and cheaper goods cannot be replicated in India. He said that world has become less receptive to exports, and asked that even if India becomes a manufacturing giant overnight, who’s going to buy its stuff?
There is no doubt that India can reap demographic dividend only if it can productively engage its young workforce. The innovative programmes like skill development, make in India and start up India have not been able to buoy the job market in India due to many constraints. Government’s latest quarterly survey on employment in eight key sectors reveals that there’s been a net addition of just 64,000 jobs across these eight sectors between April and June 2017. Even more worryingly, the manufacturing sector lost 87,000 jobs over this period, indicating that Make in India remains a distant dream. The labour bureau’s quarterly survey shows that the education and health sectors between them added 1.3 lakh jobs in April-June 2017, while the other six sectors – manufacturing, construction, trade, transport, accommodation & restaurants, and the IT/BPO industry – put together saw a net loss of 66,000 jobs. Education was by far the biggest job creator, adding 99,000 jobs over this quarter. Health saw an addition of 31,000 jobs. The survey, which in its current format has been running since April 2016, covers both regular and casual employment as well as the selfemployed in these sectors.
Since April 2016, there has been a net addition of 4.8 lakh jobs in these eight sectors with over half from education (1.7 lakh) and health (1 lakh). That translates to a 2.3% growth in employment over 15 months, an annualised growth rate of barely 1.8%. This rate is not enough to even take care of new entrants to the job market each year, leave alone reducing unemployment.
The last decade was described by many as jobless growth because the main driver of growth in India all through these years has been the services sector, particularly financial and software services which do not absorb much labour per unit contribution to GDP by very nature. The Chief Economic Adviser Arvind Subramanian had suggested in the last economic survey to focus more on labour intensive industries like textiles and leather, more so because China is leaving this space to graduate into high technology based industries. One of the major employing sectors that is metals and particularly steel industry is not doing well for quite some time and it has employment implications too. There would be certainly adverse impact of winds of protection blowing in the world, especially in the US and Europe. India needs to respond with all these challenges swiftly and imaginatively because there is still chances of more automation and technological disruptions in the world impinging on employment prospects.