In a recent interview with Bloomberg, former Reserve Bank of India (RBI) Governor Raghuram Rajan delivered a sobering assessment of India's economic trajectory, cautioning against the prevailing "hype" surrounding the nation's robust growth.
Rajan, renowned for his economic acumen, labeled India's unquestioning belief in its economic prowess as "the greatest mistake," highlighting significant structural challenges that need to be addressed for the country to realize its full potential.
Central to Rajan's concerns is the urgent need for the incoming government, post the 2024 Lok Sabha elections, to prioritize the enhancement of education and skills among the workforce.
He emphasized that without substantial improvements in these areas, India risks squandering the demographic dividend offered by its predominantly youthful population, with more than half of its 1.4 billion inhabitants below the age of 30.
"We’ve got many more years of hard work to do to ensure the hype is real," Rajan remarked, cautioning against political narratives that propagate premature notions of India's arrival on the global economic stage. He stressed that succumbing to such beliefs would be a "serious mistake," highlighting the enduring significance of addressing fundamental structural deficiencies.
Rajan cited alarming statistics reflecting the educational crisis in India, exacerbated by the disruption wrought by the COVID-19 pandemic.
Studies have revealed a regression in the learning abilities of Indian schoolchildren to pre-2012 levels, with only a dismal 20.5 percent of grade three students demonstrating proficiency in reading grade two texts.
Comparisons with regional counterparts like Vietnam highlight India's lag in literacy rates, amplifying concerns over the enduring shortfall in human capital development.
Despite recent optimism surrounding India's economic prospects, Rajan maintained that sustained growth demands concerted efforts to address underlying challenges. Foreign investors have been drawn to India's rapid expansion, with the government projecting growth rates exceeding 7% in the forthcoming fiscal year, positioning India as the world's fastest-growing major economy.
However, Rajan critiqued the policy priorities of the Narendra Modi-led government, particularly its disproportionate emphasis on subsidizing chip manufacturing over investments in higher education. He highlighted the irony of allocating substantial subsidies, amounting to $9.1 billion, to semiconductor businesses, while earmarking a comparatively paltry $5.71 billion for higher education.
"The ambition of the government is real, to become a great nation," Rajan acknowledged, but expressed apprehension regarding the misplaced focus on high-profile projects at the expense of foundational reforms.
He cautioned against fixating on prestige-driven initiatives like chip manufacturing, urging a recalibration towards bolstering the educational ecosystem necessary for sustainable economic growth.
Follow us
