- Sunday, March 09, 2025
By: Shubham Ghosh
Raghuram Rajan, former governor of India’s central bank — the Reserve Bank of India (RBI) — has called the country’s employment situation “really alarming” and said the government must focus on promoting labour-intensive jobs such as those in the services sector, Moneycontrol reported.
Speaking in a conversation with students of the Indian Institute of Management, Ahmedabad, in the western state of Gujarat, the 59-year-old economist said, “I would say we need to do far more. And it’s not about bombastic ‘oh we have arrived, we are the fifth biggest economy in the world’. It is about doing the hard work that is necessary to support the kind of jobs we need. And the jobs situation, I would say, is really alarming.”
Rajan, the Katherine Dusak Miller Distinguished Service Professor of Finance at University of Chicago’s Booth School of Business, served as the governor of the RBI both in the governments of Manmohan Singh and Narendra Modi between 2013 and 2016.
He said the rise in agriculture and related jobs was unprecedented when it comes to a growing economy.
“People leave agriculture for services and manufacturing. Here, over the last couple of years, we have seen people go back to agriculture. So the unemployment numbers are in a sense misleading because they don’t account for this effective underemployment of people who have gone back into agriculture,” Rajan said.
He said the Indian government’s approach to boosting growth and employment through a heavy focus on the manufacturing sector is not rightly guided.
“I am not in any way saying that we should not focus also on manufacturing jobs. What I am saying is that the enormous subsidies that are now going into manufacturing, we need to think of whether they would be better employed in creating the underpinnings of strong service jobs, not just in this country but as exports,” he said.
Rajan argued that it might be much easier to better services exports instead of manufacturing in the current global environment.
“Rather than manufacturing chips, which is a very capital-intensive and low-labour-intensive business, could we instead design chips, which is a very high-value-added business where we have the potential because of our smart engineers and management people,” the former RBI chief said.
In April-September, India’s services exports amounted to $150 billion, with a trade surplus of $61 billion.
Merchandise exports were higher at $232 billion, but the South Asian economy faced a big trade deficit of $148 billion in the first half of FY23.
