Former RBI Governor Raghuram Rajan has once again raised concerns about India’s economic growth numbers and its long-term ambitions. At the UBS Center Forum for Economic Dialogue, Rajan said that while Indians are hopeful of moving from 6% to 8% growth soon, the journey to catch up with global giants will be long.
“Indians are hoping that 6% growth right now reaches 8%, which will allow India to catch up to America and China,” he said, adding, “But with those kinds of growth rates, it will be 15-20 or 30 years before that happens. So India is still quite small.” He called for the “right kind of environment” to accelerate progress but cautioned against unrealistic expectations.
Questions over official growth data
This is not the first time Rajan has expressed doubts about India’s reported growth performance. He previously questioned the credibility of India’s GDP numbers, suggesting that actual economic expansion may be overstated. According to Rajan, when the “fluff” is removed, real growth could be closer to 6–6.5%, instead of the reported 8–8.5%.
At Northwestern University’s Kellogg School of Management last year, Rajan said India must clock steady 9–10% growth if it wants to reach developed-country status by 2047.He questioned why inflation trends don’t match the pace of claimed growth, “What creates this kind of inflation is when you are growing fast and you run out of supply. Typically, your labour wage rates start going up but in India they are not.”
Rajan also pointed to the lack of non-farm job creation, “For a fast-growing country, for agricultural employment, growth is a travesty. Why do people find jobs in agriculture? That’s low productivity. They should be finding jobs elsewhere.”
Rajan on workforce
In another recent event in Beijing last year, Rajan said India must target 8–8.5% growth given its population and employment pressures, “Economic growth at 6%-6.5% is strong compared with other countries, but relative to our need for jobs I think it’s still somewhat slow because we have a lot of young people who need to be employed.” Regardless of being one of the fastest-growing major economies, India still struggles to generate enough quality jobs for millions entering the workforce each year.