India needs Indian path of development not the Chinese: Rajan

Former RBI governor Raghuram Rajan says India needs an Indian path of development, and that the Chinese path will not work for it. He says the Indian path will draw capabilities of all Indians and build on India's historic culture of tolerance and respect.

“It builds on India's regulations. Now it’s a fact we have regular elections, but that's not the entirety of liberalism, it's that we can argue debate and criticise, and we can get ideas that are diametrically opposite to government, which will improve the quality of Indian government because criticism makes us better,” he says.

As per the former RBI governor, to become a “Vishvaguru”, India can’t work on the ideas of the past but it needs to work on the model of development for the future – which is “green, inclusive, local-led and persuades the world it actually works.”

He says the last few years have been quite bad for the poor, especially for younger citizens, and children who have suffered during the pandemic and continue to suffer.

He said India's lower middle-class households and MSMEs suffered the most from the impact of the pandemic so the full impact of the overall development has not been seen. “But we will see the full effect over time, and that means any rebound will remain somewhat subdued after the initial rebound, from the lows of the pandemic,” he adds at his recent address organised by the King’s India Institute and the National Indian Students & Alumni Union.

The former RBI governor says India's growth can't be taken for granted. “Our slow growth is not all the fault of the pandemic, it is something that has been building up and our underperformance actually dates from, perhaps, the global financial crisis and its aftermath.”

As per Rajan, the biggest problem is that we are not creating enough jobs. “You can see with the protests against the Agneepath scheme. A lot of people took to the streets hearing this. Simply because govt jobs are in a sense the last resort given there are fewer jobs available.”

He says the most worrisome thing about all these people looking for government jobs is not just the fact that jobs are scarce but that the biggest minority in India – women – are not entering the labour force in a big way.

India's most significant labour force participation was the lowest in the G-20 at 20.3% in 2019. India rivalled Suadi Arabia and that’s how bad it was for women, he says. “Now Saudi Arabia has become much better as they focused on increasing women's force participation, and they went up to 35%. We have gone down during the pandemic.”

“Think about how much richer India would be as a country if its youths and women could get good jobs. Therefore, despite all the talk about the strongest and largest growing economy in the world, etc, the fact is that the economy is not working for many,” he adds.

Appreciating the government schemes like Aadhaar and UPI, Rajan says they really made an impact on the ground. “The Aadhaar stack, conceived by Infosys’ Nandan Nilekani, has created several applications, including one we were able to work with at the RBI –UPI. The UPI platform started in 2016, and we have 4 billion transactions in a month now on UPI, basically the ability to pay for anything by just scanning the QR code of a shopkeeper and making the direct transfer from the bank.”

He adds that this facilitates “not just payments but also inclusion because now you don't have to go to ATM to take out money”.

He said India started UPI in 2016, the Fed is working on it now in 2023, creating an equivalent to the UPI. “In some sense, even in high-tech payments, India has been ahead in some areas. Unicorns, Mission to Mars…we have many successes but if just focus on successes and don't assess them critically we have a chance of underperformance.”

As per Rajan, India needs to skill and school its workforce. “As the period of reforms unfurled in the 1990s and 2000s, we also saw substantial increase in the years of schooling among the population. We finally focussed on enhancing the human capital of our people.”