Former Reserve Bank governor Raghuram Rajan has warned that India is “dangerously close” to the Hindu rate of growth given private sector investment, high interest rates and slow global growth.
Mr. Rajan said Sequential deceleration in quarterly growthAs revealed by the latest estimates of national income released by the National Statistics Office (NSO) last month, there was concern.
Hindu rate of development is a term used to describe Indian economic growth rate From the 1950s to the 1980s, that averaged about 4%. The term was coined in 1978 by Raj Krishna, an Indian economist, to describe slow growth.
Gross domestic product (GDP) growth declined to 4.4% in the third quarter (October-December) of the current financial year from 6.3% in the second quarter (July-September) and 13.2% in the first quarter (April-June).
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The growth rate in the third quarter of the last financial year was 5.2%.
“Certainly, optimists will point to an upward revision in the previous GDP number, but I am concerned about a sequential slowdown. The private sector is unwilling to invest, the RBI is still raising rates, and the global Growth is likely to slow later in the year.” I’m not sure where we find the additional growth momentum,” Mr. Rajan said in an email interview PTI,
Recently, Chief Economic Advisor V Ananth Nageswaran attributed the slow quarterly growth to the upward revision of estimates of national income for previous years.
The key question is what will happen to Indian growth in fiscal year 2023-24, with Mr. Rajan saying, “I am concerned that if we achieve 5% growth first we will be lucky.” The latest October-December Indian GDP numbers ( At 4.4%) the year before and 1%) relative to the previous quarter suggest slower growth than the key numbers in the first half of the year.
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“My apprehensions were not misplaced. The RBI has forecast a contraction of 4.2% for the last quarter of this fiscal. At this point, the average annual growth for the October-December quarter relative to the corresponding pre-pandemic quarter 3 years ago is 3.7.%.
“This is dangerously close to our old Hindu rate of growth! We must do better.” He said the government is doing its bit on investing in infrastructure, but the thrust on building it has not yielded results so far.
The bright spot is services, he said, “that seem less central to government efforts.” On a question about the Production Linked Incentive (PLI) scheme, Mr Rajan said any scheme in which the government puts money in will create jobs and any scheme that boosts output by offering bonuses for the last units produced in India. But increases tariffs, will produce. India, and Exports.
“A sensible assessment would ask how many jobs are being created and at what cost per job. According to the government’s own figures, 15 per cent of the proposed investment has come, but only 3 per cent of the projected jobs have been created. Doesn’t sound like success, at least not yet,” Mr. Rajan said.
Furthermore, even if the scheme fully meets the government’s expectations over the next few years, it will create only 06 million jobs, a small shortfall in the number of jobs India needs over the same period, the former RBI governor said.
“Similarly, government spokespeople point to an increase in cell phone exports as evidence that the plan is working. But if we’re subsidizing every cell phone exported, that’s an obvious consequence. Important question.” That is how much value has been added in India. It has turned out to be very less so far,” he said.
Imports of cell phone parts have also increased, Rajan said, so net exports in the cell phone sector, the relevant measure that no one talks about in the government, are roughly where the plan started.
“Except that, we have also spent money on subsidies. Foxconn has announced a big factory to make components, but they are saying they will invest for a long time. I think the PLI scheme We need a lot more evidence before we can celebrate success.” ” They said.
Currently, Mr. Rajan is the Katherine Dusak Miller Distinguished Service Professor of Finance at the University of Chicago Booth School of Business.
He further said that most developed economies in the world are largely service economies, so you can be a large economy without a large presence in manufacturing.
“Services not only account for the majority of our unicorns, services can also provide many semi-skilled jobs in construction, transport, tourism, retail and hospitality.
“So let’s not scoff at service jobs – in fact while the share of manufacturing jobs in India has stagnated, services have absorbed the exodus from agriculture.
“We need to work on both manufacturing and services to create the jobs we need, and fortunately, many of the inputs to both (services and manufacturing) require schooling, skills,” he said.
On what measures the government should take to improve oversight of private family companies to address concerns following Hindenburg’s allegations on the Adani group, Mr Rajan said: “I don’t think the issue is about more oversight of private companies. Is.”
The point is to reduce non-transparent links between government and business, and what’s really encouraging is regulators doing their jobs, he said.
“Why has SEBI not yet gotten to the bottom of the ownership of Mauritius funds that are holding and trading Adani’s stock? Does it need help from investigative agencies?” Mr. Rajan expressed surprise.
The Adani group has been under severe pressure ever since US short-seller Hindenburg Research on January 24 alleged accounting fraud and stock manipulation, allegations the group described as “malicious”, “baseless” and a “systematic attack on India”. I have denied. ,