Economic Growth At 6% Insufficient For India's Job Market, Warns Former RBI Governor Raghuram Rajan

India’s economy is on the rise, but to meet the job demands of its burgeoning population, it needs to grow at over 8%, says former Reserve Bank of India Governor Raghuram Rajan. Speaking at an event in Beijing, Rajan emphasized that while India’s 6%-6.5% growth rate is commendable compared to other nations, it falls short of addressing the country’s critical need for employment, especially for its youth.

What to know? Despite outperforming other major economies, India faces a challenge in generating sufficient jobs for the millions entering the workforce annually. The unemployment rate reached 10.05% in October, a two-year high, as per the Centre for Monitoring Indian Economy in Mumbai.

According to a Bloomberg report, HSBC’s analysis suggests that India must create 70 million new jobs over the next decade. Even with a 7.5% growth rate, the economy will only bridge two-thirds of this employment gap.

This issue is particularly pressing for Prime Minister Narendra Modi, who is eyeing a third term in office in the upcoming elections. His administration is actively working to fulfil his promise of one million government jobs by year’s end, a move to address the job crisis.

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Not all too rosy? Rajan also pointed out the need for skill development to compete with efficient manufacturing nations like China and Vietnam. He acknowledged India’s progress in producing components for products like iPhones but noted the country still has a long way to go in achieving full-scale manufacturing capabilities.

Rajan’s remarks also touched on broader economic issues. He highlighted India’s recovery from the pandemic and steady growth, driven by government infrastructure spending, balance sheet cleanups, and upper-middle-class demand. However, he cautioned that India lags significantly behind China in areas like chip manufacturing. On the global front, Rajan sees a challenging path for the US economy, with a more than 50% chance of it slowing down excessively.

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