Former Reserve Bank of India (RBI) Governor Raghuram Rajan urged India to concentrate service sector development above manufacturing expansion in order to achieve long-term economic growth and job creation. Speaking at the Annual World Bank Conference on Wednesday, Rajan claimed that manufacturing is not the "holy grail" of India's economic growth. Rajan stated that the manufacturing sector faces challenges due to limited export absorption and is no longer competing against high-cost labor in the United States, but rather with intense competition from countries such as China, Vietnam, Indonesia, and Mexico, all of which offer cheap labor and have more capital than India.
"Climbing the manufacturing ladder is harder politically and economically," he continued. In contrast to manufacturing, which has a far lower value addition, he claims that services and services incorporated in manufacturing have higher value contributed in value chain activities. "Intellectual property contributes significantly to value addition in services, not physical production. The potential for services to be at the forefront of the economy must be taken into consideration, he stated.
In order to attain better results, the former governor of the Reserve Bank of India went on to say that India should prioritize enhancing healthcare and education facilities through decentralization and local empowerment, putting more emphasis on human capital than just physical capital.
He noted that in order for India to seize chances with high-value addition, it must promote innovation and creativity. Rajan says the Indian government should stop focusing only on high-end jobs and instead concentrate on creating jobs at all levels.
In his most recent remarks, Rajan stated, "More employment are needed. Rajan emphasized that by upskilling people for the occupations that already exist and offering "last mile remedial training," India must address both the availability of jobs today and in the future. He emphasized the significance of investing in training programs for future employment chances in addition to offering employment opportunities that align with people's current skill sets.
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