India’s Growth Lies In Liberal Democracy To Earn World’s Trust, Potential To Lead Services Industry: Raghuram Rajan

Raghuram Rajan said, "Our independent judiciary, our liberal democracy, these are critical advantages if we are to go down this manufacturing service-led growth path"

Former Reserve Bank of India (RBI) Governor Raghuram Rajan on Friday said that India's growth path lies in leveraging its intrinsic strengths and becoming crucial to global supply chains by building on its historical culture of tolerance and respect for all. In his keynote address at the Ideas of India conference, Rajan said that India has the potential to lead in the services industry, and strengthening the country’s liberal democratic values was an economic necessity to earn the world’s trust in this endeavour, according to a PTI report. 

One of India's leading economists Rajan said that India would benefit from focusing on the service component of manufacturing or services more directly as a trusted global supplier, referencing China, which leads in providing cheap manufacturing. 

Raghuram Rajan said, "Our independent judiciary, our liberal democracy, these are critical advantages if we are to go down this manufacturing service-led growth path because this will enable us to earn the world's trust; it's intrinsically necessary,”

“We want democracy as Indians but we also want democracy to be able to convince the world that we can be trusted, that we can be effective providers of these kinds of services… we need to do our homework in strengthening our institutions, in strengthening our democracy,” he said.

The current government faced criticism for weakening institutions that have eroded India's democratic prowess. Rajan, who also teaches at the University of Chicago's Booth School of Business, has talked about India being seen as an anti-minority country which can lead to a loss of market for Indian products and foreign governments seeing the country as an unreliable partner.

Former RBI governor said that the world would not trust an “authoritarian neighbour, or an authoritarian country” with critical infrastructure like 5G technology as there would be concerns around backdoors that are built in. 

“When you provide consulting services, you need to convince the other place that you're not sort of getting backdoor entries to their firms, finding out what they're doing, and then use that to either get an advantage or blackmail them. For that you have to convince them that you are bound by the rule of law… for that we need to strengthen our democracy, our checks and balances, our data protection law. It’s in our economic interest and competitive advantage relative to Chinese and Vietnamese and Russian firms,” said Rajan.

He further said, “If we produce 10,000 engineers a year of high quality, we can be a global presence in chip design. So why not do that, rather than pour money into a bucket which is very deep… as a resource-strapped country, we need to spend much more cleverly."