Raghuram Rajan, former central bank Governor, cautioned that India is making a critical mistake by believing in the "hype" surrounding its robust economic growth, emphasising the presence of significant structural issues that must be addressed for the nation to realise its full potential, according to a Bloomberg report.
Rajan highlighted that the foremost challenge facing a new government post-election is the enhancement of education and workforce skills. He stressed that without addressing this issue, India would encounter difficulties in harnessing the potential benefits of its youthful demographic, especially considering that more than half of the population of 1.4 billion is under the age of 30, the Bloomberg report quoted Rajan as saying.
“The greatest mistake India can make is to believe the hype,” he said.
“We’ve got many more years of hard work to do to ensure the hype is real. Believing the hype is something politicians want you to believe because they want you to believe that we have arrived.” But it would be a “serious mistake for India to succumb to that” belief, Rajan added.
Rajan rebuffed Prime Minister Narendra Modi's aspiration to transform India into a developed economy by 2047, labelling it "nonsense" given the prevalent scenario in which a significant number of children lack access to high school education and dropout rates remain high in the country.
“We have a growing workforce, but it is a dividend only if they’re employed in good jobs. And that’s, to my mind, the possible tragedy that we face,” he said. Rajan emphasised that India's primary focus should be enhancing its workforce's employability and subsequently generating employment opportunities for the existing workforce.
Rajan referenced studies indicating a decline in the learning proficiency of Indian schoolchildren to levels observed prior to 2012 following the pandemic. He highlighted that merely 20.5 per cent of third-grade students were able to read a second-grade text. Additionally, he noted that literacy rates in India continue to lag behind those of other Asian countries such as Vietnam.
“That is the kind of number that should really worry us. The lack of human capital will stay with us for decades,” he said.