Raghuram Rajan, former Governor of the Reserve Bank of India, has been stressing that India need not focus on low-cost manufacturing, as China did, and instead look at alternatives like expansion of services. Speaking to The Hindu on the sidelines of the Global Investors Meet 2024 in Chennai on Sunday, Mr. Rajan, who is a member of the Chief Minister’s Economic Advisory Council, shared his views on what India and States should focus on.
Asked whether the services sector could create the same number of jobs as manufacturing, he said, “When we think of a service job, we somehow think of only information technology (IT). There are so many other service jobs beyond IT. What you see is manufacturing itself is increasingly becoming a service-oriented job. For example, a number of coders are coding for Tesla. I would say that we should create jobs wherever we find them. What I would resist is the huge notion that we need huge subsidies in order to get low-skill manufacturing. I would rather say, let us invest in people. Let us have skilling schemes like Naan Mudhalvan, let us improve the quality of our universities. Let us improve the quality of our schools, focus on early child care. These are the ways through which we will improve the workforce. The jobs will come.”
Asked whether we are focusing on low-cost manufacturing because of the supplies disrupted by COVID-19 owing to the dependence on China, Mr. Rajan said, “I think for the West, in strategic areas like chip manufacturing and drones, there is a worry about being overly dependent on China. I think for India, the issue is that we see lot of cheap Chinese goods coming. We should try to improve the capabilities of our manufacturing. Typically, we have been much more competitive in the higher value-added manufacturing. For example, Chinese have not made big inroads in two-wheelers. That is because there is little more value-added there than commodity-manufacturing. I would say that by all means, let us improve manufacturing. Let’s also focus on where our strengths are. Our strengths are in higher value-added areas.”
