Raghuram Rajan: 'It is a big mistake to believe the hype related to economic growth', former RBI Governor gave this warning

Raghuram Rajan, a former governor of the Reserve Bank of India, has stated that India is seriously misjudging its rapid economic growth and that serious structural problems need to be fixed. Rajan stated in an interview that raising the workforce's level of education and skill would be the main task facing the incoming government following the elections.

He said, in India where more than half of the 1.4 billion population is below the age of 30. Without fixing the education and skills of the workforce, the country will struggle to take advantage of its young population.

He said, 'Believing the propaganda would be the biggest mistake for the country. We have many more years of hard work ahead of us to make sure the hype is real. The former RBI governor said that some politicians want you to believe the propaganda but it would be a serious mistake for India to succumb to this belief.

Rejecting Prime Minister Narendra Modi's ambition to make India a developed economy by 2047, Rajan said talking about this goal was "nonsense". Many of your children do not have a high school education and the drop-out rate is high.

"We have a growing workforce, but one that can only be profitable if they are employed in good jobs," Rajan said. He said that firstly India needs to make its workforce employable, and secondly, it needs to create employment for its workforce.

According to studies cited by Rajan, only 20.5% of third-graders can read a text written in grade two, and after the pandemic, the learning capacities of Indian schoolchildren have returned to pre-2012 levels. India's literacy rate is lower than that of its Asian counterparts, such as Vietnam.

"These are the kind of numbers that should concern us. The lack of human capital will be with us for decades," he said. Rajan expressed doubt over recent expectations about the economy's prospects, saying India needs to do more to achieve 8 per cent economic growth.

Foreign investors are flocking to India to take advantage of the rapid expansion, which the government estimates will reach more than 7% in the coming fiscal year, making it the world's fastest-growing major economy.

Rajan said the policy choice by the Modi government to spend more on subsidies for chip manufacturing than the annual budget for higher education is misguided. Semiconductor businesses are to be given an estimated Rs 760 billion ($9.1 billion) in subsidies to set up operations in India, while a mere Rs 476 billion has been allocated for higher education.