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Has Raghuram Rajan become torchbearer of losers opposing rise of New India?

Former RBI Governor Raghuram Rajan

Raghuram Rajan, former Governor of the Reserve Bank of India (RBI) who also served as chief economic adviser under former Finance Minister P Chidambaram never fails to stir up a controversy.

Recently he told news agency PTI that India is “dangerously close” to the Hindu rate of growth after India clocked a growth rate of 4.4 per cent during the October-December quarter. China’s growth rate during the same quarter was 2.9 per cent.

Despite the slowdown in growth rate, India’s economy is expected to expand 7 per cent for the full financial year—one of the fastest growing major economies. While India’s economy grew at 6.3 per cent in the second quarter (July-September) it expanded 13.2 per cent in the first quarter (April-June).

The International Monetary Fund’s (IMF) Managing Director Kristalina Georgieva last month however said that India remains a “bright spot” in the world economy. Not just that. Earlier this week, Moody’s Analytics said India’s domestic economy is the primary growth driver and that the slowdown in economic activity late last year will only be temporary.

Rajan, who is now teaching at the University of Chicago Booth School of Business has typically remained a pessimist when it comes to the Indian economy.

In 2020, at a time when the world was grappling with the spread of the Covid 19 pandemic and its brutal impact, Rajan, who has been of the opinion that there was no harm in printing notes, said that the pandemic was the “greatest challenge” that India was facing since Independence. The fact is that no country in the world was prepared to handle the sudden emergence of challenges that the Covid 19 pandemic brought about. The stories that emerged from the developed countries including the US, UK, Spain and Germany were even more shocking.

Last year, Rajan remarked that India’s growth was back on track but then he was quick to point out that it was a jobless one.

“A lot of this growth is jobless growth,” Rajan told NDTV in an interview.

“Jobs are essentially task one for the economy. We don’t need everybody to be a software programmer or consultant but we need decent jobs,” he said. He also noted that India was becoming less of a liberal democracy than what it was a decade ago.

A a government official countered Rajan’s assertion by saying said that employment generation has been the top priority of the government.

“We are aware of the fact that more jobs and quality jobs are the need of the hour, we are working towards it,” he said.

Jobs can only be generated through various policy measures. The big jump in the capital expenditure outlay of Rs 10 lakh crore for 2023-24 compared to this financial year’s Rs 7.5 lakh crore can be a job spinner. The thrust on the manufacturing sector through the production linked incentive (PLI) scheme can be a game changer too, most analysts believe but Rajan thinks otherwise.

Recently, Apple, made headlines in India after it became the single largest provider of blue collar jobs in the electronics sector having created 100,000 new jobs in less than two years.

Rajan in a LinkedIn note questioned the efficacy of the PLI scheme. “Apple using India for cell phone assembly is no proof that PLI is working. Apple is looking for alternatives to China. The growing Indian market is a big attraction. It may be that the PLI scheme tipped Apple over the edge. It may equally be that they came for another reason,” said the note.

In 2021-22, when data pointed towards an economic rebound, Rajan again remained sceptic. “Create a bad enough downturn and the recovery will always be V-shaped,” Raghuram Rajan said in an interview with the India Today.

“When you grow you cannot rejoice because that is not real but when you slowdown, there is a problem..when the government or other stakeholders look for solutions, those solutions are not the right ones..you cannot have a problem with everything..such rhetoric does not augur well,” the official added.

Many analysts in India have now started questioning Rajan, known to be close to the Congress. Rajan had also participated in the Bharat Jodo Andolan with Congress leader Rahul Gandhi. Does he have political ambitions– is the question many are now asking.

Also read: India’s economy clocks 4.4% growth in Oct-Dec, expected to touch 7% for full year

SBI Research trashes Raghuram Rajan’s “Hindu rate of growth” barb