Current growth not creating enough jobs : Raghuram Rajan

Former RBI Governor Raghuram Rajan on Friday released a report named “An Economic Strategy for India”. He expressed his views on various heated topics that encircle the Indian politics and economy.

On Farm Loan Waivers

He asserted that issues like farm loan waivers should not be a part of poll promises made by the political parties. He also mentioned that he has written to Election Commission of India suggesting that such issues should be taken off the table.
He justified his stand by claiming that farm loan waivers not only inhibit the government’s investment in the farm sector but also add burden to the fiscal of states or the Centre.

He highlighted that during the last five years, loan waiver promise has been made by one political party or other. For instance, farm loan waiver and increasing minimum support price (MSP) of crops was a prominent part of the manifesto of some parties in the recent Assembly Elections.

Who gets the benefits

He further clarified, “Certainly there is a reason to think about farm distress. But, the question of whether the flows to farmers is best affected by waiving loans, after all, there is only a subset of farmers who get those loans.”

He raised a serious question on the system by saying, “So, it[benefits of farm loan waiving] often goes to the best connected rather than those most poorly off.”

Loan waivers, as the RBI has repeatedly argued, vitiate the credit culture, and stress the budgets of the waiving state or central government, he said.

Pressing on the need to increase the resources, he added, “And I think our farmers deserve no less. We need to create an environment in which they can be a vibrant force and I would say more resources are definitely needed. Whether loan waivers are the best? I think it’s highly questionable.”

In the report, he has outlined the agenda for running the country’s economy in the next 5 years.

On Unemployment

Rajan commented on the increasing unemployment, “Although India has had 7 percent growth, it is not clearly creating enough jobs.”

He also cited an example to back his point, “25 million people applied for 90,000 railway jobs. 250 people per job and these are not priced jobs. These are actually low-level jobs. So, it does suggest an enormous demand for jobs.”

On Growth and Inequality

He expressed his concern on the increasing inequality as the growth, which he claims, is not benefitting all sectors and all the people.

Referring to the GDP data brought by the Centre, he said,”We should ask the question that is this growth path viable and clearly more needs to be done on macro stability, on fiscal
deficit, there are proposals in the paper that how we can do that.”

Calling the current growth rate “not enough”, he added, “We absolutely need to enhance growth beyond 7 percent, a lot of back and forth on what  the true growth numbers are, whatever they are, they are not enough.”

The report “An Economic Strategy for India” is prepared by 13 renowned economists from India and abroad.

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