Raghuram Rajan, former Reserve Bank of India governor indicated his concerns over India’s job situation during a conversation with students at the Indian Institute of Management, Ahmedabad

Rajan called the employment situation “really alarming” and emphasised promoting labour-intensive jobs, primarily in the service sector with government support.

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“I
would say we need to do far more. It is not about being bombastic, ‘we have
arrived, we are the fifth largest economy in the world’. But it is about
working hard enough to support the kind of jobs we need,” said the former
governor.

“People leave agriculture to enter into services and manufacturing sectors. In India, over the last couple of years, people have been seen going back to agriculture. So the unemployment numbers are somewhere misleading in a sense as they don’t account for this effective underemployment of those who have gone back into agriculture,” he said.

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The
government’s approach to fostering growth and increasing employment
opportunities through a heavy focus on the manufacturing sector is misguided,
according to Rajan.

“I
am not in any way saying that government should not focus on manufacturing
jobs. But insisting that the enormous subsidies that we are now putting into
manufacturing, won’t it be better if employed in creating the firm foundation
for strong service jobs, not just domestically but as exports,” he said.

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The
government has widened the scope of its production-linked incentive (PLI)
scheme to various sectors, under which it provides incentives for incremental
sales of domestically manufactured products.

Rajan
also mentioned that it may be much easier to promote service exports than
manufacturing in the current global scenario. Service sector jobs are more
labour-intensive, which would help create jobs in the country.

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Rajan
talked about the government’s vision to manufacture chips domestically, saying
“Manufacturing chips is highly capital-intensive but low on labour dependence,
whereas if we go with designing chips on the back of our smart engineers and
management people, it would add more value to the country.”

Rajan
further commented on the PLI scheme, saying that subsidizing the manufacturing
sector parallel with raising tariffs on certain products seemed arbitrary.