India should be thinking of the next 10 to 20 years when it would need a massive push to create jobs, said Raghuram Rajan, Professor of Finance, University of Chicago Booth School of Business and former governor of Reserve Bank of India.
Credit Suisse Asian Investment Conference in Hong Kong, Rajan said India could achieve even 10% growth if it built infrastructure, cleared the way for companies, eased the way for them to do business, and improved the quality of human capital including healthcare and education.
“Now if we can do all this, and it requires some important steps which require spending political capital, but if we can do it, I think we can move up from the 7.5 percent growth which is not enough to employ the 12 million people coming to the labor force every year in good jobs. We can move up to maybe 10, provide some kind of source of demand for the work. We can do that but I think we need to work on it,” he said in an interview to CNBC.
On lack of reforms in India, Rajan said they were happening but at a slower pace. “Well, things are happening. They’re happening more slowly than one would wish. That’s potentially the cost of getting political agreement. But we do need to work at it and work faster at it because we have a young population and the world is changing, that the world is less receptive as we just talked, to exports. So if India becomes a manufacturing giant overnight, who’s going to buy its stuff? So we need to think about our pathway of growth, it will be different from China’s, but it can be a very healthy growth pathway if we do what is necessary,” he said.
On how quickly can India achieve 10% growth, Rajan said that could happen after the Lok Sabha elections next year because reforms would now be put off. “Well, first I think to some extent, reforms will be put on the shelf till the next election. But post-election, if we can accelerate this pace of reform, there’s no reason why in two or three years we couldn’t move up to a higher plane of growth. It needs some key reforms in areas like land acquisition, like reforming the power sector. But I think once those are done, the impetus will be given, industry will get more confident, business will get more confident, that could be the new era. But it probably will have to wait till the election,” he said.