India would reach the current per capita income of China by 2047, but by this time it would also have to face an aging population.

At the Bangalore International Centre Friday, former RBI Governor Raghuram Rajan and economist Rohit Lamba discussed the economic future of India, alongside the ‘unveiling of their book’, Breaking the Mould: Reimagining India’s Economic Future.

At the outset, Rajan outlined the contradiction between the high overall economic performance of the country, having overtaken the UK in terms of the size of the economy, and having low economic participation. Rajan said the book by him and Lamba concluded that while India was doing reasonably well, there was also room for improvement. Rajan said, “We absolutely need this improvement if we want to grow rich before we grow old.”

He observed that at the current rate of growth, India would reach the current per capita income of China by 2047, but by this time it would also have to face an aging population.

Rajan also noted that an authoritarian shift with a focus on manufacturing along the lines of China would no longer be an option in the modern day and the global market. He pointed out that India would have to focus on human capital and the capacity to create intellectual properties.

He said, “The West has seen what China did to manufacturing… it is going to be very resistant… protectionist measures are going up exponentially. Already you can see American firms that are not investing in China.”

Pointing out services as an alternative, he explained, “Services doesn’t just mean IT and consulting, etc. It also means services focused on the domestic economy. A lot of moderately skilled jobs can be created… the benefit is that a lot of human capital will also be created.” He also noted that education would be increasingly important in this context.

He explained, “One of the reasons that many students who graduate don’t have work… surveys suggest that 50 per cent of them are unemployable… We need to remedy a fair amount there. This is part of strengthening the education process.” Rajan noted that this would have to be done at all stages, from tackling malnutrition to improving schools and teaching students better.

Responding to a question on what takeaways entrepreneurs should have, Lamba said, “I think we need much bigger volumes. When we describe the examples in the book… but where do you get volume from? I think one thing we emphasise and the existing entrepreneurial class is already doing to some extent… is a greater emphasis on collaboration in industries and university research… this needs to happen on a war footing.”

He also pointed out that the nature of services meant that scaling an enterprise up would not necessarily be essential. While it might be needed for some global products, a large number of service-based enterprises could be maintained at a small size and still be highly profitable, Lamba added.

© The Indian Express Pvt Ltd