Raghuram Rajan says India needs to grow at 8% to create enough jobs to meet demand: Report

Former Reserve Bank of India (RBI) Governor Raghuram Rajan on Friday said though India's economy is on the rise, it needs to grow at over 8 per cent to meet the ever-increasing job demand in the country. Speaking at an event in Beijing, Rajan said that while India’s 6-6.5 per cent growth rate is commendable compared to other nations, it falls short of addressing its critical need for creating jobs, especially for its youth, a Bloomberg News report said.

Post-pandemic, India has reported a steady growth, mostly due to the Narendra Modi-led government's policies, increased government spending on infrastructure and other regulatory steps.

But despite outperforming other major economies, India is facing challenges in generating sufficient jobs for the millions entering the workforce annually. The unemployment rate reached 10.05 per cent in October, a two-year high, as per the Centre for Monitoring Indian Economy in Mumbai. According to the report, an HSBC analysis suggests that India must create 70 million new jobs over the next decade. Even with a 7.5 per cent growth rate, the economy will only bridge two-thirds of this employment gap.

Rajan said: "India’s economic growth at 6-6.5 per cent is strong compared with other countries, but relative to our need for jobs I think it’s still somewhat slow because we have a lot of young people who need to be employed." 

“We should be going at 8 per cent-8.5 per cent given the needs of the population and the need for jobs,” he added.

Rajan also pointed out the need for skill development to compete with efficient manufacturing nations like China and Vietnam. He acknowledged India’s progress in producing components for products like iPhones but noted the country still has a long way to go in achieving full-scale manufacturing capabilities.

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In October, World Bank senior economist Dhruv Sharma said thatv India needs to grow at nearly 8 per cent to become a developed country by 2047 and such rapid growth is not possible at the current low level of female participation in the workforce.

"India has aspirations to become a high-income country by 2047. That will naturally require a faster pace of growth; it is growing around 6-6.5 percent. In order to get to high-income country, it needs to grow closer to 8 percent. And you can't get there if a large part of your workforce – females – are not participating," Sharma said at the release of the World Bank's India Development Update report on October 3 in New Delhi.

He added: "So for India to go from 6 per cent to 8 per cent and become a high-income country, you need to get the female labour force participation rate to be higher."

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