'A hard ladder to climb': Days before Nirmala Sitharaman's Budget, Raghuram Rajan has a word of advice

Former Reserve Bank of India (RBI) Governor Raghuram Rajan has urged India to prioritize enhancing its services sector over expanding manufacturing for sustainable economic growth and job creation. 

Speaking at the Annual World Bank Conference, Rajan emphasized that manufacturing is not the "holy grail" for India's economic success.

Rajan highlighted the challenges faced by the manufacturing sector, such as limited export absorption and stiff competition from countries like China, Vietnam, Indonesia, and Mexico, which offer cheap labor and more capital. 

"Both politically and economically, the manufacturing ladder is harder to climb," he noted.

He pointed out that services, and services embedded in manufacturing, add more value compared to traditional manufacturing. "The significant value added is in the intellectual property within services, not in the actual manufacturing. We need to view services as the potential leading edge of the economy," Rajan said.

Rajan also stressed the need for India to improve education and healthcare services through decentralization and local empowerment, focusing on human capital rather than just physical infrastructure. 

He argued that fostering innovation and creativity is crucial for capturing high value-added opportunities.

According to Rajan, the Indian government should prioritize job creation across all levels, not just high-end positions. "The need of the hour is more jobs," he asserted, emphasizing the importance of addressing both current job availability and future employment opportunities by upskilling individuals and providing "last mile remedial training." 

Rajan underscored the necessity of creating jobs that match existing skills while also investing in training programs for future prospects.