RAGHURAM RAJAN

It Is Too Early to Celebrate India's New Growth Path

Former RBI governor and economist Raghuram Rajan has been vocal about his ideas on policy matters in India. His latest book Breaking the Mould, co-authored with economist Rohit Lamba, is a deep dive into finer issues of the economy, including welfare schemes, job crisis, misplaced priorities of the government and much more. In an interview, Rajan demystifies the current narrative of growth in the country and why manufacturing-led growth might not be the best solution at hand. Edited excerpts:

There is an oscillation between growth and redistribution cycles in a country’s economic trajectory, according to your book. How do you identify India’s post-2014 journey—as a period of growth or one of redistribution?

If you are talking about the current government, what we have seen over the last nine years is certainly building upon the initial India stack ideas. We have developed a much better ability to offer direct benefits transfers of various kinds, whether it is cooking gas subsidies or transfers to the farmers. In a sense, we have moved into a period where redistribution can be done in perhaps a more efficient way with less leakage along the way.

There is also an incentive sometimes to do this because politicians can get associated with specific schemes of redistribution. In the past, with the leakage that used to happen, you might risk angering people because it was not reaching them. Today, it reaches them instantaneously. That being said, I think the job crisis—and I am going to call it crisis because it is a building problem—means that you cannot stay away from growth for long. You cannot distribute enough to compensate for a good job. If people are not getting jobs, then no amount of distribution can take off some of the edge of your hunger; it cannot hold you up permanently. That is why I think there is certainly a concern about growth.