The need of the hour is intellectual capital factories like IIMs

Raghuram Rajan revels in his post-RBI governor status as a sort of conscience-keeper of India’s political economy, ignoring trolling and allegations of ‘Modi bashing’.

- K. SUNIL THOMAS

It helps that he is not present on any of the popular social media platforms except LinkedIn.

But as Rohit Lamba, economist at Pennsylvania State University and co-author of Rajan’s latest book, Breaking the Mould, tells me, “People should engage with the message, not the messenger! We wrote this book because we seriously think there is a political economy path vision problem, and we are proposing a different path forward.”

In the book, Rajan explains, point by point and with examples galore, why India is on the wrong path with its post-pandemic focus on manufacturing, with its production linked incentive (PLI) schemes and China + 1 focus. One highlighted example is incentives offered to Micron to set up a semiconductor plant in Gujarat. “You are spending ₹16,500 crore to set up a chip plant that is not even cutting edge, spending more than one-third of the entire education budget of the central government to generate just a few hundred or thousand jobs,” argued Lamba. “Where are your priorities? Do you have a vision broad enough to tackle growth and jobs for the coming decades for India?”

Rajan himself had more to say. Excerpts from an exclusive interview:

Q\ You’ve given a thumbs down to the economic model of PLIs and manufacturing. How do we strike a balance, how do we go about trying a new model?

A\Services is where India needs to focus on. Not just the old-style services, but new services related to value-added part of manufacturing, the intellectual property, the content and the creativity that goes into that. The problem the China model is running into is creativity. The authoritarian government does not create an environment where creativity can flourish.