'Without better governance, all changes will be stillborn'

In their book 'Breaking the Mould', Raghuram Rajan, distinguished service professor of finance at the University of Chicago Booth School, and Rohit Lamba, assistant professor of economics, Pennsylvania State University, have stressed the need to make India a hub for ideas and pointed out that the employment opportunity lies in direct services as also in manufacturingembedded services. In an interview with Shobhana Subramanian, they said the multiplier effect can be huge with every skilled job creating four low-skilled jobs. Excerpts:

What could be India's potential growth rate in the coming decade? 

The unemployment data isn't encouraging - in fact, it is worrying. In the year before the pandemic, the share of workers in agriculture had gone up. So, while we may be the fastest-growing economy in the world, it should be quality growth. Whatever the growth, it isn't enough to create the jobs that we need. We need to play to our strength, which is our human capital, and to create better work. To achieve this, we also need to spend a lot more on education and health.

If we get the focus on services exports right, what could be the job potential?

It is hard to put an exact number to it, but services are the only place where we are creating jobs. Both as a share of output and employment, manufacturing has broadly been stagnant. If we improve the kind of jobs that we are generating in both direct services and services embedded in manufacturing that are producing high value, the aggregate out-put will go up; that will create a lot of jobs as well as a large number of allied jobs. Research in the US shows that for every high-skilled job in India, four low-skilled services jobs are produced along with it. If we are able to generate millions of jobs, the multiplier effect will play out.

You have pointed out the PLI may not be the right way to go.

We are not against manufacturing. If we improve the quality of the workforce, people will come looking for our workers. The problem is to say that the only way we can get them to come here is to subsidise; we make the old mistake, we spend the money, they come in and leave when it's no longer economical.

It's not as though they're bringing in huge amount of investment. Focus on fundamentals instead of subsidising your way to jobs, because that is not sustainable.