Being the 5th largest economy ‘impressive,’ but per capita income must also rise, says Ex RBI Gov

Being the 5th largest economy ‘impressive,’ but per capita income must also rise, says Ex RBI Gov

Former Reserve Bank of India Governor C. Rangarajan’s recent remarks highlight the noteworthy achievement of India becoming the fifth largest economy in the world. However, he emphasizes the pressing need for India to accelerate its economic growth in order to increase the per capita income of the country.

Speaking at the 13th Convocation of the ICFAI Foundation for Higher Education, Rangarajan stressed the importance of this growth, especially in the aftermath of the Covid-19 pandemic and the ongoing Russia-Ukraine conflict. He suggests that the country should establish a clear roadmap for its future development, with a primary focus on raising the growth rate.

Rangarajan’s concern about per capita income is significant because despite India’s impressive GDP, there remains a substantial disparity in income distribution, leaving a large portion of the population struggling with poverty and low living standards. Accelerated economic growth can potentially alleviate these challenges by generating employment opportunities and improving infrastructure.

The economic challenges India faces, including unemployment, income inequality, and infrastructure deficiencies, necessitate a concerted effort to bolster economic growth. Furthermore, global events, such as the Covid-19 pandemic and geopolitical conflicts, can have far-reaching impacts on India’s economy, making it imperative to chart a clear path for development and adaptability in the face of changing circumstances.

While pursuing higher growth rates, it is crucial for India to ensure that growth is sustainable and inclusive. Sustainable growth considers environmental concerns and avoids overreliance on sectors that might lead to economic imbalances. Encouraging investment in research, technology, and innovation is also vital for enhancing productivity and global competitiveness.

A stable and consistent policy framework is essential to attract investments and foster economic growth. This stability provides businesses with the confidence to invest and expand, contributing to overall economic development.

Moreover, investments in education and skill development are fundamental to India’s long-term economic growth. A well-educated and skilled workforce is a valuable asset in today’s knowledge-driven global economy.

Former Reserve Bank of India Governor C. Rangarajan has acknowledged India’s impressive achievement in becoming the fifth-largest economy in the world. However, he highlights a significant disparity when it comes to per capita income. In 2020, India ranked 142nd out of 197 countries in terms of per capita income, indicating the considerable gap that needs to be bridged. Despite this disparity, Rangarajan emphasizes the necessity of rapid economic growth, given the current low level of per capita income in the country.

He goes on to explain that if India can sustain a growth rate of seven percent or more continuously over the next two decades, it has the potential to make substantial strides in terms of economic development. Such growth, if achieved, could propel India closer to the status of a developed economy.

Rangarajan’s remarks underscore the dual challenge that India faces: celebrating its significant economic size while also addressing the urgent need to raise the living standards of its citizens by increasing per capita income. Achieving sustained high growth rates is presented as a vital strategy to bridge this gap and propel India towards becoming a developed nation.

Former Reserve Bank of India Governor C. Rangarajan emphasizes the importance of India’s ability to adopt and adapt to emerging technologies. He stresses that India must be ready to embrace new technologies as they emerge and ensure that its workforce is well-equipped with the necessary skills to keep pace with these developments.

Rangarajan acknowledges that while new technologies may enhance productivity and economic output, they may also have the effect of reducing the employment elasticity, meaning that they may not necessarily create a proportional increase in jobs. However, he firmly asserts that employment generation should be closely linked to economic growth. In his view, trying to enhance employment without concurrent economic growth is not a sustainable approach. Therefore, he advocates for a sustained growth rate of at least 7 percent as a means to create more employment opportunities and support the absorption of new technologies.

In essence, Rangarajan’s perspective underscores the need for a balanced approach that combines technological advancement with workforce development and robust economic growth to ensure sustainable employment and prosperity in India.

Former RBI Governor C. Rangarajan emphasizes the need for a multidimensional development strategy for India. He suggests that the country should focus on not only economic growth but also other dimensions of development. In particular, Rangarajan highlights the importance of building strong export and manufacturing sectors as essential components of this strategy.

Additionally, Rangarajan emphasizes that growth should be accompanied by equity. In other words, economic development should not only aim to increase the overall size of the economy but should also ensure that the benefits are distributed fairly among the population. This emphasis on equitable growth reflects a concern for reducing income inequality and improving the standard of living for all citizens.

The chief guest at the convocation, M Jagadesh Kumar, who is the Chairman of the University Grants Commission, likely shares these sentiments, as both speakers seem to be aligned in their views on the importance of balanced and inclusive development for India’s future.