India’s 7% GDP Growth Not Creating Enough Jobs: Raghuram Rajan

India's economy has been growing at an impressive 7%, but former RBI Governor Raghuram Rajan has raised concerns about the country’s inability to generate sufficient jobs. Despite this growth, job creation has lagged, especially in labour-intensive sectors. Rajan, in an interview reported by PTI, pointed out that economic growth has been more capital-intensive, limiting employment opportunities.

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Growth Without Jobs

Rajan emphasized that while 7% GDP growth suggests a thriving economy, it hasn’t translated into sufficient job creation. “You would think with 7% growth, we would be creating a lot of jobs. But our manufacturing growth is capital-intensive,” Rajan explained. The high number of applicants for government jobs reflects this gap, showing a desperate demand for employment across states like Uttar Pradesh and Bihar.

Shift Towards Labour-Intensive Sectors

To address the job crisis, Rajan urged policymakers to promote labour-intensive industries. Citing examples from Vietnam and Bangladesh, he stressed the need for India to encourage sectors like textiles and manufacturing, which could absorb more workers. "We need to look at this very carefully," he noted, warning that focusing too heavily on capital-intensive growth may leave many job seekers without opportunities.

Income Inequality and Consumption

Rajan also raised concerns about income inequality, stating that while higher-income groups have seen consumption recover post-pandemic, the lower half of the population remains financially strained. This disparity threatens long-term growth unless policies are enacted to ensure economic benefits are widely distributed.

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Urgency of Demographic Dividend

India’s large, young population offers a demographic dividend, but Rajan warned that this advantage has a limited window of around 15 years. If India fails to generate sufficient jobs within this period, the country risks losing a vital opportunity for long-term growth.

Addressing GST and Regional Inequality

Rajan also called for a review of GST policy, recommending the creation of an expert committee to assess its impact. Additionally, he highlighted the need for wealth transfers from wealthier states to poorer ones, emphasizing that balanced growth across regions would prevent economic conflict.

Conclusion: Urgent Reforms Needed

Rajan’s message is clear—India’s economic growth must be accompanied by job creation and income equality. Without reforms, the benefits of this growth will remain limited, leaving many behind in the country’s growth story.

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