Former Reserve Bank of India (RBI) Governor Raghuram Rajan has urged India to prioritize improving its services sector above expanding manufacturing to achieve long-term economic growth and job creation.
The manufacturing industry faced issues because of limited export absorption and was no longer fighting against high-cost labour in the United States, but rather with severe competition from nations such as China, Vietnam, Indonesia, and Mexico, all of which offered cheap labour and more capital than India.
Services and services incorporated in manufacturing add more value to value-chain activities than manufacturing, which adds significantly less. The majority of the value added comes from intellectual property in services rather than physical manufacturing. We must regard services as a possible driver of economic growth.
The former RBI governor also said that to achieve better results, India should prioritize increasing education and healthcare facilities through decentralization and local empowerment, with an emphasis on human capital rather than physical capital.
India must address both present job availability and future employment chances by preparing people for existing jobs and providing last-mile remedial training. The necessity of generating employment possibilities that fit people’s existing skills while simultaneously investing in training programs for future job chances.