"INDIA MAY HAVE TO BEAR SOME HEADWINDS NEXT YEAR"

FORMER RBI GOVERNOR Raghuram Rajan and assistant professor of economics at Pennsylvania State University Rohit Lamba underline a policy need to look beyond centralised low-skill manufacturing and focus on ‘high-skilled service’ and ‘service embedded into manufacturing’ as an economic model for India’s growth.

- ASHUTOSH KUMAR & JOE C. MATHEW

In a discussion around their latest book — “Breaking the Mould: Reimagining India’s Economic Future” — Rajan and Lamba touch upon global challenges to India’s growth and concerns around private capex. Edited excerpts.

It seems the global slowdown has only been deferred and not averted. Where do you see the global economy and India?

Rajan: At the beginning of the year, there were a lot of worries about the global economy, which led to worries about India. That slowdown has not taken place. Signs of the U.S. economy beginning to slow are being seen. The question is whether it will be a soft landing or a hard one. Probably, it will still be difficult to engineer a soft landing. And where the Fed goes, the world follows.

The Chinese economy has not picked up since the pandemic and Europe has slowed down considerably. India has benefited from the growth this year. But it may have to bear some headwinds next year. We have to wait and see how much it will impact India.

What are the key macro aspects we need to watch out for in the Indian context?

Rajan: FDI is slowing down considerably since 2021 and private sector investment is elusive. Even when I was the governor we would say capacity utilisation hasn’t gone up to the level where the private sector seems compelled to invest. Even today the numbers haven’t picked up. So, why is capacity utilisation not picking up and why is the private sector not investing in a big way?