Services sector holds greater potential for India's economic growth: Raghuram Rajan

Former Reserve Bank of India (RBI) Governor Raghuram Rajan has stressed the importance of prioritizing the services sector for sustainable economic growth and job creation in India.

Addressing the Annual World Bank Conference on July 10, Rajan emphasized that manufacturing should not be seen as the sole driver of economic success for the country.

He pointed out that the manufacturing sector in India is grappling with limited export opportunities and stiff competition from countries like China, Vietnam, Indonesia, and Mexico, which offer cheaper labor and more capital.

Rajan noted that the global landscape has shifted, making it increasingly difficult for India to climb the manufacturing ladder both politically and economically.

"Services and services integrated into manufacturing processes hold greater potential for value addition compared to pure manufacturing," Rajan said.

He elaborated that intellectual property and value-added activities within services contribute significantly to the economy, suggesting that India should harness the potential of the services sector as a key economic driver.

Highlighting the importance of human capital, Rajan advocated for the improvement of education and healthcare services through decentralization and local empowerment.

He argued that focusing on these areas would yield better outcomes and foster long-term economic growth.

Rajan also called for fostering innovation and creativity to capture high-value opportunities within the services sector.

He emphasized the need for job creation across all levels, not just high-end positions, and stressed the urgency of addressing both current job availability and future employment opportunities.

To achieve this, Rajan recommended upskilling the workforce and providing "last mile remedial training" to equip individuals with the necessary skills for existing and future job markets.

He highlighted the importance of aligning employment opportunities with the skills people already possess while also investing in training programs to prepare them for emerging job prospects.