Raghuram Rajan's prescription
By Justice Markandey Katju
Speaking at the Jaipur Literature Festival, Raghuram Rajan, former Governor of the Reserve Bank of India and former Chief Economist of IMF, said that the Indian government should focus on job creation instead of distributing freebies for political benefit
I doubt that despite his impressive academic credentials Raghuram Rajan has any idea in his head as to how to solve the problem of unemployment in India
There is massive unemployment in India, and a crucial problem is how to create jobs on a large scale
For answering that we have to consider how jobs are created on a large scale?
Jobs are created on a large scale when the country's economy is rapidly expanding. And that happens when there is rapid industrialisation.
For rapid industrialisation, there is no dearth of technical skills in India. We have a huge pool of technical talent. In fact, India's IT engineers are largely manning Silicon Valley in California and American Universities have several Indian Professors of Science, Engineering, Mathematics, etc. I have met several of them in my visits to the USA.
We also have huge natural resources. India is not a small country like Britain or Japan but is practically a sub continent.
The main problem, however, is this: the goods manufactured must be sold, which means that the Indian masses should have the purchasing power to buy them.
This requirement, unfortunately, is missing. There is massive poverty in India, and prices of even essential commodities like food and medicines have witnessed a steep rise in recent years. Incomes are relative to the price index, and when prices are going up that means that even with the same nominal income wages/salaries are going down. When people are finding it difficult to even buy food, how can they be expected to buy industrial products ?
No doubt we have a huge population, but most of our people are poor and so do not have much purchasing power. After all, the goods produced by industry must be sold. So the problem is not how to increase production ( that we can easily do since we have the two essentials for industrialisation viz technical talent and natural resources ) but how to raise the purchasing power of our masses, in order to have a market for our goods.
In the imperialist era markets were captured by armed force e.g. the British conquest of India or the French conquest of Algeria and Vietnam. But the era of direct imperialism is over.
Acquiring foreign markets is difficult since they are already saturated e.g. by domestic or Chinese goods. Moreover, reliance on foreign markets is precarious, since it may be cut off by another power e.g. China, or there may be a recession in that foreign country.
So the only recourse left for us is to convert our huge population into a huge market, which means raising the purchasing power of our masses. How is that to be done ? We may consider a historical example.
In the Soviet Union, where there was a revolution in 1917, the policy of rapid industrialisation was initiated after adoption of the first five year plan in 1928. The broad methodology which was followed was this : prices of commodities were fixed by the government, and these were regularly reduced every two years or so by 5-10% ( and sometimes wages raised by 5-10% ). This way the real wages of workers went up, ( since real wage is relative to the price index ) and hence the people could buy more goods. Thus by state action ( and not laissez faire ) the people's purchasing power was increased. Simultaneously, industrialisation was rapidly stepped up, and the goods manufactured could be sold ( as the people's purchasing power had gone up ).
At a time when the Great Depression was going on in the world ( following the Wall Street Slump of 1928 ) and one out of every three workers in USA was unemployed, the Soviet economy was rapidly growing and millions of new jobs created in Russia.
I am not saying that we must necessarily follow the method adopted in Soviet Russia. We can devise our own method of raising the purchasing power of the masses, but unless that is done we can never industrialise on a large scale, and can therefore never eliminate poverty, unemployment and other social evils.
I make it clear that I am not against private enterprise. But I am certainly against the crony capitalism practised in India which has resulted in 7 Indians, who bribed politicians and bureaucrats, owning more wealth than the bottom 50% of India's 1400 million population.
Rapid industrialisation of India is possible only under strong patriotic political leaders who are determined to rapidly industrialise the country. Under the present system of parliamentary democracy that is not possible, as our political leaders are only interested in power and pelf by winning the next elections, and have no genuine love for the people or their welfare, and therefore no genuine interest in rapid industrialisation.
In fact Indian parliamentary democracy runs largely on the basis of caste and communal vote banks. Casteism and communalism are feudal forces which must be destroyed if India is to progress, but parliamentary democracy further entrenches them ( as it runs on their basis )
China has no parliamentary democracy and so has progressed rapidly, while we are still embroiled in Ram Mandir, Gyanvapi, caste census, and cow protection issues. So parliamentary democracy in India has to be replaced by some other system led by modern minded, selfless, patriotic leaders who are determined to rapidly industrialise India, and make its people prosperous.
For doing that, the enlightened, patriotic sections of our people must use all their creativity.
(Justice Katju is a retired judge of the Supreme Court of India. These are his personal views.)
