Former Reserve Bank of India Governor Raghuram Rajan said on Wednesday that young people in the country require jobs, and that while attention can be diverted by social media and fake news, it will only work for so long. “Young people without jobs can be diverted to this and that for a little while. But they are going to come to the streets if they don't create jobs. We can use social media, fake news to divert things but eventually, it is going to fail,” he said.
Rajan was speaking at a webinar by the Centre for Financial Studies at Bhavan's SP Jain Institute of Management and Research. During the webinar, he also cautioned against imports being replaced as part of the Atmanirbhar Bharat initiative. He said that this was a path India had tried to pursue earlier but did not succeed.
“If the focus is on import substitution by erecting tariffs, which we have done a lot of in the last few years, then I think it is a direction we have tried before, and it has failed. I would caution against going in that direction," Rajan said.
He said in order for one to export, one needs to be able to import things that go into exports cheaply, adding that China rose as an export power because of assembly. "It brought in the stuff, put it together and exported it out. "In order to export, you have to import. Don't erect huge tariffs and focus on creating the right environment for production in India,” he added.
Speaking about targeted government spending, he said it could be useful in the long term. He said that while the country has to keep an eye on overall spending and this is not the time for a free cheque book, targeted spending can help if done wisely and carefully.
He further spoke about the consequences of the slowdown on the economic system. "If a number of firms have shut down never to reopen again, the supply side of the economy is affected. If a number of households have stopped sending their kids to school because they can't afford to do so, that again inhibits our growth potential for the future as these are going to be poorly educated kids who are going to be capable of much less quality jobs," he reportedly said
He further added that reforms for real problems are good, but it requires consensus among stakeholders, which he said is important in a democracy. “"People, critics, opposition parties have some ideas and if you could build more consensus in them... you make sure they are rolled out in a more effective way,” he said.
He also added that the country needs to work on fixing its financial system, and said that it is “pathetic” at that 50% credit to GDP we still don’t have a healthy financial system. “We are failing both in quantity as well as in quality," he added.