BREAKING THE MOULD: REIMAGINING INDIA’s ECONOMIC FUTURE

Every year, I try to make it to the Jaipur Literature Festival so I can fill up my intellectual bucket, so to speak, for the rest of the year so I can produce things that I find worthy of my time. This year’s JLF started with none other than Mr Raghuram Rajan . This year's Jaipur Literature Festival opened with a session led by Mr. Raghuram Rajan, titled "BREAKING THE MOULD: REIMAGINING THE ECONOMIC FUTURE." This session delved into their recently published book, featuring a discussion between Raghuram Rajan, co-author Rohit Lamba , and moderated by none other than Mr Naushad Forbes . The book examines some critical and crucial questions surrounding India's economic trajectory. The book proposes some strategies for accelerating India's economic development through investment in human capital, expanding opportunities in high-skilled services, and fostering innovative manufacturing of new products. In conversation with Naushad Forbes, both authors discussed the nuances of India's economic growth while navigating the challenges of being central to a global economy.

First off, they tackled the idea that every 12 years, India doubles its GDP. That's a pretty impressive stat, showing growth and potential. But then they introduced something called the "smile curve." This wasn't just any curve but about finding value in unexpected places, particularly in the services sector.

The discussion shifted to how traditionally, countries like Taiwan, Korea, and China followed a manufacturing-led growth model. India, though, is standing at a crossroads where it doesn't have to stick to the old paths. The world has changed, making the traditional manufacturing route tougher due to factors like global competition and protectionism. But here's the twist – services are becoming the new frontier for economic development. The pandemic proved that services could be delivered from anywhere, highlighting a significant shift towards a service-based economy.

Did you know there are 40 million lines of code in every Tesla? The example of Tesla was fascinating. It's not just a car; it's a bundle of services wrapped in metal. The software in Tesla, the speakers noted, represents a shift in how we think about products and value creation. This shift hints at a broader trend where value isn't just in making things but in the services that come with them.

But here's the catch – for India to leverage this shift towards services over manufacturing, there's a need to upskill the labor force. It's not about choosing services over manufacturing entirely but recognizing that the value comes from combining the two, focusing on high-value services embedded within manufacturing processes. If we want to keep doubling our GDP and become rich before we get old, we need to invest in our people. It's not enough to just have jobs; we need jobs that add value and are sustainable in the long run.

What struck me most was the sense of optimism. Despite the challenges, there's a roadmap for growth that plays to India's strengths, particularly in the services sector. It's about embracing technology, education, and innovation to create a future where India isn't just growing but thriving.

Here are my top learnings from the session. More to follow once I finish reading the book! It's a heavy-duty one.

GDP Growth Every 12 Years: India has the potential to double its GDP every 12 years, indicating robust economic growth and potential for more.

The Smile Curve Concept: This concept suggests that value addition in the economy isn't linear and highlights the importance of both high-end services like design and innovation, and the support services that come after manufacturing, like marketing and after-sales support.

Diversification Beyond Manufacturing: The traditional path to economic growth through manufacturing is changing. Emerging markets, including India, are facing new challenges that make this path less viable, such as competition with lower labor costs in countries like China and Vietnam, and global protectionism.

Services as a New Growth Avenue: The pandemic has shown that services can be delivered remotely, proving that India can leverage its service sector for growth, not just within the country but as exports.

Tesla as an Example: Tesla's reliance on software illustrates the increasing importance of services and technology in manufacturing, suggesting a shift towards a more service-oriented approach in traditionally manufacturing industries.

Upskilling the Labor Force: For India to take advantage of new growth pathways, there's a crucial need to upskill the labor force, ensuring they are prepared for the jobs of the 21st century.

Manufacturing Still Matters: While there's a push towards services, manufacturing remains important. The key is to not view it as the only path to growth but as part of a broader strategy that includes services.

Low-skilled Manufacturing Jobs: Despite the focus on services, there's still a place for low-skilled manufacturing jobs, as seen in countries like Bangladesh and Vietnam, where such industries have driven employment and economic growth.

The Importance of High-value Jobs: The discussion emphasizes not just creating jobs but creating high-value jobs that can lead to more significant economic benefits and personal growth opportunities for workers.

Education and Opportunity for All: Ensuring access to quality education and opportunities for skill development is paramount. Success stories of individuals moving from low-skilled positions to high-value roles underscore the transformative power of education and opportunity.