“Need $5 trillion growth with shared prosperity, not just for top 10%”, says former RBI Governor, Dr D Subbarao
On the 2nd of November 2022, the Centre for Civil Society (CCS) in collaboration with the Economics Research Centre (ERC) organized the BR Shenoy Memorial Lecture 2022. This lecture is a part of the annual BR Shenoy Memorial Lecture Series, which aims to memorialize the ideas of the late Prof BR Shenoy. This year’s lecture was delivered by Dr Duvvuri Subbarao, Former Governor of the Reserve Bank of India and a distinguished visiting faculty at the National University of Singapore on the “Macroeconomic Challenges on the Path to a $5 Trillion Economy”.
The lecture began with a welcome note and introduction to Prof. Shenoy’s life and work by the moderator Mr Kumar Anand, Economics Research Centre. Kumar mentioned how in the early years of the Indian Republic Prof. Shenoy’s was the lone voice against the then-dominant Soviet model of economic planning and state-owned heavy industries. As a member of the planning commission, in a celebrated Note of Dissent to the Second Five Year Plan, he had argued for employment-generating investment in agriculture and light industry. Prof. Shenoy always argued for new thinking and practical policies that would build a stronger Indian economy.
This was followed by the lecture by Dr Subbarao where he highlighted the 7 key macroeconomic challenges on India’s path to a $5 Trillion Economy, such as: accelerating the growth rate, reducing inequality, maintaining a steady inflation & exchange rate, maintaining financial stability and creating more jobs. Dr Subbarao pointed out how even after being the 6th largest economy (by the GDP measure) India is still one of the most unequal societies in terms of per capita income across the world. And the pandemic has widened the inequality gap even more. He quoted “We can definitely reach $5 Trillion by inflating the economy, by just the top 10% of the population becoming richer and getting better with the bottom 90% remaining where they are, but that’s not what we want, we want a $5 Trillion growth with shared prosperity”.
While discussing the macroeconomic challenges, Dr Subbarao reflected on unemployment as possibly being the most crucial problem facing the economy. The critical link to exploiting demographic dividend is to provide jobs. About 12 million people join the labour force every year, but we’re not even able to provide half as many jobs. The jobs we created are low-productivity jobs. The lecture concluded with the final closing thoughts that, “the attitude which we should take to our economic management is to be open to ideas, to challenge conventional economic orthodoxy, to respect dissent and to be pluralistic. And that’s where the life and work of Dr Shenoy is a shining example for guiding today’s economic management”.
The discussion was followed by an intriguing Q & A session, whereby participants coming from a diverse demographic & professional background asked their queries pertaining to challenges towards building the $5 trillion economy in the coming decade. During the Q&A session, Dr Subbarao reflected on the crucial role of manufacturing on this path. While quoting Raghuram Rajan, he mentioned “We must focus on services for tomorrow’s growth” but at the same time, we cannot deemphasize manufacturing. We still have to rely on manufacturing to provide 10s of millions of jobs. India will have to mobilize jobs from the service sector, there is a huge potential in the manufacturing sector.
The full lecture can be viewed online here.