Raghuram Rajan: Higher unemployment may give space to politicians catering to divisions: Raghuram Rajan

Former Reserve Bank of India Governor Raghuram Rajan has said that if unemployment rates in India remain high, it may lead to ‘entrepreneurial’ politicians who cater to religious divisions, rather than focusing on actually enhancing jobs.

In an interview with
ProMarket, Rajan said the higher unemployment rate in the country is a real danger.

“Unemployment rates stay high, especially for the lower middle class and that creates more inequality and divisions, and (room for) entrepreneurial politicians who cater to these divisions. (Perhaps they say) “let’s focus on recovering these former Hindu temples which now have mosques (standing there)” rather than focusing on actually enhancing jobs,” Rajan said.

Rajan said that India needs a programme of strong, sustainable and equitable growth, that brings together all minorities, including women and Muslims, into the fold and takes them along.

On the growth front, Rajan has argued that the Indian economy isn’t doing too badly.

“If we focus on just the Indian growth number right now, we’re not doing too badly apart from the dramatic plunge during the pandemic but if you add in that the women’s labor force participation is worse than in Saudi Arabia—people don’t believe me when I say this—these are pressing issues that need to be solved,” he said.


Lanka crisis

The Indian government has been helping the debt-ridden Sri Lanka India has extended about $3.5 billion in assistance since January. A crippling shortage of foreign reserves has led to long queues for fuel, cooking gas and other essentials while power cuts and soaring food prices have heaped misery on the people.

Rajan said that India provided emergency loans to Sri Lanka when he was the Governor at RBI as well, but the situation wasn’t as dire. It was an attempt to help a friend in need.

“India is definitely making some loans to buy fuel, send food, and so on. I think the worry from India’s perspective on the debt side is that Sri Lanka has an enormous amount of debt and if we are treated pari passu with everybody else, then we will only get a fraction back of the money we are lending now for humanitarian reasons. So there has to be some kind of guarantee provided by international organizations or other creditors that this money will not be treated on par with existing debt,” he said.

But Rajan has argued that other kinds of aid—like sending food—are things India should help with, with the aim that it is necessary for goodwill in the neighborhood.