India's challenge not only to grow fast, but to make growth employment intensive: Subbarao

Former Reserve Bank of India RBI Governor D Subbarao while saying he was optimistic about Indias medium term prospects has said the country will require stronger private investment labourintensive manufacturing to sustain an economic growth of 7 per cent according to news agency PTIIndias 78 per cent growth in the first quarter suggests that the economy is more resilient than many expectedI am optimistic about Indias mediumterm prospects but not complacent he told PTISustaining growth of 7 per cent or more will require stronger private investment labourintensive manufacturing better human capital and deeper integration into global value chains he said adding The challenge is not merely to grow fast but to make growth productive employmentintensive and resilientIndias GDP growthIndias GDP grew at 78 per cent during the June quarter beating industry estimates This prompted several institutions and rating agencies to raise their growth forecast to 7 per cent or 71 per centAccording to Subbarao three factors supported the firstquarter growth amid the West Asia crisisDomestic consumption has remained resilient public investment in infrastructure has supported demand and helped crowd in private investment in some sectors and manufacturing and services particularly financial real estate and professional services have performed well he saidJob creation needs to match growthHe said the composition of growth is equally important to the pace when it comes to job creation in the economy especially in IndiaAn economy can grow rapidly through capitalintensive industries automation and sectors that employ relatively few people Output rises but employment does not increase proportionately That is a central concern for India he saidHe pointed that many of the educated youth find it difficult to find suitable employment because the economy is not generating enough jobs that match their skills He added that millions of workers in the agriculture sector are underemployed and the servicesector jobs are informal with lowproductivity and low salaryThis is not merely a labourmarket problem it is a macroeconomic concern he saidHe highlighted that that if growth does not translate into income for a broad section of the population it constrains the consumption demand which weakens the incentive for businesses to invest and expand This in turn impacts growth and creates a vicious cycleWe need to encourage labourintensive manufacturing including textiles garments footwear and food processing We must also expand productive services employment improve vocational training and make it easier for small businesses to grow into larger more productive enterprises he saidAccording to Subbarao the economic success needs to be measured in terms of how many people can earn a decent livelihood rather than how much the economy producesIndia needs growth that creates jobs and jobs that raise productivity Otherwise our demographic dividend could become a demographic disappointment he saidGDP methodologyOn the GDP methodology update he said it was important as the economy changesFour improvements are particularly important Updating the base year gives us a more representative picture of the economys current structure Better estimates of the informal sector help capture activity that may not be fully reflected in organised businesses accounts he saidDouble deflation improves the measurement of real manufacturing growth by accounting separately for changes in input and output prices And better producerprice measures can help distinguish changes in actual output from changes in prices he addedHowever he cautioned that a better methodology does not automatically guarantee that every estimate is correctThere are legitimate questions about some estimates including the manufacturing deflator and differences between GDP figures and other indicators of economic activity Subbarao saidHe added that these deserve transparent technical examination with the statistical authorities explaining the underlying data assumptions and apparent divergencesWith inputs from PTI