Reserve Bank Governor Raghuram Rajan on Friday cautioned the government on Prime Minister Narendra Modi’s ‘Make in India’ mantra, suggesting that India would have to look for regional and domestic demand for growth — to make in India primarily for India.
Dr. Rajan said that at this stage, an exports-push strategy for growth would be ineffective; as the industrial world stagnated, many emerging markets were rethinking their export-led growth model, he said. He was delivering the Bharat Ram Memorial Lecture here.
“There is a danger when we discuss ‘Make in India’ of assuming it means a focus on manufacturing, an attempt to follow the export-led growth path that China followed … But the world as a whole is unlikely to be able to accommodate another export-led China,” Dr. Rajan said.
Since the global economy was still weak, he argued, it would be much less likely to be able to absorb a substantial additional amount of imports in the foreseeable future.
“Export-led growth will not be as easy for India as it was for the Asian economies that took that path before.”
He also cautioned the Modi government against picking a particular sector such as manufacturing for encouragement, simply because it had worked well for China. “India is different, and developing at a different time, and we should be agnostic about what will work … Such agnosticism means creating an environment where all sorts of enterprise can flourish,” the RBI Governor said.
He announced that the RBI was likely to discuss an appropriate timeline with the government to take the economy to the centre of the medium term inflation band of 2 per cent to 6 per cent.