en English

Raghuram G. Rajan
Says More…

This week in Say More, PS talks with the University of Chicago’s Raghuram G. Rajan and Rohit Lamba of New York University Abu Dhabi and Cornell University, co-authors of Breaking the Mold: India’s Untraveled Path to Prosperity.

Project Syndicate: In your new book, Breaking the Mold: India’s Untraveled Path to Prosperity, you argue that the export of services – both direct services and higher-skilled manufacturing-related services – should be central to a distinctively Indian development strategy. And, as one of you recently pointed out, India has already “started providing a much wider range of remote services, including consulting, telemedicine, and even yoga instruction.” How do high-income jobs in tradable services lead to the creation of lower-income domestic jobs and contribute to social mobility across generations?

Raghuram G. Rajan and Rohit Lamba: This is a very good question, and there seems to be much confusion about how India can generate jobs for the future. The received wisdom is that state-subsidized manufacturing – the development path taken by most East Asian countries – is the only way. But manufacturing’s share of jobs in India has not changed much since the early 1980s; those leaving agriculture have instead been absorbed largely by the services and construction sectors. In line with this experience, we see enormous potential today to create a huge number of jobs in tradable services (both direct services and those embedded in manufacturing), as well as more traditional services (such as retail and transportation).

As you note, India is already emerging as a global leader in services exports, accounting for around 5% of global trade in services, compared to less than 2% of trade in manufacturing. Improved communication technologies (think Zoom and Webex) and changes to the rules of business etiquette (meeting a new client virtually is now seen as perfectly acceptable) have made it possible to provide even direct services, like consulting or telemedicine, at a distance.