Former RBI Governor Raghuram Rajan emphasized the crucial role of the services sector in the economic growth story, urging a balanced approach and caution against undervaluing this significant component. Speaking at the Global Investors Meet 2024 organized by the Tamil Nadu government, Rajan encouraged attendees not to oversubsidize manufacturing at the expense of the services sector.
“Don’t oversubsidize manufacturing and think that’s the only part to growth… Services are also a big part of the growth story, and let’s not treat services as a stepchild—less valuable, less amenable to low-skilled jobs. Think about tourism in the state,” expressed Raghuram Rajan, who is also a member of the Tamil Nadu CM Economic Advisory Council.
Rajan highlighted the potential of the tourism industry in creating job opportunities, especially low and semi-skilled jobs. He emphasized the need to recognize services as a valuable contributor to economic development.
Expressing skepticism about a substantial migration of jobs from China in non-strategic areas, Rajan stated, “I’m a little more skeptical that we’re gonna see a whole lot of jobs fleeing China in the non-strategic areas.” He pointed out that barriers to exporting from China might be more limited in non-strategic areas compared to strategic sectors where barriers have emerged.
Discussing the global economic landscape, Rajan stressed the importance of setting ambitious targets. He stated, “I think we have to make it possible. I think we should be as competitive as we can. It is important to focus on creating an environment for industry.”
Tamil Nadu has recently signed investment pacts exceeding $4.39 billion with prominent companies such as Tata Electronics, Pegatron, and Hyundai Motors. These investments are expected to generate thousands of jobs in the state, contributing to its economic growth. The investment pacts were unveiled at the Global Investors Meet, where Chief Minister M. K. Stalin assured support to investors, expressing the state’s ambition to play a major role in India’s growth trajectory.
“The Tamil Nadu government will support investors in every way possible,” stated Chief Minister M. K. Stalin during the event, emphasizing the government’s commitment to facilitating investment and job creation.
The investment commitments in Tamil Nadu come ahead of another significant investment summit scheduled in Prime Minister Narendra Modi’s home state, Gujarat. The upcoming summit in Gujarat is anticipated to attract numerous domestic and foreign investors, underscoring the continued interest and confidence in India’s economic potential.
Raghuram Rajan’s remarks underscore the need for a comprehensive and balanced approach to economic growth, recognizing the significant contribution of the services sector. As Tamil Nadu secures substantial investments, the state aims to leverage these partnerships to boost job opportunities and play a pivotal role in India’s overall economic development. The emphasis on competitiveness and creating a conducive environment for industry aligns with the broader goal of fostering sustainable and inclusive economic growth.
