Labour-intensive industries can spur growth, says Rakesh Mohan

India needs to push labour-intensive large scale industries to ensure it can return to an annual GDP growth rate of 8 per cent, notes a paper authored by Rakesh Mohan (pictured) for Brookings India.

“Apart from maintenance of appropriate interest rates and a realistic and competitive real exchange rate, the achievement of such industrial growth rate needs focused attention on the promotion of labour using manufacturing exports,” according to him. 

His paper is significant since it comes just before the newly-elected National Democratic Alliance (NDA) government presents its first annual Budget on July 5. 

Mohan was one of the economists who presented his observations to Prime Minister Narendra Modi at an interaction last week. 

The former deputy governor of the Reserve Bank of India and secretary, economic affairs, discussed the contours of his paper at a session in the city on Friday. 

Mohan said other than labour-intensive manufacturing, the other points of departure in his paper was the emphasis on role of the state in promoting economic growth.

“The countries that have been successful in maintaining high rates for three decades and more have been those whose governments have succeeded in setting up growth-promoting governmental institutions that coordinate the needed public investments,” the paper said. 

Commenting on the paper, Aditya Birla group chief economist Ajit Ranade said the spurt in India's growth rate between 2003 and 2008 was due to a combination of unique factors. 

This included factors like global spurt in commodities due to the demand from Chinese build up for its Olympic Games, the Y2K impact and domestic reforms like the new telecom policy.

According to him, it was difficult to envisage a return of such combinations again.