India will run out of its demographic dividend by 2047 and move into an aging population era, according to former RBI Governor Raghuram Rajan. He emphasizes that in order to mitigate the effects of an aging population, strong economic growth must continue.
Factors Affecting GDP Growth According To Rajan
Rajan credits big government infrastructure spending for India’s strong second-quarter GDP growth. He stresses the beneficial effects of infrastructure investments in promoting economic growth, acknowledging the government’s proactive involvement in this regard. Given the positive outlook, the Reserve Bank of India revised upward its GDP growth estimate for 2023–2024.
The importance of investing in human capital is emphasized by Rajan as a means of ensuring the medium-term prosperity of India. With 1.4 billion people, developing and educating a sizable workforce can unleash enormous potential for economic development. Rajan suggests making resolving issues with human capital development a top priority in order to achieve long-term growth.
Rajan’s observations illuminate the careful balancing act necessary for India to effectively manage its demographic shift. As India gets closer to realising the full potential of its demographic dividend, sustained economic growth, strategic investments in infrastructure, and an emphasis on the development of human capital become imperatives.
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Cleanup of the Banking System
In response to questions on the banking system, he says that although it has taken some time, the system has now been significantly cleaned up. The cleanup was started during his time as RBI Governor. This acknowledgement sheds light on the steps taken to improve the well-being and productivity of India’s banking industry.
Finally, his observations shed light on the complex network of variables that are essential for India to properly manage its demographic transition. A strong financial system, deliberate infrastructure spending, an emphasis on developing human capital, and steady economic growth are all essential for safeguarding India’s future in the face of demographic challenges.
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