RBI Governor D. Subbarao said while India is recording rapid growth, creating jobs is one of the big challenges. He said sustaining a growth rate of 7% or above needs investments that will help maintain such an average growth rate. These include labor-intensive manufacturing, human capital development, and integration into global value chains. Subbarao remained hopeful on India's medium-term outlook but called for prudence.

The first-quarter growth rate of 7.8% shows India is more robust than people expect. Recently, the World Bank increased the GDP growth forecast of the country for the current fiscal year by 0.5 percentage points to 7.1%. This comes due to the strong domestic demand and exports, notwithstanding the global challenges facing the economy. Asian Development Bank, OECD, and the rating agencies like S&P and Fitch have projected India's GDP growth for FY2027 at around 7%.

OECD increased the GDP growth forecast of India for FY2027 by 80 basis points to 7.1%. Subbarao said three factors helped first quarter growth rate. The domestic consumption is robust and government's investments in infrastructure helped boost demand. The manufacturing and services sector performed well.

According to Subbarao, the problem is not that growth doesn't create jobs, but that the structure of growth is as important as its pace. The economy can grow faster through capital-intensive industries, automation, and sectors that employ fewer people. This increases production, but employment does not increase proportionately, which is a central concern for India. Millions of workers in the agricultural sector are underemployed. Many service jobs are informal, low-productivity, and low-paying. Even educated youth struggle to find suitable employment because the economy isn't creating enough jobs that match their skills.

Subbarao said this isn't just a labor market problem, but a macroeconomic concern. If growth doesn't translate into income for a large segment of the population, consumption demand remains constrained. This weakens the incentive for businesses to invest and expand, which in turn harms growth and creates a vicious cycle. We need to encourage labor-intensive manufacturing, including textiles, apparel, footwear, and food processing. We must expand employment in productive services. We must improve vocational training and make it easier for small businesses to transform into larger, more productive enterprises.

Subbarao also addressed the methodology for GDP estimates. He said updating the methodology is essential as the economy continues to change. Four reforms are particularly important: keeping the base year on record, better estimates of the informal sector, double deflation, and better producer-price measures. These are theoretically improvements, but improved methodology does not automatically guarantee the accuracy of every estimate. There are legitimate questions about some estimates, such as the manufacturing deflator and the divergence between GDP figures and other indicators of economic activity. These should be subjected to transparent technical scrutiny.

RBI Governor D. Subbarao said while India is recording rapid growth, creating jobs is one of the big challenges. He said sustaining a growth rate of 7% or above needs investments that will help maintain such an average growth rate. These include labor-intensive manufacturing, human capital development, and integration into global value chains. Subbarao remained hopeful on India's medium-term outlook but called for prudence.

The first-quarter growth rate of 7.8% shows India is more robust than people expect. Recently, the World Bank increased the GDP growth forecast of the country for the current fiscal year by 0.5 percentage points to 7.1%. This comes due to the strong domestic demand and exports, notwithstanding the global challenges facing the economy. Asian Development Bank, OECD, and the rating agencies like S&P and Fitch have projected India's GDP growth for FY2027 at around 7%.

OECD increased the GDP growth forecast of India for FY2027 by 80 basis points to 7.1%. Subbarao said three factors helped first quarter growth rate. The domestic consumption is robust and government's investments in infrastructure helped boost demand. The manufacturing and services sector performed well.

According to Subbarao, the problem is not that growth doesn't create jobs, but that the structure of growth is as important as its pace. The economy can grow faster through capital-intensive industries, automation, and sectors that employ fewer people. This increases production, but employment does not increase proportionately, which is a central concern for India. Millions of workers in the agricultural sector are underemployed. Many service jobs are informal, low-productivity, and low-paying. Even educated youth struggle to find suitable employment because the economy isn't creating enough jobs that match their skills.

Subbarao said this isn't just a labor market problem, but a macroeconomic concern. If growth doesn't translate into income for a large segment of the population, consumption demand remains constrained. This weakens the incentive for businesses to invest and expand, which in turn harms growth and creates a vicious cycle. We need to encourage labor-intensive manufacturing, including textiles, apparel, footwear, and food processing. We must expand employment in productive services. We must improve vocational training and make it easier for small businesses to transform into larger, more productive enterprises.

Subbarao also addressed the methodology for GDP estimates. He said updating the methodology is essential as the economy continues to change. Four reforms are particularly important: keeping the base year on record, better estimates of the informal sector, double deflation, and better producer-price measures. These are theoretically improvements, but improved methodology does not automatically guarantee the accuracy of every estimate. There are legitimate questions about some estimates, such as the manufacturing deflator and the divergence between GDP figures and other indicators of economic activity. These should be subjected to transparent technical scrutiny.