India’s Growth Story: Subbarao Calls for Labour-Intensive Manufacturing and Better Jobs

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.