Former Reserve Bank of India Governor Raghuram Rajan has sharply questioned why India's private sector is not demonstrating greater ambition on the global stage. Speaking on the 'DeKoder' program, Rajan suggested that many large Indian companies appear satisfied with dominating the domestic market rather than aggressively pursuing international innovation and competition.
Weak Investment and Missed Opportunities
Rajan highlighted that private investment in India has remained weak for years, despite the nation's significant economic potential. He specifically pointed to the technology sector, asking why giants like TCS and Infosys seemingly missed the initial wave of the artificial intelligence revolution. While acknowledging they are now catching up, Rajan queried why they weren't part of the technology's initial ramp-up, dismissing the argument that high development costs alone could be the reason, citing China's ability to create AI models at lower costs.
“I would say it is time for the private sector to ramp up, and the real question is - why is our private sector not more ambitious? Why are they not trying to conquer the world? Why is it that they're satisfied with dominating the Indian market and making profits here?” Rajan stated.
Pharmaceuticals and Research Deficiencies
The economist also drew comparisons between India's pharmaceutical industry and China's advancements. He noted that while India's pharma firms largely remain focused on generics, China has moved into developing new formulations that attract Western interest. Rajan attributed this disparity partly to inadequate research within Indian companies and weak linkages between universities and industry, hindering innovation.
“Why is it that our pharmaceutical firms still are focused on generics with a few exceptions?” he asked, suggesting that India's research ecosystem needs significant strengthening to foster truly innovative product development.
Beyond GDP Numbers: Focusing on Jobs and Strategy
The discussion also touched upon India's economic growth figures. Rajan urged a shift in focus away from debating the accuracy of GDP numbers towards examining whether economic growth is effectively creating enough jobs and delivering tangible outcomes for the populace. He stressed that India's investment performance, particularly private sector investment, has been a major concern since the global financial crisis.
While acknowledging increased public infrastructure spending, Rajan cautioned that government investment alone cannot indefinitely compensate for a tepid private sector. He further questioned whether India possesses a clear, independent strategy to achieve its ambitious goal of becoming a developed country by 2047, suggesting that the current policy approach often appears to mimic initiatives adopted elsewhere rather than forging a unique path.