Reserve Bank of India (RBI) Governor Raghuram Rajan on Thursday said emerging market economies are getting increasingly nervous that with fast-changing technology, industrial countries may not need to outsource production to cheaper developing countries and that would lead to huge job losses.
"Increasingly, the debate is moving to emerging markets that perhaps the industrial countries will get it right this time and they won't need us," Rajan said at the launch of a book called The World in 2050.
According to Rajan, predicting non-linear events that far in the future was not possible but the next five years could be extrapolated from the present spot. In 35 years' time, "enormous changes can take place of which we have absolutely no idea about", he said.
However, in the near term, the main question facing the world is what will happen to the jobs of the middle class with the emergence of robots.
Technologies such as 3D printing and the emergence of robots had shifted the focus away from whether jobs would get outsourced to Bengaluru to whether the robot in the next room would take jobs away, he said, adding, this has resulted in rising protests against emerging technologies to even populism. A number of industrial countries are now resorting to populism and this has its own set of political implications. Events like Britain's referendum to stay with the EU show that some could be wanting a separate system and less integration. "We are already seeing worrisome signs everywhere of populists who have easy answers" which can happen when a large part of the middle-class gets disempowered. However, one question that needs to be asked is whether the world economy is resilient enough to meet any adverse event, said Rajan.
Here, liberal markets like today's financial systems are vulnerable as they are more integrated and as such ripple effects are inevitable, the RBI governor said.
Speaking at the same event, Montek Singh Ahluwalia, former deputy chairman of the Planning Commission, said inequality in the country was on the rise but it was different than what advanced countries are facing.
"It is not the same problem as the West is experiencing. They are experiencing increase in inequality in an environment of overall low growth. We are experiencing inequality in an environment of overall faster growth. The question is are we happier with lower growth, but no increase in inequality or is it better to have faster growth and tolerate some increased growth in inequality," he said during a panel discussion.
Factually and actually, inequality in the world hadn't increased, Ahluwalia said, explaining that what is true is that China, and for the last 10-12 years India, have been catching up with the industrialised world. "If you give credit to the fact that Chin and India are catching up, inequality has actually fallen," he said. What has happened is the rise of the developing economies had threatened the economic strictures of the developed countries and their middle class has lost their jobs, he added.
