Not by growth alone

| Updated on January 11, 2018

A package of measures is needed to enable businesses to employ more people

Faster economic expansion of about 8-10 per cent no doubt is a prerequisite for job creation, as noted by the Chief Economic Advisor Arvind Subramanian recently. Yet high growth alone is not enough to create jobs. In India’s case, the low import duties on capital goods, besides archaic labour laws, encouraged the substitution of labour for capital during the phase of high, but jobless growth. India has witnessed sluggish growth of jobs in high growth sectors such as automobiles, due to automation and use of robotics. Over the next few years, many jobs will fall victim to artificial intelligence as businesses look for ways to lower recurring manpower costs. For India, with almost half of its population below 25 years of age, settling for slow growth of jobs is out of the question.

While creating jobs is not the Government’s primary responsibility, it should act as a facilitator by moulding an environment that enables rapid economic growth, new investments and expansion of jobs. Given India’s demographic profile, varying literacy levels, range of skills and stage of development of its economy, the nation needs to create various kinds of jobs — from low-skill construction jobs to high-precision ones and from low level back-end jobs to specialist ones. That would call for more than single ministry-led missions and programmes. It requires less cumbersome labour laws and a bankruptcy code that together enable easy exit and entry of labour and capital, accompanied by a workable safety net and private-public institutions to beef up skills. Good infrastructure and connectivity are, of course, a pre-requisite to further investment.

The CEA had identified the apparels and footwear items sectors for creating low-skill jobs, particularly for women, in Economic Survey 2016-17. These sectors also have high export potential. While India is a major exporter of apparels and leather items, other countries in South-East and East Asia have done better, because they offer better infrastructure and easier conditions to do business. India has lost out to countries such as Vietnam in recent years in terms of attracting businesses leaving China, where sharp rise in labour costs made low-skill manufacturing uncompetitive. Cheap labour alone will not ensure that ‘Make in India’ is successful. India should learn from China’s experience with special economic zones, where industry invested readily as it was provided the necessary infrastructure, including workers’ quarters, while also being obliged to rope in local units and transfer technology. Like Vietnam, India needs to offer excellent infrastructure and logistics. The rollout of GST in a few months could be a positive factor for investors.

Published on May 19, 2017

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