Solutions for legacy failures in India
India needs to convert the failures of the past into a successful strategy for generating productive employment in the future
It’s official. The east to south arc of Asia, still the most dynamic economic region of the world and the most resilient to exogenous shocks, is set to face a slowing of its trend growth rate over the medium-term to mediocre levels relative to its own dazzling past. This is the persuasive data-based judgement of the Regional Economic Outlook: Asia And Pacific, the annual April publication of the International Monetary Fund (IMF). The new normal is a result in part of the spread into the region of the demographic decline which has already afflicted the Western world. The difference is that Asia will face the burden of dependent old age at lower levels of per capita income than did the West. India, Indonesia and the Philippines will be the last to cross over from working age domination to old age domination, and are the three countries still poised to reap the demographic dividend of a young age structure. But sadly, as we know all too well, India has not embedded the skills in its young people, which would have enabled a full reaping of that dividend.
The Asia and Pacific grouping of the IMF is a loose collection of countries of all sizes to the east of India on the landmass of Asia, including China and Korea, island nations off this coastal arc, such as Japan, Taiwan, the Philippines, Indonesia and Singapore, and Australia and New Zealand to the south. It is possibly the most disparate grouping among the IMF regional formations, including as it does a majority share of the world’s poor, and a major share of the manufacturing capacity of the world. The report is a sanitized document, refraining from any overt criticism of country policies. In the Indian case, there is no mention of the legacy of failed universal primary education. There is only mention of the need for further structural reform, which has reference in the current context largely to the banking crisis. Parenthetically, India is the only major country in the region to have experienced a sharp worsening in banking indicators relative to the situation during the taper tantrum of mid-2013.
The problem of declining rates of output growth, and the declining employment generated by that growth, is now a global phenomenon. Although I tend to blame the low interest rate environment in the Western nations since the global crisis for the increasing robotization of manufacturing processes, the declining employment content of growth predates that, and the data do not seem to show a more marked decline since 2008. Automation is an irreversible reality set to grow everywhere, which leaves the whole world having to scramble to find service sector employment for new entrants into the labour force. Service sectors are resistant to automation, more so than manufacturing processes. Machine replacements are difficult in education, health, and care services, although of course driverless cars may be upon us sooner than we think. The challenge is to structure services so that they can be reliably provided manually on a spatially dispersed basis, and so create stable jobs for all.
That leaves us in India having to ponder problems peculiar to us, so as to convert the failures of the past into a successful strategy for generating productive employment in the future. The base of the education pyramid in India can usefully be split into roughly two. One group consists of students who travel some distance up the school ladder, maybe up to class VIII. The second consists of the rest, who travel beyond class VIII up to class XII or beyond. From the “Annual Status of Education Reports” (Aser) of Pratham, a survey organization with an established niche in assessing the quality of school education, the first group can at best be expected to have the ability on average to read short sentences in the primary language. The employment absorption possibilities for this group are necessarily confined to construction and other off-farm activities not calling for appreciable literacy skills.
It is here that another major failing of Indian policy points to a possible solution. The share of food produce processed beyond the bulk stage in India is commonly estimated at roughly 10%, as an average across wide variations by type of crop. The scope here is truly enormous by virtue of the low starting base, and offers the only sure-fire employment option we have, one furthermore that does not require large-scale movement of labour, and can provide incentives for farm productivity improvements as well. Spatially dispersed processing units all over the country, ready to convert perishable output into processed food with an extended shelf life, will act like a price-smoothing buffer scheme. Fortunately, we happen to have at the moment a dynamic ministry of food processing, with an ambitious plan of action for establishing food parks in every state. It might not be too much of an exaggeration to say that the employment hopes for the under-educated workforce, and for productivity improvements in agriculture, which is the majority employer, are vested almost exclusively in this ministry.
The residual segment of workforce entrants with higher basic skills than a class VIII education, carries either direct employability, or the base on which employable skills can be further built. The standard measure used to estimate the absorptive capacity for skill and productivity enhancement, such as for instance in the IMF Regional Outlook, is enrolment in tertiary education (beyond class XII) as a share of the relevant age cohort, but the composition of this tertiary education matters. We have established a profusion of costly Indian Institutes of Technology (IITs) in place of technical institutes, which could have produced certified electricians, machinists, sanitation engineers, plumbers and civil construction technicians. This has given rise to soaring failure rates in IITs as the expanded student intake finds it difficult to cope with the rigorous academic skills IITs specialize in (placing all concerned under deep stress), while at the same time not getting the kind of hands-on intermediate engineering skills which are in short supply.
Then there is the further problem of the declining labour force participation rate (LFPR) among women, highlighted in the “India Development Report” just issued by the World Bank. This is a result of many factors, including lack of safety in public places and lack of certified and regulated childcare facilities. There are work-place crèches, but they restrict job mobility, and are not in any case feasible in the big employment sectors for women, like domestic work and retail trade. In addition to the traditional drop-out triggers, women also increasingly withdraw from the labour force for the care of elderly dependents. India may still be only at the 9% mark in the old age to working age population ratio, but it is high enough to play a role in the withdrawal of skilled working age women from the labour force.
Here is another avenue where public policy failure to do anything about care of the elderly offers a way forward. After the enactment of the Maintenance and Welfare of Parents and Senior Citizens Act in 2007, financial responsibility for care of the elderly is vested in their children or other legal heirs. What is needed is a structure under the National Skill Mission to develop the training of licensed geriatric care workers, along the lines of nursing colleges that graduate registered nurses. There could be two levels of these, one not requiring the literacy and education levels needed for qualification as a nurse—say an LGW1, and a further specialization within the nursing stream, designated LGW2. These personnel could then be hired in certified, commercially operated, day-care centres so as to free family caregivers for productive participation in the labour force during the working day. This could in principle work in rural areas as well, as a possible adjunct to anganwadi centres which provide day care for infants and young children. A structure with a provision for visiting personnel with the higher level of certification should enable the mix of medical and routine physical care needed. Alternatively, certified personnel could hire themselves out as individual professionals, as indeed happens in some major urban centres now, but without formal certification. Geriatric care is a function calling more for constant presence than constant activity, and the withdrawal of would-be (usually female) participants from productive work because of the absence of such certification initiatives needs to be urgently corrected going forward.
Other interventions can reduce the causes of disability in the elderly, and thereby lower the intensity of geriatric care needed. Blindness owing to lack of access to cataract surgery, deafness owing to lack of hearing implants, inability to eat normally for lack of dental replacements, all impose avoidable cost on both the elderly and their caregivers.
What would make for a robust structure would be if the care pyramid is supervised at the highest level by medical doctors with a specialization in geriatric medicine. Such a specialization is unfortunately not on offer in our medical colleges. The American Medical Association once had it, only to withdraw it subsequently. Atul Gawande, a widely respected writer on medical issues, has written forcefully of how geriatric care calls for a holistic approach, and cannot be effective through isolated disease-specific silos. A concerted plan of action can prevent India from incurring the loss of productive workers owing to rising old age dependency, while at the same time providing employment options to new entrants into the labour force.
Indira Rajaraman is an economist.