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What India can learn from Singapore, and what to be cautious about

Singapore breaks the trend of advanced nations sustaining a steady reduction in the share of manufacturing in total output, points out a fascinating story in the Wall Street Journal. (Photo: iStock)Premium
Singapore breaks the trend of advanced nations sustaining a steady reduction in the share of manufacturing in total output, points out a fascinating story in the Wall Street Journal. (Photo: iStock)

The WSJ article describes how Singapore reversed the declining trend for manufacturing’s share in GDP (it fell from 27% in 2005 to 18% by 2013), raising that share to 21% in 2020 and 22% in 2022, essentially through high degrees of automation, employing very few, highly skilled workers.

A futuristic factory comprises a gleaming building block inside which is automated machinery that whirs constantly, a man and a dog. No, the factory does not require that one man to operate it— the dog has been stationed there specifically to keep the man from touching any part of any of the interconnected machines. Why have a man there, in the first place? Someone's got to feed the dog, no!

That, of course, is a joke. But Singapore seems to not have much of a sense of humour. It has taken this level of automation very seriously, and converted itself into a new hub of advanced, automated manufacturing. Singapore breaks the trend of advanced nations sustaining a steady reduction in the share of manufacturing in total output, points out a fascinating story in the Wall Street Journal. Does this hold out a model for a country like India? The answer varies, probably, for India and for Bharat.

The trend for developed countries to outsource manufacturing to countries with lower wages and see manufacturing’s share in either domestic output or employment fall is well known. In 2015, Dani Rodrik of Harvard University’s Kennedy School popularized the phrase, premature deindustrialization (he acknowledges that Sukti Dasgupta, chief of the employment, labour markets and youth branch at the International Labour Organization in Geneva, and the late professor of economics at Cambridge University, Ajit Singh, coined the term in a UN University-WIDER paper of 2006, building on some insights of post-war Cambridge economist Nikolas Kaldor into England’s economic evolution). He noted that not just advanced countries, but several developing countries, too, have started experiencing the tendency for manufacturing output and employment to fall off, with the difference that, for these countries, the decline is happening at low levels of income. In 2015 itself, former chief economic adviser Arvind Subramanian, writing alongside Amrit Amirapu of University of Kent, debated the desirability of India trying to develop low-skill manufacturing, considering that South Korea was probably the last major success story of development via industrialization, as opposed to developing skill-intensive services.

The WSJ article describes how Singapore reversed the declining trend for manufacturing’s share in GDP (it fell from 27% in 2005 to 18% by 2013), raising that share to 21% in 2020 and 22% in 2022, essentially through high degrees of automation, employing very few, highly skilled workers. “Singapore has aggressively wooed highly automated factories with tax breaks, research partnerships, subsidized worker training and grants to local manufacturers to upgrade operations to better support multinational companies, among other enticements", notes WSJ. However, a rising share of manufacturing in total output has been accompanied by a falling share of manufacturing workers in total employment, and a steady rise in the number of robots per worker: Singapore is behind only South Korea on the latter count. Manufacturing employment in the total came down from 15.5% in 2013 to 12.3% in 2021.

Productivity growth has been spectacular in manufacturing, across the world. The share of manufacturing in economic output has been on a downward trend across the past decades. From 19% in 1997, it has come down to 16% by 2019, for the world at large. For developed countries, which acquired that qualifier on the strength of manufacturing, since the Industrial Revolution, the percentage share of manufacturing in output is now in the low teens, 11% for the US, 14% for Denmark, where manufacturing performed a resurgence in the last decade, after touching 11% in 2010.

For India, the share of manufacturing in total output stood at 13% in 2019 and 2020. It had touched 18% in 1979 and 1995. After dipping since then, it again rose to 17% in 2007 and 2009. While governments have declared ambitious targets of raising this to 25%, including under the Make In India initiative, progress towards that goal has been wayward at best.

Can India actually set out a target of a higher share of manufacturing in overall output and achieve it? Does industrial policy work, or is it a trap that would hinder further evolution of the sector? Even if the share of manufacturing in overall output rises, can it push up the share of employment in manufacturing? Or should India focus on developing its service sector to supply the jobs its youth needs by the million?

Ultra-automated manufacturing jobs are, in the jargon, already servicified. The worker supervising or controlling the machines that do the actual work break no sweat, push computer keys and monitor screens, the way a regular service worker would. Further, a lot of the so-called Manufacturing 4.0 work entails running sophisticated bits of software. The software that would determine what a set of 3D printers would make comes as a file, to be downloaded from the cloud. Well, filling the material in the ‘ink wells’ of the printer is a manual job, but that would count as a service, were it to be performed by the employee of a company that maintains an office’s printers. In terms of the skills required and in the nature of the work rendered, advanced manufacturing jobs are very similar to advanced service sector jobs.

For a country as diverse as India, where people make a living collecting forest produce at one end of the skill spectrum, and designing and fabricating Mars probes at the other, there is no need to confine its industrial strategy to high-level automation or low-level production of the kind that can be performed by agricultural labour removed by a crop season, if not a generation — the mill workers of early 20th century cotton mills in Tamil Nadu were recruited from the fields and went back to them during harvest. Folding and pasting pieces of paper to make paper bags, rolling biris or making preserves of fruit calls for only primitive skills. Weaving fabric and tailoring garments call for higher order skills, but do not entail intricate technology. Once stable power supply during the day becomes a reality in rural India, countless numbers of food-processing units could come up, using a range of technology ranging from the advanced to the primitive. India can host dozens of Singapores and several Bangladeshes, with its industrious garment makers, all at once.

Singapore clearly had industrial policy. For the advocates of the free market as theology, industrial policy is hard to digest. Hence the hemming and hawing and all kinds of qualifications about accepting the validity of industrial policy. But there is substance in the advice not to make the policy too specific to any particular sector, and to keep things general, in terms of the infrastructural (high-speed, low-latency internet connectivity, for example) and skill requirements. More important are the regulatory and operational ecosystems. These have to be compatible with jurisdictions that intimately engage with one another in advanced manufacturing, in terms of data flow, standards of privacy and integrity, financial market efficiency as well as digitization of finance and native ease with advanced levels of computing at all levels, whether in machine learning, encryption, cyber security, virtual and augmented reality and, probably, the metaverse, in the near future.

India will be able to have enclaves that are at home with the Singapore levels of automation. India will also have large swathes of middling technology, handicrafts and village industries. What India will need to worry about is not just the ecosystem of the ultra-modern enclaves, but also about the gap between the Indians who inhabit this rarefied space and the rest, and the potential for schism this contains.

The emerging world is one, in which quality education of at least the higher secondary level has to be universal; migration from village to town must be possible without having to abandon dignity, as happens in Indian urban slum clusters; law and order is the order of the day, rather than the orders of a politician on a particular day; and healthcare is a functional reality rather than a permanent promise of the morrow.

Singapore is a city state, free of cannabis, political dissent and gobs of chewed gum. India has all these, and other warts by the tonne. But India has the world’s largest supply of young people who can train in science, technology, engineering and maths; and an extended diaspora of skilled professionals along whose network opportunity and skills flow. India can have the shining city on the hill, as well as the hinterland to supply that city.

Singapore might focus on the automated chunk of modern wizardry. India can have both machines and humans, provided we follow inclusive politics and policies.

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