Opinion
Create more competitive jobs to drive the Indian economy ahead
Summary
- The creation of jobs that enable productivity gains has a crucial role in raising living standards
Manufacturing has been the backbone of many economies. India has for a long time pondered ways to ramp up manufacturing in the country. In recent years, there have been sincere and potent attempts at doing this. The government’s ‘Make in India’ initiative, production-linked incentive schemes for 14 key sectors with an outlay of ₹1.97 trillion, Industrial Corridor Development Programme and National Logistics Policy, among others, have been successful in achieving their respective goals. The fact that rapid growth in services preceded quick expansion of India’s manufacturing sector, unlike what tends to be the case in most other countries, is an oft-repeated observation.
Given this scenario, India’s vigorous manufacturing push is timely and well needed. The traditional view has held the manufacturing sector as holding immense job creation potential to absorb surplus labour that is otherwise employed in agriculture. Its potential has also stemmed from its ability to absorb low-skilled labour for labour-intensive work. Hence India has placed emphasis on manufacturing industries to create a growing pool of jobs. The country has undertaken significant work on this. We must complement these efforts, however, with a focus on the creation of competitive jobs.
Competitive jobs are best defined as those that provide pathways to higher productivity and enable individuals to earn their own livelihoods and become self-reliant. Competitive jobs don’t just assure employees wages in the marketplace, they also provide opportunities for people to develop capabilities that can enhance productivity over time. These jobs are extremely important because a focus on developing the capabilities of workers and improving their productivity is key to unlocking long-term economic growth. To quote economist Paul Krugman in this context, “The capacity of a country to improve its standard of living through time depends almost entirely on its capacity to increase output per worker." By not allowing stagnation in an individual’s capacity and by offering instead an environment conducive to raising the economic value added by each worker, competitive jobs can prove transformative when generated at scale across an economy.
A large chunk of employment in India comes from informal spaces of work. Informality and irregularity in employment restricts the scope to enhance human capital and improve performance over time. It has a stifling effect on worker capacity, with limited incentives to invest in assets that would drive productivity. The International Labour Organization’s World Employment and Social Outlook 2023 report considers productivity as “key to addressing today’s multiple crises".
India has unmatched potential to be a driver of high productivity on a global scale. In 2020, India was home to 900 million people in the working-age bracket, and the country will add more than 100 million by 2030. Our working-age population is growing by roughly 10 million annually, and is expected to exceed China’s working-age population in total numbers. This explains why a discussion on our demographic dividend and need to make the most of it, as efficiently as possible, has been gaining ground. On the other hand, a digital revolution has been transforming lives and livelihoods across the country. Both these trends together can be foundational for a more productive India.
Conditions are ripe. India’s total telephone subscriber base stood at 1,178 million in 2022, with 44.3% of these subscribers located in rural India. In January 2023, around 8 billion transactions worth nearly $200 billion were carried out on the Unified Payments Interface (UPI).
Digitization and a burgeoning youth population can together be utilized to create more competitive jobs. As the changing nature of jobs reshapes the terrain of work, India can focus on two aspects. One is to invest in human capital that is yet to enter the labour market, and the other is to make productivity enhancement a continuous process for those active in the labour market.
An able workforce is just one side of the coin. Our competitive job-creation imperative also depends on gross domestic product growth acceleration. According to McKinsey’s analysis in 2020, to cater to growing employment needs, net employment would need to grow by 1.5% per year from 2023 to 2030 while maintaining productivity growth at 6.5-7.0% per year.
There are significant efforts underway to map our journey towards India’s centennial year. Amrit Kaal will be a reality not just on the back of any one defined pathway, but multiple pathways that complement each other and amplify the overall positive impact. So, even as we aim to boost manufacturing, our focus should be on the creation of competitive jobs.
In the long run, it will hold India in good stead to abandon the perception of a dichotomy between service and manufacturing sector jobs—to be replaced by the encouragement of competitive jobs across all sectors that make up our economy.
