India Cannot Depend On Just Manufacturing For One Million Jobs Per Year: Ajay Banga, CEO, Mastercard
Banga said he is also worried that the country does not have 25 years to fix this situation
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Emphasising on the need for India to focus on productivity to ensure robust GDP growth, Mastercard president and CEO Ajay Banga cautioned that the country cannot depend on manufacturing alone to create one million jobs a month which it is aspiring for. He said, "My belief is that what India is trying to do and needs to do more of is democratising productivity. India is all about creating jobs and quality of life. Whether you are a politician or a government employee, private sector person, mother or a rich businessman, if you create jobs and you give quality of life, that's all India is speaking about now.”
Voicing concern about India's over-emphasis on manufacturing to grow its economy and create jobs, Banga said. "You are thinking only about manufacturing today, everything about India is manufacturing. That's where I differ."
"The manufacturing train is a hard train to get on today because supply chains in the world are getting disrupted, trade barriers are going to create further disruption of the supply chain. Besides, the cost of production in India is much higher than the cost of production elsewhere," he said.
The Mastercard CEO added, ‘It irritates me no end that India does not get the idea that democratising productivity cannot continue to be done with yesterday's rules. It needs what is going on today plus more. Yes, it needs Goods and Services Tax (GST), yes demonetisation, yes skill-building and focusing on other sectors like tourism.’
Giving the reasons why focus on only manufacturing concerns him, Banga said apart from changes in supply chains and trade barriers, Artificial Intelligence and robotics will create a different manufacturing environment from the one that has existed in the last 30 years. "India needs to provide a million jobs a month. You cannot create a million jobs a month only from manufacturing. Manufacturing is only one component," he said.
Banga applauded Prime Minister Narendra Modi's focus on digital India, saying digitisation will help in job creation as will focusing on sectors like tourism. "It's going to need to unlock the power of entrepreneurship of women in India. There is progress in some of these areas and in others more energy is needed," he said.
Banga said the country does not have dearth of labour but has low productivity. He stressed that GDP growth does not depend on labour growth alone. "GDP growth is equal to the growth of labour multiplied by the growth of productivity. India has lots of labour and thanks to the demographic dividend, it will have lots of labour maturing over the next 25-30 years. But India does not have productivity," Banga added.
"If you don't get productivity, you cannot get GDP growth. You cannot get GDP growth only with labour growth. You will get a very low level no matter how much effort and energy you put into the system," he said.
Banga noted that 80 percent of India's labour outside of agriculture is in the informal sector. The informal sector by the nature of the beast has no form of contract and health benefits, of increasing a person's productivity. It's a low productivity sector, he said adding that there is no incentive for an owner of capital or of business to make its employees more productive.
Emphasising that he is bullish on India's future, Banga said he is also worried that the country does not have 25 years to fix this situation. Time is not on our side because that demographic dividend could change into challenge relatively quickly.