Three Years Of Modi Govt: On The Real Journey To Growth
Labour law reforms should be the centrepiece of the central and the state governments’ reform programme
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Job creation will be India’s single biggest challenge and opportunity in the next 20 years; it can make or distort the India story, and analogously determine the durability of leaderships across the country.
Worldwide, the job market is going through disruption, with growth models and assumptions of the past coming under scrutiny. In the last two decades, production systems got increasingly connected as the manufacturing value chain got defragmented, and corporations sought cost arbitrage across global locations. Now, thanks to automation, production systems are getting localised within developed markets — and becoming less dependent on labour. Even in India, some auto original equipment manufacturers are using “bots’’ on the shop floor that can do the jobs of up to four humans at a lower cost. Similarly, the IT outsourcing and BPO industry are feeling the heat of growing protectionism, automation and artificial intelligence — with the effect that they have started paring down hiring in India.
So what can India do to create new avenues for job creation? A lot actually.
First, labour law reforms should be the centrepiece of the central and the state governments’ reform programme in the next 12 months. The emphasis should be on hiring flexibility, and stronger social security, with greater freedom to design service contracts to encourage and enhance hiring.
Second, clusters and networks of small enterprises must be strengthened; small enterprises require less capital, enjoy more flexibility in hiring, and can create widespread employment faster. The government has defined 1,100 “modern industrial clusters”, but these need to be segmented based on job growth potential, and adequate infrastructure investments must be provided to each according to their specific needs.
Businesses that create scale quickly must be supported, since scale leads to jobs. Instead of classifying businesses only on the basis of invested capital, India needs policies that encourage enterprises to grow. Also, businesses that deploy more skilled workers could be supported along with the capital-intensive enterprises. Already, there is indication that this is what the government aims to do. For example, there are reports that enterprises seeking exemptions under the Startup India programme must declare upfront the number of jobs they expect to create.
Third, there’s an urgent need for learning systems that increase the shelf life of skills. India’s young must be able to acquire new skills when the nature and scope of their work changes. Educational institutes have a critical role to play here.
India also needs to boost opportunities where the manpower intensity is naturally high such as textiles, housing, healthcare, water and sanitation. There is also a large growth opportunity in natural produce sectors such as food, fruits, vegetables, dairy, poultry and fish. When the Prime Minister speaks about doubling farm incomes, developing natural produce enterprises must lie at the core of the execution strategy because of the inherent potential to create unskilled and semi-skilled jobs.
While much has been written about the job creating ability of tourism and hospitality, it is huge and cannot be ignored. Creative industries are another area with immense untapped potential. India still has a significant artisan-based population, with estimates ranging between 7 million (official) and over 100 million (unofficial). Unfortunately, the vast majority operate in informal work settings, with limited scope for growing and improving their craft.
As per the latest handicraft report by the Indian government, the creative industry in India is $7 billion plus, and globally, it is at $103 billion — this represents a great growth opportunity.
Since liberalisation in 1991, growth in India was seen as an end in itself; while it performed well and created many jobs, we have also had periods of low job growth. The government now seems determined to create a new paradigm where growth is the outcome, and job creation is the real journey. This is probably the single biggest challenge facing us as a nation and will provide us the ammunition against poverty that we badly need.
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