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BW Businessworld

Becoming Fit For The Industry

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Prime Minister Narendra Modi has taken his ‘Make in India’ campaign to the defence industry, promising to create jobs. His desire to transform India from the world’s largest arms importer into a more self-reliant military power makes political and economic sense. But don’t count on that industry to generate even a fraction of the millions of manufacturing jobs that the government plans to create. Far from requiring legions of Indian workers, the production of high-tech weaponry depends on numerically controlled machine-tool operators and specialist engineers. Conversely, the jobs that need filling in larger numbers call for millions of bricklayers, plumbers and electricians.
Modi must be credited for his focus on revitalising the manufacturing sector and urbanisation through his ‘Make in India’ and smart cities projects. With the world around us filling up with old people, last year he told a cheering audience in New York, the world would be turning to young India to manufacture the goods it needs.

Indeed, by 2020, India is expected to become the world’s youngest country, with 64 per cent of its population in the working age group. At a time when China’s rapidly ageing labour force is shrinking, India could be poised to assume the role of becoming the world’s factory. There are two big caveats: First, the world may be ready to turn to India for manufactured goods, its bulging youth population may not be; and second, judging by current technology trends, the factories of tomorrow will employ far greater numbers of robots, 3-D printers and digitally controlled lasers than human workers.

The first problem is one of simple human capital. Despite its huge population, India is woefully short of skilled labour. Only 25 per cent of the working age population has the skills to find work in the private sector.  A well-rounded education depends on quality rather than quantity, but the vast majority of India’s students are graduating high school ill-equipped to enter the job market. A recent report on skill shortage noted that a mere 10 per cent of MBA and 17 per cent of engineering graduates are employable. Less than 3 per cent of high school students get meaningful vocational education.

Companies that want to hire Indian workers are already feeling the pinch. A FICCI survey from 2011 showed that 90 per cent of the companies participating in the study said they were unable to recruit adequate numbers of workers to maintain or grow their operations. Given the glacial pace of skills training and the steady pace of population growth, the situation is likely to have worsened in the years since then.

Add to the slow growth of India’s manufacturing sector the rising challenge from technological innovation. The increasing automation and use of robotics in automobile and other heavy manufacturing sectors have meant that industries returning to the US from low-cost China have not created very many jobs. There will, of course, be need for large-scale manufacturing but increasingly, this will not require many workers. As India strives to skill up, it is competing not only against lower-wage countries but also against the inexorable tide of new manufacturing technologies. It is increasingly a battle between man and machine — a machine that works 24/7 without demanding a pay raise.

The combination of these two factors — education and technology — creates a time pressure that Modi will need to recognise. His government has taken welcome steps in establishing a National Skills Development Policy to set up institutions required to implement the mission of creating 500 million skilled workers by 2022. What is needed now is a sense of urgency to implement this on a war footing.

The clock is ticking and India’s hopes of reaping a demographic dividend from its young labour force could disappear swiftly if manufacturing jobs become scarce and specialised. Without focused action, what seems like a dividend today could easily become a disaster tomorrow.
The author is editor-in-chief of YaleGlobal Online, published by  the MacMillan Center, Yale University
(This story was published in BW | Businessworld Issue Dated 23-03-2015)