Can newer services help create more jobs and prosperity for India?
News Excerpt:
Countries that grew at a fast pace after WWII have done so by expanding their manufacturing base and producing goods for the rich countries of North America and Europe.
About the growth in Services:
- India’s manufacturing-to-GDP ratio for the July-Sept quarter stood at 17.1 per cent.
- China had a manufacturing-to-GDP ratio of around 28 per cent in 2022. It was 32 per cent before 2012.
- In Vietnam, the ratio was 25 per cent in 2022.
Importance for Export Industries to Grow:
- Countries that grew at a fast pace after WWII have done so by expanding their manufacturing base and producing goods for the rich countries of North America and Europe.
- During the initial years, export focus was necessary given that the domestic market was small. The foreign firms would not allow local manufacturing firms to achieve scale and push up domestic productivity. Further, by doing this, countries could cash in on their comparative advantage of cheap labour, which the rich countries had lost.
- Countries that benefited by using this formula were Japan, South Korea, Taiwan, Malaysia, Thailand, Indonesia and China.
- The initial manufacturing focus was on sectors that needed low skills, like clothes, shoes, etc.
- China’s export share in world markets for clothing and footwear rose from 1.3 per cent in 1980 to an astonishing 37.6 per cent in 2007.
- During the same period, India’s share went up from 1.4 per cent to 3.2 per cent.” This created demand for labour and helped countries move workers from agriculture toward a more productive manufacturing sector. As workers became more skilled, countries could manufacture more sophisticated goods “such as cameras, motorcycles, cars and machinery.”
Problems Associated with India:
- Indian workers looking to latch onto the manufacturing bandwagon are not competing with workers from rich countries but with workers from China and other countries like Vietnam, which are already big in the manufacturing game.
- Logistics: India is facing problems with logistics where these countries have their logistics in place.
- As the World Trade Report for 2013 points out: “A central feature of this age of globalisation is the rise of multinational corporations. Upwards of two-thirds of world trade now takes place within multinational companies or their suppliers -- underlining the growing importance of global supply chains.”
- Competition: There is tough competition in almost every segment of the manufacturing portion of these supply chains and profits have been competed down, implying that the low-hanging fruits have already been taken.
Initiatives India Should take in manufacturing sectors:
- India is targeting services exports to grow to $400 billion in FY24 and equal goods exports target of $1 trillion in 2030.
- Case Study - Example: Take the case of the recent success story of Global Capability Centres (GCCs) or offshore units of MNCs that operate out of India. India has around 1,600 such centres and they employ close to 1.4 million individuals.
- Data from the India Brand Equity Foundation, a trust established by the Ministry of Commerce and Industry, suggests that two new GCCs are created every week. It is expected that by 2026, India will have 2,000 GCC employing 2 million individuals. This will be a huge and direct employment.
- Creation of Indirect Employment: A lot of indirect employment can be around this, like domestic helpers, drivers, security guards, cooks and more, will be required.
- Services need attention: Services that are intertwined with manufacturing will help create good jobs.
- Companies like ID Fresh Food, which makes and sells idli and dosa batter among other things; Lenskart, which makes and sells spectacles; and Tilfi, which makes and sells Banarasi sarees. “Employment creation in services can be substantial, but many will be in small and medium enterprises.
Conclusion:
The government initiative is more to develop the manufacturing base of India and create services for the youth. The services sector witnessed a swift rebound in FY22, growing Year-on-Year (YoY) at 8.4% compared to a contraction of 7.8% in the previous financial year, highlighted in the Economic Survey 2022-23. “India’s services sector is a source of strength and is poised to gain more. From low to high value-added activities with export potential, the sector has enough scope to generate employment and foreign exchange and contribute to India’s external stability”, noted the Survey.
Beyond Editorial
Despite the Indian government’s outward rhetoric of a strong economy, there are indications that it is cognisant of the lack of job creation in the economy. This is revealed in its promotion of Rozgar Melas (employment fairs), public sector recruitment drives, factory incentives as well as attempts to internationalise skills transferability and worker mobility.
Government Initiatives:
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Aatmanirbhar Bharat Rojgar Yojana (ABRY): Aatmanirbhar Bharat Rojgar Yojana (ABRY) was launched with effect from 1st October 2020 as part of Atmanirbhar Bharat package 3.0 to incentivize employers for creation of new employment along with social security benefits and restoration of loss of employment during Covid-19 pandemic.
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National Career Service (NCS) Project: Project for transformation of the National Employment Service to provide a variety of career-related services like job matching, career counselling, vocational guidance, information on skill development courses, apprenticeships, internships etc.
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Digital India: It is under the Ministry of Electronics and Information Technology. Digital India is a flagship programme of the Government of India with a vision to transform India into a digitally empowered society and knowledge economy.
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The National Industrial Corridor: It is under the Ministry of Commerce and Industry. It was launched to coordinate the development of the industrial corridors, with smart cities linked to transport connectivity, driving India’s growth in manufacturing and urbanization.
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PM Gati Shakti: PM Gati Shakti is a transformative approach to economic growth and sustainable development. The approach is driven by seven engines, namely, Roads, Railways, Airports, Ports, Mass Transport, Waterways and Logistics Infrastructure. This approach is powered by Clean Energy and Sabka Prayas leading to huge job and entrepreneurial opportunities for all.
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The National Skill Development Mission: The National Skill Development Mission was officially launched in 2015 on the occasion of World Youth Skills Day. The Mission has been developed to create convergence across sectors and States in terms of skill training activities. It will be implemented through a streamlined institutional mechanism driven by the Ministry of Skill Development and Entrepreneurship (MSDE).
Further Growth (Estimated Growth):
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The Indian job market is estimated to witness 22% churn over the next five years, with top emerging roles coming from AI, machine learning and data segments.
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According to the World Economic Forum, Globally, the job market churn is estimated at 23%, with 69 million new jobs expected to be created and 83 million eliminated by 2027.
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The top roles for industry transformation in India would be AI (artificial intelligence) machine learning specialists, and data analysts and scientists.
- Jobs for agricultural professionals, especially agricultural equipment operators, graders and sorters, are expected to see a 15-30% increase, leading to an additional 4 million jobs.
