When the next government takes over, it will have to attend to multiple challenges. Before we discuss those, however, we need to talk about an overarching challenge that is at the heart of any discussion involving India’s future – employment generation.
If the economy produces the kinds of decent jobs that Indian youth are struggling to find right now, the ramifications will be massive and positive. India could end extreme poverty, reduce inequality and achieve upper-middle-income country status. The table below provides the World Bank’s income classification. India’s gross national income (GNI) per capita in 2017 was US$1820. There is quite a distance to travel and other countries won’t be sitting still. Even so, some researchers predict that by 2030, India could eliminate extreme poverty. Reaching upper-middle-income status also appears to be a distinct possibility. Clearly, there is a lot at stake.
We should not assume, however, that growth is inevitable or that job creation will happen if there is growth. Such complacency is unlikely to yield appropriate institutional and policy frameworks because of the nature of the employment challenge.
Between 2010 and 2030, India’s working-age population is on course to grow by a massive 25 crore people. But herein lies the problem. India is not creating jobs at the scale at which aspirational young Indians are joining the workforce. Each month, close to 10 lakh young people join the workforce. Many of them hold degrees from Indian schools, colleges and universities. With a degree in hand, expectations of jobs are natural. However, there are very limited job opportunities in the formal sector, where employers often complain about the problem of inadequate skills of potential employees. Inevitably, most Indians are self-employed or work in the informal economy.
As educated youth shift away from rural areas, the availability of non-farm jobs becomes increasingly important. However, greater mechanisation in India’s manufacturing sector and a greater emphasis on skills and automation services could leave many without jobs. Technological changes could potentially worsen India’s employment scenario. Already, there are dire predictions about machines taking over jobs due to automation. Many of these are activities that millions of Indians are engaged in. ICRIER’s Radhicka Kapoor has argued, “Capital intensity of production has been increasing sharply, but recent economic growth has benefited industries which rely more on skilled workers and capital as opposed to unskilled/low skilled workers.” As capital intensity grows, this will have important implications for labour and inequality.
The World Bank has predicted that 69% of jobs in India are threatened by automation. According to the World Bank, the kinds of jobs created in India in the last decade and a half suffer from three deficits – “a deficit in the overall number of jobs, a deficit in the number of good jobs, and a deficit in the number of suitable jobs for women”. The World Bank warns, “In a young and increasingly aspirational society, this growing jobs deficit has the potential to turn the much-awaited demographic dividend into a demographic curse.”
There is good reason to believe that jobs will be the central issue for India in the coming years and decades. There is important work ahead and, frankly, it can’t start soon enough. Having said that, India’s next government must look at the employment challenge as a journey. We need to create a bridge of ideas and actions from where we are today to where we want to be in 2030 and beyond.
First, do no harm
This may be obvious but in a world driven by rising populism, we need to be extra vigilant about the implications of government policies. Depending on which side of the ideological spectrum we find ourselves on, we could debate the merits or demerits of any policy initiative. However, in rare cases, there may be policies that unambiguously disrupt economies and not in a good way. Demonetisation was clearly one such policy, even though government supporters at the time made it seem like the greatest thing since sliced bread!
I am perfectly willing to accept that there can be inefficiencies built into policies that create entitlements or prolong government ownership of PSEs. However, that is not the same as quackery masquerading as expertise, as we saw in the case of demonetisation. Future policies should always pass the basic smell test of the “first, do no harm” principle. If populism makes the enactment of a patently harmful policy inevitable, then it is incumbent on experts and those who believe in sensible policymaking to make their voices heard and point out that their government’s proposed action is harmful to the public interest.
Change is rarely easy. However, it bears reminding that adopting an ostrich-like attitude in the face of clear and overwhelming change is downright irresponsible. There are plenty of experts and institutions that have sounded the alarm with respect to global advances in technology and how that might impact humans. The future of work is now a dominant development theme. Dire predictions about artificial intelligence, machine learning and robotics taking over jobs from a growing number of young people, especially in countries like India, are an almost daily news item for those of us who track international development issues.
Reactions range from dismissal of such concerns as Malthusian exaggeration to Luddite obstructionism. However, what India needs is a measured realism and an acknowledgement that innovation and technological advances (or climate change for that matter) are very much a reality that we must contend with. As with past upheavals, our generation does have the opportunity and capacity to adapt to these shifts. Instead of giving in to pessimism, we must get our heads out of the sand, remove the blinkers from our eyes and put our thinking caps on. India has a lot to gain by actively preparing for and shaping the future.
Invest in people
Underinvestment in people is at the heart of India’s development challenges. For far too long, sectors such as health and education have received less attention than they deserve. If Indians look back at Modi’s tenure or even before that, they can testify to the fact that public discourse has little space for foundational topics such as child health, early- childhood education, malnutrition, etc. We talk a lot more about ease of doing business, enhancing India’s manufacturing capabilities or growing faster than any other nation. This suggests we are seeking shortcuts and are unaware that growth by itself is not sufficient for ensuring a decent standard of living for all people.
As experience from countries around the world tells us, economic development does not happen through quick fixes. Modern manufacturing and services can’t work without skilled and educated workers. Children who suffer from malnutrition or students who receive poor-quality education cannot become productive workers of future enterprises. This is just one of the many linkages between investments in basic health and education and economic activities at the broader level. Simply put, human capital development must become the core of India’s development engine and an integral part of our development discourse.
Reinvent the role of the state
Modi’s slogan of “minimum government” was catchy and it conveyed a degree of unease with big government. However, as we now know, Modi’s centralising instincts have led to a government that is neither smaller in size nor more effective. Instead of coming up with an alternative slogan, we need to take a step back and see where government and its institutions stand today with respect to our changed socio-economic landscape. Taking this further, we need to understand what the future may look like and assess what our government should look like.
Clearly, as our way of living evolves and as our economic structures change, government institutions, policy frameworks and programmes must adapt accordingly. Of course, this has happened in the past although one cannot say with confidence that the government has adapted in a systematic way to changes in our socio-economic structure. The institutions that were relevant in the 1950s, 1960s or 1970s may not be relevant now. Certainly, the future is likely to look very different from our current circumstances. Have we done a good job of evolving the capacities of our institutions to keep up with our changing needs? I don’t think a lot of people would answer that question in the affirmative.
More likely than not, the creation of new institutions or reforms of existing ones have been episodic and not systematic. It is difficult to argue that maintaining institutional status quo in an era of profound changes is going to help us. We need to be very open to reforming our institutions and building capacities to help deliver the promise of the future. The government’s enabling role in ensuring sustainable progress is well recognised. However, the government can only perform that role if it is sufficiently stocked with appropriate skills, an ability to adapt continuously and a recognition that it is primarily an “enabler”, not a “doer”.
Excerpted with permission from The Great Disappointment: How Narendra Modi Squandered A Unique Opportunity To Transform The Indian Economy, Salman Anees Soz, Penguin Random House India.