Wenn Indien China als arbeitsintensives Produktionszentrum ablösen will, muss Indien das Humankapital besser fördern.
'Demographic dividend' is not a given
If India is to replace China as a labour-intensive manufacturing hub, human
capital has to be nurtured.
Browsing Indian economic news on the internet
and watching it on the television can be a surreal experience. Economic news in
India is dominated by ups and downs in the share market, minutiae about winners
and losers of changes in taxation rates and subsidy policies, visionary
statements of people in power about India’s potential growth rate, to name some.
Discussions about unemployment, which shapes debates about the state of the
economy in the United Kingdom, my country of residence, are remarkably
low-key.
There could be good reason for that. Perhaps - to quote
Baba Ramdas of Three Idiots fame - "all is well". After all, according to
the World Bank, India's 2010-14 unemployment rate is 3.6 per cent, much below
the corresponding figures for the UK and most developed countries. Scratch the
surface, however, and problems emerge.
Not a clean picture
India's labour force participation rate is around 60 per cent. A joint
publication of the US Bureau of Labor
Statistics and the ILO (International Labour Organisation)suggests that, in
2010, among 35 major economies of the world, India's labour force participation
rate was ranked fifth from the bottom.
China and Brazil, two of India's
Brics competitors, recorded the highest labour force participation rates. At
less than 30 per cent, India had the lowest women's labour force participation
rate, less than half the corresponding rates for China and Brazil.
An
OECD (Organisation for Economic Co-operation and Development) publication
confirms this: in 2012, in the Asia-Pacific region, labour force participation
rate in India was higher than those of just three countries, namely,
Timor-Leste, Sri Lanka and Pakistan.
Dig further, and an even more
disturbing picture emerges. A 2012 Gallup poll indicated that only about one in
four adults is in full-time employment. This survey, which takes into
consideration all adults and not just the labour force participants, found that
unemployment and underemployment are particularly high among the 15- to
30-year-olds. Further, nearly half the full-time workers had blue collar jobs in
the agricultural sector. In other words, not only has India not been able to
utilize a very significant proportion of its labour force, especially women and
younger citizens, it is yet to move a very large proportion of workers from the
agricultural sector to higher value added occupations in the manufacturing and
services sectors.
Would a manufacturing sector boom, led by the 'Make in
India' initiative, and a more flexible labour market be a panacea? Whether or
not India becomes a manufacturing hub, it is unlikely to resolve the problem of
underutilization of India's most abundant resource, its people, and the
attendant problems of poverty and deprivation. Estimates of employment
elasticity reported by Reserve Bank of India economists suggest that the impact
of economic growth on employment from 1999-2000 to 2009-10 was high only for
three sectors, namely, construction, finance and real estate, and mining and
quarrying. It is very unlikely that labour market flexibility alone explains
these low employment elasticity rates.
The challenges
Three challenges stare Indian policymakers in the face.
First,
technological change is making labour partially or wholly redundant in a number
of sectors, across the world.
Second, where labour is still necessary,
increasing complexity of production requires labourers to have a minimum skill
level that is much higher than the skill level required during the
labour-intensive output boom in China and South-East Asia in the past
decades.
Third, displacing China as the global manufacturing hub requires
the creation of a comparable ecosystem that can successfully compete with the
agglomeration economies enjoyed by the Chinese manufacturing industries. In the
best of times, that is a very tall order.
Whatever the future of India's
manufacturing sector, therefore, the future of India's labourers is likely to be
in construction, mining and other services. While 'Make in India' can be
justified by its own right, policymakers have to simultaneously provide an
ecosystem to sustain greater labour force participation through sectors that are
more likely to create jobs, and ensure that labourers are protected from the
impact of temporary and the cyclical nature of jobs in those
industries.
That, in turn, calls for more and better schools, especially
in rural areas, not new IITs and IIMs. It also calls for better transportation
links between rural areas and regional urban hubs, alongside high-speed rails.
It calls for emphasis on a welfare state infrastructure with the same intensity
as the emphasis on four-lane highways and larger ports and
airports.
There has long been glib talk in India about its demographic
dividend. Like most good things, this dividend has to be earned. It’s not the
proverbial manna from heaven. Indeed, not earning it is not an option given the
gap between the rising aspiration of the people and their economic status. Time
perhaps for a little less focus on Dalal Street and tax exemptions, and a little
more focus on the people.
Sumon Kumar Bhaumik, the author, is chair in
finance at Sheffield University Management School, United Kingdom.