JOIN USThere has been a lot of talk on India’s so-called ‘demographic dividend’. But, in order to tap that, the energy of the youth must be channelised into productive avenues — either by providing meaningful employment or by creating a suitable environment for entrepreneurship to flourish. India adds almost a million to its workforce every month. Rapid growth of the manufacturing sector is one of the sure-shot ways of creating employment opportunities for the vast army of semi-skilled and unskilled workforce.
Of the many ambitious programmes announced by Prime Minister Narendra Modi, the ‘Make in India’ initiative was one of the first. Launched in September 2014, the objective of this programme is to make India a global manufacturing hub and create more jobs in India. Opening up of key sectors like ‘Railways and Defence’ to FDI also augurs well for manufacturing sector to grow in India. The ‘Start-up India’ initiative is relatively new. Launched in January 2016, this is to fuel India’s entrepreneurial talent, so that we can become a ‘country of job creators’ from being a ‘country of job seekers’.
Addressing the devil
Our quest for manufacturing prowess may have been inspired from China’s success on this front. However, to find out whether India is ready for ‘Make in India’, we need to ask ourselves some questions and answer those honestly:
Do we have the necessary skill sets? Well, less than 4% of our workforce has received any formal vocational training, and this figure is in stark contrast with 75% in Germany, 80% in Japan and almost 50% in China. Majority of the labour in India acquire hereditary skills or learn on the job. There is an urgent need to enhance the employability of our workforce by investing in skilling programmes. Emphasis on vocational training by setting up more number of Industrial Training Institutes (ITIs) and Polytechnics is imperative.
The government has launched the ‘Skill India’ programme apart from setting up a new Ministry for Skill Development and Entrepreneurship. What is now needed is an increased level of engagement between industry and academia. This is essential for shaping courses, curricula and also creating a cadre of qualified teachers. Industry, both in private and public sectors, can provide first-hand information on what kind of skill sets they are looking for in their employees.
Are our labour laws suitable for promoting manufacturing? One of the main reasons behind China’s success has been its cheap labour. At the same time for China, not being a democracy, it has been possible for them to keep the cost of labour low artificially. India being a democracy, the rules of China cannot be applied here. But, it is imperative to reform our labour laws to promote manufacturing. Our age old labour laws do not address the well being of the workers, they just try to save the jobs, which is essentially counter-productive for the manufacturing sector.
The myth of businesses being anti-labour needs to be broken. Amendments in labour legislations such as the Industrial Disputes Act, Contract Labour (Regulation & Abolition) Act, Trade Unions Act and Factories Act are the need of the hour. Flexibility in terms of setting minimum wages, overtime, employment of contract labour, among others must be there for manufacturing to truly flourish in India. Labour being in the Concurrent List of the Constitution of India, the central government is now encouraging state governments to frame their own labour policies. States like Rajasthan and Madhya Pradesh have already framed their own policies and the competition that would ensue is likely to prompt other state governments to frame policies which will be more conducive for attracting investments.
Is the tax structure favourable for manufacturing sector to grow? Indian manufacturing sector was a victim of the ‘inverted duty structure’, whereby for many sectors the import of product components or raw materials attracted more import duty vis-à-vis finished products. This essentially encouraged trading and not manufacturing. Thankfully, the ‘Make in India’ initiative has addressed this loophole. The ‘Make in India’ initiative would also require attention on issues such as setting up of effective pricing mechanisms and conditions for repatriation of profits by multinational corporations. Equally important is to quickly roll out a unified Goods & Services Tax (GST) so that taxation structure can become simple, predictable and transparent.
Is our infrastructure good enough to support a manufacturing boom? World class infrastructure is a pre-requisite for manufacturing sector to succeed. China’s massive investments in its infrastructure has been one of the factors which contributed to its rise as a manufacturing powerhouse. Infrastructure development figures prominently in the Indian government’s priority agenda, so much so, that instead of waiting for private investment to pick up, the government has went ahead and started investing on its own to expand capacity in infrastructure. Ushering in power sector reforms, de-bottlenecking road projects and stepping up the rate of highway building, expanding the role of private sector in building railway infrastructure and laying out a major expansion plan for augmenting port capacity augur well for the growth of the manufacturing industry.
Can India strike a balance between high-end manufacturing (which typically involves automation of processes) and jobs which suit millions of semi-skilled and unskilled Indians? This is one area where there is no convincing answer. There is no doubt India is a late entrant in the manufacturing race. India’s manufacturing sector accounts for about 11% of our total employment, compared to China’s 30%. With the ‘Make in India’ mission,
we can try to catchup with China. But we must not forget how fast technology has evolved in the last few years and how it has redefined the manufacturing processes globally. Rules of the game have changed and continue to change. Software is today an integral part of manufacturing processes and products. The way disruptive technologies like 3D printing, robotics, artificial intelligence (AI) are encroaching into manufacturing, I am not too sure how long and to what extent the human angle in manufacturing will remain relevant. In such a fluid and ever-changing environment, skills learnt today may just cease to be relevant tomorrow.
In this backdrop, our training ecosystem should ideally focus on producing good and fast learners, people who are adaptive and who can learn in a task-aligned manner as per requirements of emerging jobs. In addition, the need of the hour is to harness technology and foster innovation for creating centres of excellence for manufacturing for specific sectors. Research and development (R&D) should ideally rope in foreign collaboration. For a sustained technological development, a robust mechanism to protect intellectual property by safeguarding the rights and interests of technology creators and providers is a must. However, how to strike a balance between technology and human labour in the days ahead is something which is yet to be figured out. Going forward, probably we can think of a system whereby certain manufacturing processes will be reserved exclusively for machines, some exclusively for human beings and some for a mix of both.
Need for right reforms
To sum up, with the right reforms and a progressive government at the helm, India can surely aspire to emerge as a global manufacturing hub. However, to what extent it will be possible to emulate China’s success is something that remains to be seen. One point is worth pondering - just because China has treaded that path, do we need to follow their footsteps to solve our employment problem? It is worthwhile to note that nearly two-thirds of India’s population remain directly or indirectly dependent on agriculture while contribution of this sector in India’s GDP is only about 16%.
Perhaps it would be worthwhile for the government to not rely only on manufacturing for absorbing the vast army of semi-skilled and unskilled workforce.
If agriculture and agro-processing industries can be modernised with adequate incentives, the contribution of this sector to the growth of the economy will rise and more people will find it worth pursuing careers in agriculture or agri-related industries. Thus, agriculture can also absorb a large segment of the workforce and open up entrepreneurship opportunities. That, in turn, can actually facilitate a more orderly growth of the manufacturing sector.
(The author is the President of Associated Chambers of Commerce and Industry of India)