Like the rest of the world, India too is witnessing massive job loss due to the drastic changes brought about by the Covid-19 pandemic. Unfortunately the pandemic is not the only harbinger of joblessness in India; with the advent of the “fourth Industrial Revolution”, India stands at a greater risk of joblessness. The projections show a worrisome picture unless the bull is taken by the horns.
Three decades ago while China invested heavily in creating jobs in the manufacturing sector, India was busy and heavily dependent on jobs in the Business Process Outsourcing, Legal Process Outsourcing and Knowledge Process Outsourcing sector. Millions of Indian youths were employed in this sector. US policies changed and this source of employment dried up with time.
With the full-scale arrival of the fourth Industrial Revolution in the near future, India stands at a greater risk of job loss in comparison to other countries. India needs to prepare for the new revolution, which fuses physical, digital and biological spheres, and transforms global production systems.
Just to recap, in the first Industrial Revolution we saw a shift from reliance on animals to textile spinning mills, steam engine-based production. It is widely perceived to be the shift from our reliance on animals, human effort and biomass as primary sources of energy to the use of fossil fuels and mechanical power.
The second Industrial Revolution was identified with electricity. It occurred between the end of the 19th century and the first two decades of the 20th century, and brought major breakthroughs in the form of electricity distribution, both wireless and wired communication, the synthesis of ammonia and new forms of power generation.
The third revolution related to the arrival of computers and electronics. Development of digital systems, communication and rapid advances in computing power have enabled new ways of generating, processing and sharing information.
Now we are on the threshold of the fourth Industrial Revolution. If handled properly, it could catapult India to becoming a superpower; but lack of foresight and effective strategies could relegate India to the background. It would be the case of missing another bus.
The fourth Industrial Revolution would be the manifestation of highly advanced technologies such as the Internet of things, artificial intelligence, block chain, robotics, and additive 3D manufacturing, which is changing the future of manufacturing. India is the fastest growing economy in the world. The future depends on individual and collective capacities to use the rapidly-growing technologies.
Currently, the odds are in favour of developed countries, which have greater access to capital and skills to quickly respond to the exponential speed of change. However, India has a unique opportunity to leap-frog to the next level of development by identifying its comparative advantage across sectors and value chains and preparing for the future. This means investing in the right skills, innovation frameworks, institutional partnerships and policy frameworks.
According to Suchi Kedia, World Economic Forum community specialist, India and South Asia region, India has a vast and diverse manufacturing sector that generates 17 per cent of GDP and 15 per cent of the total employment. The country’s manufacturing sector benefits from traditional strengths like cost competitiveness, a young and large workforce, natural resources that support a wide range of industry sectors, and a rich pool of English-speaking scientists, researchers, and engineers.
The global manufacturing Competitiveness Index 2016, compiled by the US Council on Competitiveness and Deloitte, ranks India 11th out of 40 countries on manufacturing competitiveness. It projects that by the end of this year, India will assume the 5th spot globally.
India has long enjoyed the competitive advantage of its low-labour rates. However, in a technologically enhanced future, cost arbitrage alone will no longer guarantee growth. Instead, India should focus on its unique demographic advantage: it is home to one of the world’s youngest populations. By 2050, India is expected to account for over 18% of the global working age population.
Over 100 million newcomers are expected to enter the workforce by 2022. This is a double-edged sword. The new workers will need to be trained, as will the existing workforce of almost 300 million to keep up with technological change. Government initiatives to develop relevant skills, technical and vocational training programmers, innovative approaches to industrial training, and enhanced public-private collaboration will allow India to reap the benefits of its unique demographic dividend.
However, the advent of the fourth Industrial Revolution would lead to sweeping changes. It would lead to large-scale automation and connectivity with iCloud, perhaps even your refrigerator would be connected to icloud for micro management.
Artificial intelligence and digitisation of data may lead to job loss in banking, financial sector and data analysis. Jobs related to loan risk assessment, legal process outsourcing would be at the receiving end as AI algorithms would come up with infinite viable options at a faster pace.
While jobs in these sectors would be at a risk, new jobs would be created. But the workforce has to be prepared for acquiring new skill sets and better education to meet the requirements of the new challenges.
Experts say the Modi government understands the importance of manufacturing in the country’s growth strategy. A series of initiatives, such as Start-Up India, and structural reforms in the areas from tax to intellectual property rights has sparked global optimism about the Indian manufacturing sector and improved investor confidence.
In the World Bank’s Ease of Doing Business Index of 2018, India’s rank shot up by 30 places. Foreign investments have also risen. But manufacturing as a share of GDP has been largely flat since the 1991 Narsimha Rao-led economic overhaul. This is in sharp contrast with countries like China, Thailand and South Korea where manufacturing makes up around 30 per cent of the economic output.
Factors such as lack of adequate infrastructure, misalignment with global supply chains, inadequate innovation, and a quagmire of legal and bureaucratic procedural delays have worked together to stymie the growth and dynamism of Indian manufacturing.
Advanced manufacturing technologies add another layer of complexity by posing a threat to India’s cost competitiveness. These technologies are offering significant productivity gains, thereby creating a new competitive advantage for countries that use them.
As per the available workforce projections in the present scenario of joblessness, India would be adding more than seven million workforce every year. If the jobs are not created this could lead to socio-economic distress, which would have a negative effect on the political set up. The country’s democracy could also come under threat. A high unemployed workforce would only deplete the country’s reserves. The revenue generated by tax collection could only be used for sustenance of the huge numbers of unemployed.
According to a UNDP report on preventing violent extremism, one of the reasons for rise in world extremism is growing horizontal inequalities and unemployment. Therefore there is a serious need that the government should envisage a strategy for the next 30 years.
Other than diversifying in the sunrise industry and manufacturing sector, the strategies could be aimed at skill development with a focus on the agriculture sector. India’s agricultural skill set needs major improvement in terms of value addition.
India’s arable area as a percentage of national landmarks is among the highest in the world, about 43 per cent. Fertility of the GangaYamuna plains and Punjab plains is one of the highest. However, the problem is with the agricultural output, which is among the lowest in the world in comparison to the potential resources the country has. Since India’s Independence, very little capital investment has gone into this sector on an institutional level.
In China during the Mao era there was a major thrust in the agriculture sector. There was a push in the capital investment. Today China doesn’t just sustain itself but has also become one of the largest exporters of agricultural goods.
In countries such as the Netherlands, France, Ukraine and Australia, the agricultural GDP share is between 18 to 19 per cent. In India, the contribution of agriculture to the GVA (gross value added) has decreased from 15 per cent in 2015-16 to 14.4 per cent in 2018-19. GDP from agriculture in India averaged Rs 4,231.13 billion from 2011 to 2020, reaching an all-time high of Rs 6,098.83 billion in the fourth quarter of 2019 and a record low of Rs 2,690.74 billion in the third quarter of 2011. GDP from agriculture in India decreased to Rs 5,306.26 billion in the first quarter of 2020 from Rs 6,098.83 billion in the fourth quarter of 2019. It is estimated that India’s agriculture sector accounts only for around 14 per cent of the country’s economy but for 42 per cent of total employment.
India’s problem has been small land holdings of farmers and community farming has not taken off in a big way. Storage is another issue. Interestingly, now the government focus is on creating the latest storage and food processing facilities with participation from the private sector. This is a welcome move.