Tuesday, November 24, 2015

JUST MAKE IN INDIA? NOT SO FAST!



JUST MAKE IN INDIA? NOT SO FAST!
If you need an example of the proverbial conundrum of SIX BLIND MEN OF HINDUSTAN AND THE ELEPHANT, you don’t have to look far – Make in India clearly fits the bill! While the meaning of the GoI’s initiative in itself is self-explanatory, pundits differ on its prospects and dispute the concept itself.
CONTEXT
The context is about seizing the demographic dividend. While industry no doubt creates jobs, quite a few of these are low – productivity, non-contractual jobs are in the unorganized sector which fetches low incomes. In contrast, service jobs are comparatively high productivity ones, but its contribution to employment growth is rather low.
Most of the new jobs are in the construction sector and 85% of the workers employed there are from informal sector. They are low paying!
There are also other reasons for the malaise. India has not been very successful in building jobs around its natural comparative advantage. Besides, those jobs which get created are not skills-intensive. However, we’re rather good at skill-intensive service sector jobs, where the unskilled who are in majority, are misfits.
Can this trend be reversed? History is against us here. The cost of a skill intensive model will be that one or two generations of the currently unskilled will be left behind without opportunities to advancement. Will this be socially acceptable?
PROSPECTS
Ever if we achieve the impossible, trade elasticity is declining. International vertical specialization is on the downside. Besides, there is a significant growth in Industrial Robotics, replacing human labour. This may make manufacturing faster overall and cheaper, while at the same time tilting the balance against countries like India. Japan and China are miles ahead in this front.
The head winds are against countries like India and Indonesia who’ve embarked on intense “make in” efforts.
Is there a silver lining? These is: it is the fast growing cross border trade in services, which could help us.
All is not last. Agriculture is our “other side of the moon” phenomenon, when it comes to job and GDP growth. Agriculture, in all fairness, should find an honourable place in Make in India campaign, because it delivers 15 percent of India’s exports, valued at $40 billion. It should be a clear candidate for a National Skill Development Mission as it employs 260 million people over half of India’s workforce. Many experts are of the view that Agriculture exports can be doubled to $80 billion. The increased output can be produced by well trained farm workers. It will trigger a “virtuous cycle”, benefitting the industry as well as and the economy, boosting job creation across the board.
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