Making growth more employment-inclusive requires a broader approach than just seeking solutions in labour-intensive manufacturing.
India’s accelerated infrastructure build-up is creating alternative job opportunities that could take some pressure off manufacturing, which needs to be competitive as supply chains diversify beyond China.
In any case, employment intensity of manufacturing is declining, and it will need to be buttressed by services, where India has an advantage over its East Asian neighbours.
Services also have a bigger impact than manufacturing on reducing job market inequity such as gender, age and social bias. Policy support to increase participation by marginalised groups is needed to address the quality of India’s labour market, as ILO has recommended. Focus on healthcare and digital economies should help, it adds.
These suggestions are in line with what India has been attempting, apart from trying to ease rigidities in its labour market. Neither manufacturing nor services can absorb the low-skilled workforce emerging from India’s agriculture, and intervention is necessary to equip them with the required skills.
The skilling imperative is vital in an environment of economy-wide technological disruption. India may have to tap innovative solutions, such as incentives to small enterprises, for job creation just as it offers export subsidies to large manufacturers. It will also have to devise means to ensure real wages do not stagnate for extended periods.
The Indian solution to unemployment will differ from other developing economies because of its scale and rapidly evolving nature of global production. GoI will have to experiment with a wider set of approaches than building big factories teeming with workers.
