Job creation in Post-Covid India critical for growth revival

Huge scope for labour-intensive manufacturing

By K R Sudhaman

Job creation in India is critical for economic revival in the post covid era. This is more so as about 11 million people enter job market every year and, according to CMIE, an additional 121 million people have lost jobs in view of the pandemic. They too need to get back their jobs. That apart several million people move out of agriculture in search of jobs outside faming every year. This is a grim situation but global economic and geo-political situation has opened the door to convert this challenge into opportunity.

Former Chief Economic Advisor Arvind Subramanian is right when he said recently in United States that it is a golden opportunity for India to attract labour-intensive manufacturing for exports as many such companies are exiting China with labour cost going up there. Already $150 billion exports of labour-intensive manufactured goods have exited, of which India has attracted only $15 billion in terms of manufacturing. There are many more multinationals which want to exit China after Sino-US stand-off as they do not want to depend on only one global manufacturing hub for their supply chain. India now offered that opportunity to attract those industries that are moving out.

Merchandise exports from India are also looking up, indicating more global companies are sourcing from India post pandemic. India has an abundant cheap, skilled and youthful labour. India has exported over $200 billion of merchandise export so far this year, apart from an additional $100 billion services exports. Merchandise exports are likely to touch a record $400 billion this financial year, clocking over 20 per cent growth every month this year. Services exports may touch an additional $250 billion as it clocked $206 billion in 2019-20.  When India posted over 9 per cent annual GDP growth from 2004-09, both merchandise exports, that is goods and services exports, grew over 20 per cent annually on a sustained basis.

Now yet another opportunity has come India’s way to push export-led growth and timely policy decisions will ensure the economy does not miss the bus this time.

With Prime Minister Narendra Modi’s government rightly stepping up infrastructure development targeting Rs 100 trillion in the next 5-6 years, the foundation is being laid to ensure India becomes a global manufacturing hub. The productivity linked incentive scheme in several sectors is a good move of the government to push up manufacturing and thereby employment. Some of the sectors where PLI scheme has been announced are labour-intensive like food processing, electronics, textiles, leather and so on. Coupled with this a boost to construction, tourism and hospitality industry will enhance job creation in the country.

One idea that Prime Minister Modi could adopt is the suggestion made by yet another former chief economic advisor and World Bank chief economist Kaushik Basu, who has mooted the idea of building small labour-intensive industrial clusters called diamond quadrilateral, dotting along the golden quadrilateral of highway network connecting four metropolis of Delhi, Mumbai, Kolkata and Chennai. This includes two diagonals encompassing Bangalore, Hyderabad and Ahmedabad as well.

This will ensure underemployed youth from agriculture can get jobs in non-farming industries nearby to their villages so that they are not displaced from their homes. Also this will help in densification of villages and improvement of rural infrastructure bringing about much needed economies of scale. Along with this skill development institutes could be set up in those areas for skilling purposes.  Industries like food processing, textiles, leather and some not very highly sophisticated electronics goods could be manufactured in these clusters.  It could also be khadi, handlooms, handicrafts, gems and jewellery. Nearly 50 per cent of India’s population is still depended on farming for employment whereas agriculture accounted for only 15 per cent of GDP. So there is need for shifting huge amount of labour from farming to manufacturing and services. Services sector, which already accounted for more than 50 per cent of GDP, had not much absorptive capacity for additional jobs in a big way. May be some lost jobs could be replaced by new recruitment post covid.  It is, in fact, manufacturing that provided opportunity for absorbing the jobless and urban unemployed. Also this will enable India to step up merchandise exports to $ 1 trillion by 2030 as envisaged by the government to truly make India a global manufacturing hub.

 

Setting up an oil refinery will entail an investment of Rs 15,000-20,000 crore. But it provides just 1,000-2,000 jobs as it being capital intensive. Whereas Rs 500 crore investment in textile mills, leather, food processing and some of the electronics will provide jobs to 15,000-20,000 people. Also skilling required is not that hi-tech in these industries. Rs 1-1.5 lakh investment in a small scale labour intensive industry creates one job. In capital intensive industry, it ranges from Rs 10 lakhs to Rs one crore depending upon the nature of the sophistication. Of course these are approximations but clearly indicate where the job opportunities lay. It is clearly cottage and small scale industries. Nearly 45 per cent of India’s merchandise exports are from MSMEs.

So there is a great potential to create jobs and boost economic growth and what is needed is some tweaking of policies to achieve it.

The digitization of the Indian economy too offered great opportunity for job creation apart from renewable energy like solar and wind power. This is already getting much needed push from the government. Most of the banks are flush with funds. It is unlikely there would be dearth of funds for investment. That apart India has become a major destination for foreign direct investment and very soon it is likely to touch $100 billion annually. Many global pension and insurance funds are looking for opportunity in India and they are gung ho about it.

There are enough indications for a quick economic recovery and job creation post covid pandemic in India and coming years are going to be exciting for investment and jobs.  Domestic private investment, which has not been forthcoming in the last few years due to excess capacity, should also now look at major investment opportunities with demand picking up with Covid waning. Some of the industrial bigwigs have already started investing as demand is gradually exceeding supply forcing them to ramp up capacity. (IPA Service)

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