The pace of change of everything has accelerated in India in the 21st century. The percentage of young people below 25 years of age has increased to over 50% – over 60 crore Indians are that young and need to work. The extent of knowledge, and hence aspiration levels, of the young is very different compared to their predecessors of 20 years ago. This is the result of rapid increase in the ownership of cell phones, particularly smart phones, easy access to internet and the low cost of data. The media too has played an important role in spreading awareness of the progress in other parts of the world. The one million additions to the workforce every month want productive work to fulfill their aspirations and also partake in global prosperity. The PM won the 2014 election because the youth believed that he was the only person who could actually deliver on the promise to create jobs. The Government has, accordingly, made growth of manufacturing, and the ‘Make in India’ platform as its priority objectives. All of us must realize the importance of making this programme a success, because the consequences of not doing so are frightening.
The experience of a few countries with large populations, who have made rapid economic progress after 1950, would be useful in understanding the importance of manufacturing for growth, job creation and prosperity. Japan was the first among the Asian countries to make a national effort to recover from the ravages of the World War, bring prosperity to its people and gain global self-respect by attaining economic strength. The route chosen was to make manufacturing more efficient and competitive compared to any other country.
The one million additions to the workforce every month want productive work to fulfill their aspirations
Industry and Government worked in partnership to make this happen, and industrialists managed their enterprises with this objective as their absolute priority. They motivated all employees to share their thinking and working for the national good, through increasing prosperity of their companies. The success of Japan in this endeavour is well known. Manufacturing at one time reached 34% of the GDP.
This article is a part of FICCI publication “Economy of Jobs” that was released during our 89th AGM in December 2016. It presents essays from India’s leading business leaders and eminent thought leaders who share views and suggestions on job creation. The articles cover varied issues: demographics, education, skill development, entrepreneurship, impact of technology, labour laws, and as well as specific issues across sectors.
More articles from this series can be viewed here at: Economy of Jobs
Korea followed the example set by Japan, and had an additional goal of equalling or bettering the success levels of the Japanese. Industrialists, in partnership with the Government, made manufacturing activities highly competitive and the share of manufacturing in the GDP reached as much as 31.4%. China was the third country that adopted the route of creating prosperity and jobs through growing the manufacturing sector. It is presently the most competitive manufacturing country in the world – manufacturing at one time was 40.4% of GDP. Can India provide jobs for its millions without making manufacturing globally competitive, and achieving high rates of growth? If there is a way, no one seems to have successfully tried it so far.
However, there are many economists and others who argue that manufacturing, with growing automation, is not the way to create jobs. Figures are cited to show that the manufacturing sector has not added significantly to new job creation in the last many years. This view point arises if we view job creation from manufacturing in a rigidly compartmentalized manner. The reality is that a very large percentage of jobs created in the services sector, excluding the IT services and call centres, arise directly or indirectly as a result of manufacturing activity. These jobs would not exist if the related manufacturing did not take place.
Retailers largely sell products that have undergone some manufacturing process. The higher the demand and sale of goods, the larger is the job creation in this sector. Manufacturing activities also create jobs in the transportation sector, servicing and maintenance of manufactured products, accounting and book keeping, tax related services, banking including consumer loans and so on. The more the manufacturing, the higher the need for jobs in these activities. When assessing the employment created by manufacturing, the correct way would be to consider the jobs created in all sectors required to sell, service, maintain and meet the regulatory requirements of manufacturing. The experiences of Japan, Korea and China cannot just be brushed aside, especially without offering a credible alternative.
There is also a section of policy makers and advisors who advocate the promotion of ‘labour intensive’ industries in India. Certainly, if an industry can directly generate large employment, and also produce competitive products, that industry must be encouraged. However, in the quest for labour intensive industries, we must not forget that all manufacturing activity has to be promoted in a manner that the products made are globally competitive in quality and price. Only then can they sell in increasing quantities, and drive job creation in manufacturing and downstream of manufacturing. If achieving competitiveness requires automation, we should not shy away from that. Job creation has to be viewed holistically.
R C Bhargava, Chairman, Maruti Suzuki India writes this piece for FICCI publication “Economy of Jobs”. Post continues on Page 2.