India has a workforce of 500 million people and with nearly 13 million youth entering the labour market annually, there has to be a gateway to absorb and direct this energy into fruitful gains for the nation and society. Manufacturing is the only sector capable of creating a large scale employment channel, says Gayatri Paul
The recent exhortations of Prime Minister Narendra Modi to ‘Make in India’, implying transformation of the Indian manufacturing sector and making India a global manufacturing hub, has not come a day too soon for a nation desirous of becoming an economic superpower and bringing overall prosperity to its growing number of citizens. Infusing new life into the listless manufacturing sector is also critical for generating employment for its growing pool of ‘young work force’ — the largest in the world — if India wishes to reap demographic dividends. The paradoxical gap between contribution to GDP and employment generation of service and agriculture sectors makes it even more imperative to vitalise Indian manufacturing sector.
Statistically, service sector’s contribution to India’s GDP is approximately 54 per cent but it employs only about 28 per cent of the work force. Agriculture with a meager 17.5 per cent and sliding share in GDP continues to be the largest employment provider with 47.5 per cent Indian work force working in this sector. In comparison, industry contributes about 28.5 per cent to GDP and generates employment for 24.5 per cent of the Indian work force. India has a work force of 500 million people and with nearly 13 million youths entering the labour market annually, there has to be a gateway to absorb and direct this energy into fruitful gains for the nation and society. In India’s case, manufacturing is the only sector capable of creating such large scale employment channel.
Moreover, in a three-tiered economy consisting of agriculture, services and industry, demand for services is a function of the outputs generated by producing sectors of agriculture and industry. So, without the growth of agriculture and industry, this sector alone can’t sustain its growth in the long run due to the high backward and forward linkages of agricultural and industrial sector. This fact coupled with the trend of rapidly urbanising India whereby nearly 40 per cent of its population will dwell in urban settlements by 2030 implies that future work force needs to be absorbed in sectors other than agriculture. Increasing manufacturing activity again is the most obvious and preferred choice for this absorption, given a good reserve of natural and financial resources within the country.
But between India’s aspiration and goal realisation, there are some serious impediments — skill deficiency among its work force being one of the most critical gap areas. Skill and knowledge are the driving forces of economic growth and social development for any country. Countries with higher and better levels of skills also adjust more effectively to the challenges and opportunities of globalised world. In our case, skill deficiency has resulted in large section of work force being ‘unemployable’ compounding the problem of unemployment. Skill deficiency has also been one of the reason discouraging big-time corporate investments in manufacturing and low-quality goods being produced by SMEs leading to an unacceptable contribution of manufacturing sector in the GDP of India. Relatively low contribution of industry in GDP is also an aberration for an emerging economy like India abundant with natural resources and humungous work force.
The other impact has been less than desirable share of India in the global manufacturing basket which at present hovers around 2.1 per cent as compared to 22.5, 17.4, 9.7, 6.0, 2.8, 2.4, 2.3 and 2.2 per cent respectively for China, US, Japan, Germany, Korea, Italy, Brazil and Russia. We stand at ninth position in global manufacturing ranking. This is not to say that our manufacturing sector has not grown with time but certainly its pace has been less than enviable if one compares our growth with that of our neighbor China, which by design or default has become our benchmark for comparing economic growth.
China was the seventh largest manufacturing economy in 1992, third in 2002, and overtook US in 2012 to become world’s largest manufacturing economy. They have since increased the lead over US. Several other emerging economies also rose in the ranks during this period. Brazil jumped from 12 in 2002 to eight in 2012. From 1992 to 2012, South Korea rose from 13 to fifth while India climbed from 18 to ninth position.
The realisation in India about the importance of reviving manufacturing is not new as even the previous governments had initiated policy changes and institution building to take forward this agenda but a strong push had been missing. With new dispensation, a new hope has arisen for taking forward the agenda of making India a ‘global manufacturing hub’. So, how can private sector contribute to this cherished goalIJ For one, just like other economic deficiencies where public-private cooperation has become the preferred and rightly so the best way, Skilling India requires active and enlightened private sector participation to reduce India’s skill deficit.
To realise the dream of Make in India, the country needs to skill at least 500 million work force over the next ten years. Even before the introduction of mandatory CSR regime, enlightened organisations like DlF Foundations and various others, envision building India’s human and social capital by nurturing and ensuring educated, enterprising and sustainable communities. Among key initiatives, skill development has been one of the prime intervention areas.
An additional benefit of skilling India comes in the form of graying population in the more prosperous parts of the world. It’s estimated that by 2020, there will be shortage of skilled manpower to the extent of nearly 56 million. Thus, India can reap ‘bonus demographic dividend’ by being the lead exporter of skilled manpower even as it expands manufacturing frontiers domestically. ‘Skilling India to Make in India' is the way forward!
The writer is director, programmes, DlF Foundation.