Despite India's substantial youth population, little concerted effort has been made by the government to ensure their accommodation in India's labour market. Manufacturing could help partially address this, write Shubhranka Mondal and Pratibha Joshi

Joshi, Pratibha

Mondal, Shubhranka

LSE Research Online

Can	manufacturing	change	India’s	demographicdestiny?Despite	India’s	substantial	youth	population,	little	concerted	effort	has	been	made	by	thegovernment	to	ensure	their	accommodation	in	India’s	labour	market.	Manufacturing	couldhelp	partially	address	this,	write	Shubhranka	Mondal	and	Pratibha	Joshi.	The	current	status	of	employment	in	IndiaIndia	currently	has	the	world’s	largest	youth	population.	The	working	age	group	of	15-59	years	forms	anoverwhelmingly	large	percentage	at	around	91%	of	the	country’s	population.	The	median	age	in	the	country	isapproximately	28	years.	However,	there	has	not	been	enough	job	creation	to	employ	the	youth	transitioning	out	ofeducation	and	moving	in	to	the	labour	market.	More	than	31	million	people	in	India	are	currently	unemployedaccording	to	government	estimates.	Independent	sources	claim	it	to	be	even	larger.	It	is	therefore	vital	that	thegovernment	abandons	the	self-complacency	of	what	was	dubbed	by	critics	following	remarks	by	Prime	Minister	Modias	a	‘pakora’	or	start-up	economy	and	consider	the	most	appropriate	and	definitive	policy	changes	to	employ	itsburgeoning	youth	and	adult	population.So	far	the	services	led	growth-model	has	not	only	provided	limited	job	opportunities,	but	the	poster	children	of	theIndian	service	sectors	–	the	IT	and	the	BPO	sectors,	have	now	systematically	started	downsizing	payrolls.	TheMSME	(Micro,	Small	&	Medium	Enterprises)	sector,	typically	employs	less	than	five	people	and	on	average	haslimited	scope	for	expansion	as	most	tend	to	remain	own-account	enterprises.	Currently	only	a	fifth	of	Indians	havesalaried	jobs,	and	half	the	workforce	is	in	agriculture.Agriculture,	while	remaining	the	largest	form	of	employment	in	India,	is	no	longer	the	sector	which	provides	thegreatest	value-add	to	India’s	economy.	Moreover,	the	youth	of	today	are	now	looking	towards	an	traditionaleconomic	transition	model	with	greater	job	prospects	in	the	cities.	However,	urban	based	occupations	remainprimarily	of	the	informal	sector,	day	labour	variety.	The	prevalence	of	manual	over	mechanised	labour	in	Indiaremains	high	–	coolies	carry	luggage	in	a	railway	station,	construction	workers	carry	bricks	on	their	head	or	breakstones	with	hands	and	hammers.	Manual	scavenging	though	abolished	by	law	is	still	a	common	practice,	and	manymiddle	class	households	still	employ	maids	to	perform	domestic	chores.Growing	the	manufacturing	sector:	challenges	and	solutionsAlthough	there	is	no	one-size-fits-all	solution,	historically	formal	manufacturing	has	had	one	of	the	highest	potentialsfor	mass	job	creation,	as	well	as	the	potential	to	provide	higher	quality	jobs	with	fairer	pay	to	a	large	section	of	lowskilled	people.	What	India	needs	to	do	immediately	in	order	to	bring	about	manufacturing	lead	growth	is	not	to	giveinto	the	delusion	that	automation	is	soon	going	to	take	over	much	of	the	manual	work.	As	of	2016,	India	used		threerobots	for	every	ten	thousand	workers	as	against	the	world	average	of	seventy-four.	Republic	of	Korea	tops	the	list	ofautomation	with	631	followed	by	Singapore,	Germany	and	Japan	at	488,	309	and	303	respectively.	China,	the	globalmanufacturing	giant	is	at	sixty	eighth.	It	will	therefore	take	India	a	number	of	decades	to	reach	any	globallycomparable	automation	level.South Asia @ LSE: Can manufacturing change India’s demographic destiny? Page 1 of 3		Date originally posted: 2018-09-05Permalink: http://blogs.lse.ac.uk/southasia/2018/09/05/can-manufacturing-change-indias-demographic-destiny/Blog homepage: http://blogs.lse.ac.uk/southasia/Mechanical	punch	presses	in	operation	in	a	factory.	Photo	credit:	ILO	in	Asia	and	Pacific,	Flickr,	CC	BY-ND	2.0.The	benefits	of	manufacturing	and	trade	related	growth	are	substantial.	First,	creating	manufacturing	jobs	requirelittle	skill	training.	Empirical	evidences	show	that	it	requires	about	six	week’s	training	for	fifth-grade	educated	adults	toearn	as	much	as	Rs	15,000	in	low	skilled	manufacturing	like	apparel,	footwear	or	carpet	industry.	Second,manufacturing	has	a	large	multiplier	effect.	As	per	estimates,	for	each	job	created	in	manufacturingaround	sixteen	more	jobs	are	created	in	the	related	services	sector	like	parlour,	restaurants,	schools,	colleges,banking,	finance,	transportation,	logistics,	management	etc.	These	are	sectors	where	even	medium	and	high	skilledpopulation	of	the	country	can	find	jobs.	And	third,	manufacturing	not	only	caters	to	domestic	markets	but	given	theirtradable	nature	can	expand	and	grow	to	cater	to	exports.	With	this	in	mind,	it	should	not	be	a	surprise	that	previouslyChina	and	South	Korea,	and	now	Vietnam,	Bangladesh	and	Ethiopia	–	recent	high	growth	developing	countries,have	a	flourishing	manufacturing	sector.Manufacturing	jobs	can	provide	an	alternative	to	agriculture	jobs.	Indeed,	due	to	the	growing	unsustainability	ofagricultural	livelihoods,	demand	for	non-farm	jobs	is	clear	from	the	eight	million	people	who	are	signed	up	forMGNREGA	(Mahatma	Gandhi	National	Rural	Employment	Guarantee	Act)	jobs	on	any	given	day.	In	order	to	realisethis	change	on	ground,	India’s	latest	industrial	policy	has	to	identify	and	prioritise	key	sectors	of	manufacturing,	buildproper	industrial	clusters	and	provide	them	market	linkages	to	sell	the	finished	goods	both	inside	the	country	as	wellas	abroad	and	across	multiple	value-chain	systems.	This	also	requires	significant	investment	in	infrastructure	tomobilise	movement	of	people	and	goods.However,	it	is	important	to	acknowledge	that	the	challenges	to	bring	about	this	structural	transformation	will	beconsiderable	and	we	cannot	ignore	the	fact	that	the	global	order	and	process	for	this	transformation	are	not	the	sameas	they	were	decades	ago,	when	for	instance,	manufacturing	played	a	central	role	in	China	to	lift	800	million	peopleout	of	poverty	in	just	three	decades.Now	that	we	have	proposed	to	build	industries	we	should	make	sure	that	we	have	solutions	to	the	questions	ofadequate	pay	which	allows	upward	mobility;	good	work	conditions;	the	rise	of	ethical	trade;	international	competitionand	trade	barriers.	India	can	reap	gains	of	its	demographic	dividend	if	it	ensures	its	human	capital	is	well	equippedwith	correct	training	and	knowledge,	and	infrastructure	is	able	to	mobilise	human,	physical	and	financial	capital.India	therefore,	needs	to	act	before	its	youth	bulge	starts	ageing,	unless	of	course,	it	wants	to	remain	in	the	crack	ofthe	epistemic	developmental	divide	between	the	East	and	the	West.This	article	gives	the	views	of	the	authors,	and	not	the	position	of	the	South	Asia	@	LSE	blog,	nor	of	the	LondonSchool	of	Economics.	Please	read	our	comments	policy	before	posting.About	the	AuthorsSouth Asia @ LSE: Can manufacturing change India’s demographic destiny? Page 2 of 3		Date originally posted: 2018-09-05Permalink: http://blogs.lse.ac.uk/southasia/2018/09/05/can-manufacturing-change-indias-demographic-destiny/Blog homepage: http://blogs.lse.ac.uk/southasia/Shubhranka	Mondal	is	a	researcher	with	IFMR	LEAD	and	is	working	in	the	field	of	MSME,	financialinclusion,	trade,	global	value	chain,	labour	and	employment	related	issues.	She	tweets@ShubhrankaM.	Pratibha	Joshi	is	a	researcher	at	IFMR	LEAD,	she	has	worked	on	RCTs	related	to	worker	productivityand	business	training	for	small	business	owners,	as	well	as	on	topics	related	to	human	capitaldevelopment.South Asia @ LSE: Can manufacturing change India’s demographic destiny? Page 3 of 3		Date originally posted: 2018-09-05Permalink: http://blogs.lse.ac.uk/southasia/2018/09/05/can-manufacturing-change-indias-demographic-destiny/Blog homepage: http://blogs.lse.ac.uk/southasia/

Can manufacturing change India's demographic destiny?

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Can manufacturing change India's demographic destiny?

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