By Mriganka M Bhowmick
The current political unrest, if one may term it so, is a reflection of the gloom about the future perceived by the youth and a large section of the middle and lower middle class. A large number of people in India, mainly youth, have realized that their skills are not of any use to the economy per se. The world has already moved ahead with automation and artificial intelligence, where the production of goods and services will be its forte. Human labour is gradually becoming unqualified for the production of GDP, as it is largely unskilled and semi-skilled. Taking the entire mammoth population into 2050 while keeping political and social cohesion intact is a herculean task. The coming time is not as good as it is perceived to be in social media reels and government advertorials. A real challenge for India is unfolding, irrespective of which party is or will be in power.
India’s call for industrialization in recent years is largely fuelled by the aspiration to engage its large labour force in gainful employment in factories and the ancillary services around them. Not much has been achieved on this front, due to the very basic fact that the world has been moving towards man-less production for the last few decades, even before Covid. The advantage of having an abundant cheap labour force has not been perceived as a special advantage. The production of goods and services around the world, including India, has increased over the last two decades and wealth gets created, but alas, it has not been distributed en masse, as people are no longer needed to create value in trade and commerce. You may criticise it politically as “job-less growth”, but it is a tech over-reach upon human labour that has created this void. The government has no option left but to feed the large population through welfare schemes. Otherwise, a human life crisis would have erupted.
Until now, it was a golden period for India, when a large labour force was needed to complement technology to optimise GDP, be it in software, financial services or industrial production. As new technology is now cloning itself to substitute the second wheel too, which was human in economic activity, the equilibrium has broken. At this juncture, it appears that neither high-value nor low-value human labour is really in great demand. Getting into engineering colleges or even IITs does not guarantee a good job. On the other hand, getting into polytechnic courses or ITIs is also a dry option for newly mid-qualified youth. Pessimism looms large.
One may try to take a sneak peek to get some answers as to how China catered to its population growth vis-à-vis job creation and policies. China’s journey was different, and India cannot replicate that story due to multiple socio-economic and political reasons. Data says that China’s population was around 92 crores, whereas India’s was around 62 crores in 1975. India landed in 2025 with a population of 141 crore-plus and increasing further, whereas China was pegged below 140 crore and declining. The fact of the matter is that China created enormous wealth in the last 50 years by using its human resources and implementing commensurate economic policies, be it in agriculture or industry. Its biggest success has been mobilizing agricultural labourers from low-productivity jobs to high-value-creating industrial jobs. But that did not happen due to a single policy decision; it was a series of strategic policy decisions taken by China.
China began its major policy shift in 1978 with farm liberalization, and the country then moved in sequence to creating rural industry, then to export-led manufacturing coupled with the creation of export zones, and then to foreign investment. The time was different. The labour force released from agriculture was being absorbed at the same pace in highly productive, export-led industrial jobs. Instead of capital-heavy industry, China initially specialised in areas where its huge labour supply was an advantage. FDI and exports brought technology, management and a market far bigger than China’s own consumers. Cheap logistics, energy and supplier networks lowered costs, so each factory job was supported by many more jobs upstream. High investment and savings, made possible by a favourable age structure, funded the expansion. The hukou system kept migrants’ social costs low for cities and employers, which further lowered input costs (though at a human price for migrants).
If you compare that with India’s journey, you will realize there are sharp contrasts in the policy decisions that shaped India in that very same phase. India did not really embrace land reform and farm liberalization with high productivity, and has not done so to date. The major policy shift happened only in 1991 with the liberalization policy, which removed industrial licensing and opened trade with the global market. But land, labour and power continued to remain hard to reform. Due to this rigidity, India’s industrial story did not take off in a grand way, unlike China’s.
However, thanks to global market access, the country’s economy leaned towards the service industry, which gave rise to IT and business-process outsourcing, telecoms, finance and, more recently, global capability centres, where job creation is comparatively lower than in the highly productive manufacturing segments. Due to the aforesaid policy rigidity, India’s industrial growth happened in highly capital-intensive niche areas like pharmaceuticals, automobiles and engineering. But it failed to foster industries like mass garments, toys and electronic assembly, which could absorb unskilled labour.
Standing at this crossroads, India needs to pave the way for a growth strategy that feeds its 140-crore-plus population with productive employment. One can say that it is the challenge of this century. The baseline of this challenge is the very basic fact that 45-46% of the population is still engaged in agriculture, which contributes 16-18% of India’s GDP and, in that parlance, only 0.5-0.6% of world GDP. The time has arrived when high-tech agricultural production and food processing need a solid boost to increase per-person productivity in agriculture. Walking into this disruptive era of AI, robotics and automation, the country should safeguard its labour resources by entering into state-run, labour-intensive manufacturing like apparel, footwear and electronic assembly. Private organizations would be able to create more wealth for their promoters, but would not be able to absorb the labour force on a large scale.
The state’s public welfare module needs to be recapitulated by entering into labour-intensive manufacturing to avoid a human life crisis over the coming 20 years. India is a different story, and it will have a different solution compared to China. In the last 50 years, China had jobs growing faster than people, while India has had people growing faster than good jobs. Henceforth, it will not be an employment generation scheme, but rather an indigenous growth model that will ease India’s economic growth and provide jobs and food for its people. (IPA Service)
