RELEVANCE TO UPSC SYLLABUS: GS 3: ECONOMIC GROWTH; EMPLOYMENT; LABOUR AND PRODUCTIVITY
THE CONTEXT: Infosys chairman N.R. Narayana Murthy sparked a debate by urging young Indians to work 70 hours per week to develop the country. He cited Japan and Germany as examples of countries that grew because their citizens worked for longer hours to rebuild their nations in the aftermath of the Second World War.
- Against law of economics: According to Keynesian law of economics, the output is determined by aggregate demand of goods, and the demand for labour is entirely dependent upon this demand. Firms that employ more labour while aggregate demand has not increased will find themselves with unsold goods. So, an offer by workers to work longer hours will not ensure that they will find employment so long as firms are unwilling to hire them.
- Not aligned to Indian conditions: The high working hours that contributed to
other countries are unlikely to serve the purpose in Indian conditions. In the economic rise of the mentioned countries, it was post-war reconstruction that provided the demand for greater output.
- Informal nature of economy: In India, major segment of economy is informal in nature which is another hurdle in reaping the benefits of increasing worker productivity.
- Asymmetric demography: There is asymmetric growth of the working-age ratio in India as major working population is likely to be concentrated in some of India’s poorest states. The full economic growth can fully realized only if India is able to create gainful employment opportunities for this working-age population.
- Lack of skills: Most of the new jobs that will be created in the future will be highly skilled and lack of skill in Indian workforce is a major challenge. India may not be able to take advantage of the opportunities, due to a low human capital base and lack of skills.
- Lack of capital: Indian workers do not actually lag behind other countries when it comes to clocking in long hours at work. But there is a lack of sufficient capital that can help boost their productivity. Among the top 10 biggest economies, India has the highest weekly working hours and the lowest per capita GDP.
CONDITIONS IN OTHER COUNTRIES
- Germany and Japan had experienced a decline in their workforces due to greater mortality, both from combat and the bombing after second world war. So, when it came to rebuilding these economies, the demand for labour was abnormally high. In the case of west Germany, there was the Marshall Plan by which the United States had assisted the country’s revival.
- South Korea too was recovering from a war, though a different one, and its resurgence was supported by considerable foreign aid received from the U.S.
- Prior to the resumption of production, these cities would have had to be cleared of rubble, a task requiring massive deployment of labour given the scale of the devastation.
- However, a political aspect beyond finance, common to all these three countries, is a strong nationalistic element that is likely to have accompanied their post-war reconstruction.
- There is insufficient recognition of the fact that the manufacturing success of the east is underpinned by prior success in agriculture.
THE WAY FORWARD
- Employment generation: The nation needs to create enormous job to absorb the addition of young people into the workforce. Promoting business interests and entrepreneurship would help in job creation to provide employment to the large labour force.
- Enhance human development parameters: India ranks 130 out of 189 countries in UNDP’s Human Development Index, which is alarming. Therefore, health and education parameters need to be improved substantially to make the Indian workforce efficient and skilled.
- Use of global market to grow domestic economy: There is a need to use the global market demand to grow the domestic economy for which India’s goods would have to be globally competitive. Here, the experience of South Korea is relevant. As most of the produced inputs into production are available to all countries via trade, a country’s competitiveness is determined by the productivity of its workforce. The strength of a workforce is related to its health and skill. Here, India’s workers are at a disadvantage compared to the most successful economies of Asia. Thus, there is need to enhance skills for maximum utilization of global economy.
- Expand the domestic market: There is a need to expand the domestic market which can increase the aggregate demand. For example, there is need to cut cost of food production to increase the real income of the Indian households. This would lead them to spend on non-agricultural goods and services. This would generate the demand needed to spur production in the rest of the economy.
THE CONCLUSION: India represents a unique case and any arbitrary comparison with other countries would only lead to irrational policy prescriptions. There is a need to enhance social investments potential for increased labour productivity to achieve more sustainable and desirable outcome.
PREVIOUS YEAR QUESTIONS
- Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard. (2023)
- Is inclusive growth possible under market economy? State the significance of financial inclusion in achieving economic growth in India. (2022)
MAINS PRACTICE QUESTION
According to the International Labour Organization, despite long working hours, Indian economic growth is not substantial. How can India translate its worker productivity to economic growth? Explain
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