THE CONTEXT: Mark Zuckerberg’s Meta has announced the opening of its first data center in India, signaling a modest step towards job creation in a country that urgently needs to generate 90 million new non-farm jobs by 2030. Despite India’s rapid economic growth and its potential to become the world’s third-largest economy, it faces significant challenges, including a low working-age population employment rate and a massive skills deficit. The country’s focus on the service sector over manufacturing has led to unique development pathways and new challenges in job creation and skill development.
ISSUES:
- Employment Rate Concerns and Informal Work: India’s working-age population is about 950 million, but only 46.6% are working, which is lower than the 70% rate in other emerging markets. Many of the workforce is self-employed, including unpaid helpers in family enterprises, which may not provide stable or sufficient income.
- Service Industry Focus and IT Sector Slowdown: India has historically focused on the service industry for economic development. It has moved from call centers in the 1990s to a broader range of technology-enabled services today, employing 5.4 million people. The IT sector, once the jewel of the service industry, has experienced a contraction for the first time in 25 years due to automation and artificial intelligence, leading to job redundancies and hiring cutbacks.
- Rural Migration: Low earnings in low-skilled service jobs have led many to return to their villages during the COVID lockdown, and 60 million more people are working in agriculture than four years ago.
- Manufacturing Sector and Skills Deficit: The manufacturing sector’s share of GDP has shrunk to 13%, and there is a belief that the opportunity to develop this sector as a significant employer may have passed. There is a massive skills gap in the country. The 2023 India Skills Report indicates that only half of young Indians are currently employable, highlighting the need for skill development.
- Tech Startup Potential: Despite recent setbacks in investments and valuations, Indian tech startups in AI, SaaS, defence, and greentech have the potential to create jobs if they scale up responsibly.
- Green Economy: According to the World Economic Forum, India’s transition to renewable energy and green hydrogen production could create 50 million new “green economy” jobs.
- Manufacturing Opportunities: Despite the focus on services, manufacturing should not be neglected, especially for small and medium enterprises that could be significant labor absorbers with the help of digital public infrastructure.
THE WAY FORWARD:
- Long-term, Multi-level Relationships and Commitment: Emphasize building long-term, multi-level relationships between companies, educational institutions, and government bodies to foster an environment of continuous learning and skill development. The partnership between Siemens and the German government to develop dual education systems in various countries. This approach combines classroom learning with on-the-job training, addressing the skills gap directly relevant to industry needs.
- Focus on High-Value Service Offerings: Encourage companies to move towards offering high-value services that require specialized skills, such as R&D, design, and conceptualization, which can, in turn, generate demand for lower-skilled services. Infosys, a global leader in consulting, technology, and outsourcing solutions, has moved beyond traditional IT services to offer high-value services like digital transformation consulting and next-generation AI services, creating a demand for specialized skills in the workforce.
- Collaborative Problem-Solving: Adopt a collaborative approach to problem-solving that involves all stakeholders, including government, industry, and educational institutions, to identify underlying concerns and generate creative solutions that satisfy all parties’ needs. IBM and India’s National Skill Development Corporation (NSDC) are collaborating to offer a free digital education platform for skill development across various sectors. This initiative aims to equip the youth with new-age skills to make them more employable.
- Address Organizational Issues: Tackle organizational issues that hinder job creation and skill development by improving communication, fostering a culture of continuous improvement, and implementing effective change management practices. Tata Consultancy Services (TCS) has implemented an Agile Workforce model, which emphasizes flexibility, constant learning, and adaptability. This model has helped TCS address organizational challenges and rapidly adapt to changing market demands.
- Promote Global Capability Centres (GCCs): Support the growth of GCCs by employing a significant number of people in high-value service roles, contributing to India’s exports and economic development. American Express has established a GCC in India, focusing on high-value functions like analytics, risk management, and technology development. This GCC is a critical hub for AmEx’s global operations, creating high-skilled jobs in India.
- Facilitate a Green Economy Transition: Support the transition to a green economy by investing in renewable energy and green hydrogen production, which can lead to the creation of millions of new jobs. ReNew Power, India’s largest renewable energy company is an example of how investments in green energy can create jobs. By focusing on solar and wind energy projects, ReNew Power contributes to India’s green energy targets and job creation in the renewable energy sector.
THE CONCLUSION:
To tackle the pressing employment and skills challenges, India must adopt a multifaceted approach that includes enhancing education, fostering high-value service exports, supporting tech startups, and not neglecting the manufacturing sector. Collaborative efforts between the government, industry, and educational institutions are crucial to creating a skilled workforce capable of propelling India towards sustainable economic growth and making it a global leader in innovation and job creation.
UPSC PAST YEAR QUESTION:
Q.1 Faster economic growth requires an increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard. 2023
MAINS PRACTICE QUESTION:
Q.1 Analyze the role of digital public infrastructure in enhancing the competitiveness of small and medium enterprises (SMEs) in India. Discuss how initiatives like the Open Network for Digital Commerce (ONDC) can level the playing field for SMEs and contribute to job creation in the manufacturing sector.
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