THE CONTEXT: The COVID-19 pandemic changed the way we think about our economic future and globalisation is now in retreat as well. Though, India recovered relatively quickly from the pandemic, yet it has entered a phase of ‘premature deindustrialisation’.

ISSUES:

• Sustained growth: Industrial policy and strategic state-led economic interventions are back in the world everywhere. The Inflation Reduction Act in the U.S., the European Green Deal, and India’s Atmanirbhar Bharat are prominent examples. However, India’s growth momentum has sustained without much growth.
• Unequal distribution of growth: The fruits of high growth were shared by a small minority which worsened pre-existing gaps of already unequal society. On the one hand, High-end cars get sold out and on the other hand common people struggle to cope with high food prices. This fault line is built into the structure of India’s growth.
• Stagnant manufacturing sector: India has not been able to industrialise sufficiently in last 75 years. Its manufacturing share in output and employment has always been stagnant and below 20%, except during the ‘Dream Run, 2003–08’. Even the 1991 economic reforms, which came with the promise of labour-intensive industrialisation, didn’t alter this reality. India’s industrial investment is stagnating, with high levels of unemployment and chronic disguised unemployment. Its trade deficit largely driven by imported goods, has been widening. India is not able to export goods and even lagging in producing the goods its consumers.
• Poor employment elasticity of services-led growth: India’s experience with services-driven growth since the late 1980s had two negative implications. First, it could not absorb the labour exiting agriculture in the same way that manufacturing would have. Second, the service sector required a large highly skilled workforce that India could not adequately supply. Inequality from services-driven growth is thus much higher than from manufacturing-led growth. The Gini index of inequality for regular wages in the services sector was 44 compared to 35 for manufacturing (Periodic Labour Force Survey, 2021-22).
• Unequal investment in human capital: Early investments in higher education contributed to the near abandonment of mass school education. These higher education institutions cultivated self-serving elites who played a role in India’s IT “revolution” while contributing to industrial stagnation. Thus, investments in human capital were deeply unequal.
• Differ in returns to education: The returns to education differ across classes and social groups. School enrolment is high. Higher education is not as inaccessible as it was earlier. But the differential quality of schooling feeds into the quality of higher education, which feeds into labour market outcomes. The high-skill services pitch would suit the traditional elite but not the majority first generation graduates from colleges in rural areas and small towns. The majority of these students reap poor returns on their investments in education. The poor quality of most state-run schools and colleges is closely linked to the elites renunciation of public education. Even as these fault lines are new forms of class divide in India, they reflect older ones rooted in the caste system.
• A culturally rooted diagnosis: The lack of mass education meant that an important cultural prerequisite for industrialisation was missing. India has looked down upon certain occupations, particularly those that are essential as electrical, welding, etc., partly impeding organic innovation in manufacturing. Industrialists say that India undervalues the vocational skills needed for manufacturing. Certain skills are not valued even if they command higher wages. Artisanal knowledge doesn’t enjoy as much social respect as scholasticism or metaphysical abstraction. Increasing returns and efficiency come from innovation and its diffusion, which are based on mass education and collective absorptive capacity.

THE WAY FORWARD:

• Need of deep industrialisation: India needs deep industrialisation, not just the service sector, that has the power of changing the foundations of society.
• Rise of useful knowledge: Economic historian Joel Mokyr suggests that the rise of useful knowledge is key to technological progress and growth in modern economies.
• Revaluation of culture of growth: A culture of growth also requires the revaluation of labour, production, and technology.
• High skill driven growth: Focusing on skill development programs tailored to the manufacturing sector can address the skill mismatch and enhance the capabilities of the workforce.
• Reviving demand: Supply-side efforts and regulatory reforms will certainly help but the key to the manufacturing-sector revival lies in reviving demand across the economy particularly discretionary spending.
• Boost Investments: Encouraging both domestic and foreign investments in the manufacturing sector can help upgrade infrastructure, improve technology adoption, and enhance productivity. This can be achieved through attractive investment policies, tax incentives, and easing of regulatory procedures.
• Regulatory Reforms: There is a need for streamlining regulatory processes by reducing bureaucratic complexities, and simplifying labour laws can create a business-friendly environment. It can attract investments, foster innovation, and enhance productivity in the manufacturing sector.
• Research and Development: Encouraging R&D activities and innovation in the manufacturing sector can lead to technological advancements and productivity gains.

THE CONCLUSION:

Despite the policy push and various state incentives, the industries in India has been hurt by a decline in its consumer base which has seen incomes come under stress. The industrial sector needs a major revival not just for the sustainability of economic growth, but also for income and employment generation, both of which have been under stress for some time now.

UPSC PREVIOUS YEAR QUESTIONS

Q.1 What are the salient features of ‘inclusive growth’? Has India been experiencing such a growth process? Analyse and suggest measures for inclusive growth. (2017)

Q.2 “Industrial growth rate has lagged behind in the overall growth of Gross-Domestic-Product (GDP) in the post-reform period” Give reasons. How far the recent changes in Industrial Policy are capable of increasing the industrial growth rate? (2017)

MAINS PRACTICE QUESTIONS

Q.1 There is a continuation of a trend of weakening of industrialisation over the past decade. Analyse the reasons and suggest measures to boost industrial growth in the country.

Q.2 The declining share of manufacturing in overall economic output as well as employment is a worrying sign for the economy’s long-term growth prospects. Comment.

SOURCE: https://www.thehindu.com/opinion/op-ed/why-india-needs-deep-industrialisation/article67841633.ece

THE CONTEXT: There is a rising concern that the economy is unable to generate sufficient employment to absorb the millions entering the labour force each year with a decline in the unemployment rate and a rise in self-employment.

FINDINGS OF PLFS 2022-23:

• In recent decades, there has been a growing link between economic growth and employment generation
• As per the survey, the labour force participation rate has continued to rise across the country. Alongside, the unemployment rate has continued to decline. However, the survey also documents a decline in the share of regular wage/salaried employment and a rise in self-employment.

LFPR Status in Periodic Labour Force Survey

• At the all-India level, the labour force participation rate (15 years and above) has increased from 49.8 per cent in 2017-18 to 57.9 per cent in 2022-23.
• In rural areas, LFPR increased from 50.7% in 2017-18 to 60.8% in 2022-23 while for urban areas, it increased from 47.6% to 50.4%.
• LFPR for male in India increased from 75.8% in 2017-18 to 78.5% in 2022-23 and corresponding increase in LFPR for female was from 23.3% to 37.0%.
• Female participation rate in rural areas has risen from 24.6 per cent in 2017-18 to 41.5 per cent in 2022-23 — an increase of roughly 17 percentage points over this period.
• While this should be encouraging, considering the low levels of female participation in the country, some have suggested that this rise in participation is indicative of the economic distress in rural areas, which is pushing women to work in order to augment their family incomes.

• The PLFS claimed a decreasing trend in the Unemployment Rate (UR) for persons of age 15 years and above.
• UR in urban areas decreased from 7.6% in April-June 2022 to 6.6% in April-June 2023 for persons of age 15 years and above.
• For male, it decreased from 7.1% to 5.9% during this period and for female, it decreased from 9.5% to 9.1% during this period,”

WHAT IS A PERIODIC LABOUR FORCE SURVEY (PLFS)?

• It was launched in 2017 by the National Sample Survey Office (NSSO) under the Ministry of Statistics and Program Implementation.
• Its objective is to estimate the key employment and unemployment indicators in:

1. 1. Short time interval of three months for the urban areas only in the ‘Current Weekly Status’ (CWS).
   2. Both ‘Usual Status’ (ps+ss) and CWS in both rural and urban areas annually.

The key employment and unemployment indicators are defined in periodic labour force survey, as: 

• Labour Force Participation Rate (LFPR): LFPR is defined as the percentage of persons in labour force (i.e. working or seeking or available for work) in the population.

It is calculated as:

 

• Worker Population Ratio (WPR): WPR is defined as the percentage of employed persons in the population.
• Unemployment Rate (UR): UR is defined as the percentage of persons unemployed among the persons in the labour force.

Definitions of CWS and Usual Status

• CWS: The activity status determined on the basis of a reference period of last 7 days preceding the date of survey is known as the current weekly status (CWS) of the person.
• Usual Status: The activity status of a person is determined on the basis of the activities pursued by the person. When the activity status is determined on the basis of the reference period of last 365 days preceding the date of the survey, it is known as the usual activity status of the person.

DIFFERENT TYPES OF UNEMPLOYMENT IN INDIA:

• Disguised Unemployment: It is a phenomenon wherein more people are employed than actually needed. It is primarily traced in the agricultural and the unorganized sectors of India.
• Seasonal Unemployment: It is a type of unemployment that occurs during certain seasons of the year.
• Structural Unemployment: It is a category of unemployment arising from the mismatch between the jobs available in the market and the skills of the available workers in the market.
• Cyclical Unemployment: It is a result of the business cycle, where unemployment rises during recessions and declines with economic growth.
• Frictional Unemployment: It refers to the time lag between the jobs when an individual is searching for a new job or is switching between jobs.

RELATED ISSUES :

• Quality of jobs: Measuring the quality of jobs is a subjective thing, however, by measuring wages, it is being calculated that the quality of jobs in India is very low.
• Informal nature of jobs: Most jobs pay poorly and are of informal arrangements in the unorganised sectors. More than 80% of the workforce in India is engaged in the informal sector, which has suffered the adverse effects of major structural changes in the Indian economy.
• Issue of Jobs in the formal sector: Government data captures only a small portion of the formal sector employment. Also, there is issue of large number of vacancies in the government-run sectors, which are not being filled.
• Jobs in the agricultural sector: Agriculture is absorbing more people than it did in the past. That indicates there’s not much labour transfer happening from farms to factories.

THE WAY FORWARD:

• Increase in Investment: There is a need to have an equal focus on both public and private investment to stimulate demand and generate jobs which should be of a quality nature to increase the productivity of the labour force.
• Skilling and upskilling the workforce: To increase the quality of work, workforce, needs to be skilled and upskilled by providing various trainings and restructuring the entire skill development to adapt to the changing job market.
• Gender inclusive: It is necessary to improve legal equality for keeping the rights of women workforce intact. Major regulations for equal remuneration for work of equal value, allowing women to work at night and in an industrial job in the same way as men, etc need to be implemented.
• Advantage of Demographic dividend: There is a need to reverse the dropout trends of school and college students and engaging them in vocational training to make maximum utilization of the demographic dividend.

THE CONCLUSION: Though there is an increase in the labour force in the country, It is only by raising the quality of skills of its existing workforce, that India will be able to meet its aspirational development goals.

PREVIOUS YEAR QUESTIONS

Q.1 ‘Earn while you learn’ scheme needs to be strengthened to make vocational education and skill training meaningful.” Comment. (2021)

Q.2 “Demographic Dividend in India will remain only theoretical unless our manpower becomes more educated, aware, skilled and creative.” What measures have been taken by the government to enhance the capacity of our population to be more productive and employable? (2016)

MAINS PRACTICE QUESTION

Q.1 There is a need for constant reskilling and upskilling of the workforce to realize the full potential of India’s demographic dividend. Discuss.

Q.2 According to PLFS 2022-33, despite the increase in the labour force and a decrease in unemployment, the quality of work is not up to the mark. What strategies and approaches can be considered as a way forward to address these challenges and maximize the potential of the workforce?

SOURCE: https://indianexpress.com/article/opinion/editorials/labour-force-participation-is-up-unemployment-is-down-what-about-the-quality-of-work-8980566/