Context
India’s economic growth over the past two decades has been largely driven by the services sector, particularly in Information Technology (IT), banking, and finance. However, this expansion has coincided with a noticeable decline in traditional industries such as apparel and footwear, which provide livelihoods for millions of low-skilled workers. The stagnation in manufacturing, which continues to remain at around 14% and well short of the targeted 25%, has exacerbated the divide between high-skilled and low-skilled jobs in the country.
Decline in Labour-Intensive Jobs
- A new World Bank report has identified a worrying trend: export-related jobs in India have been declining over the past decade. Direct employment linked to exports peaked at 9.5% of total domestic employment in 2012 but fell to 6.5% in 2020.
- The reduced ratio was cited by the World Bank to the increased export product concentration on the service sector as well as high-skill manufacturing that is ineffective in employing a large population hence a reduction in employment creation as a result of trade.
- This is rather worrisome, considering that India has not been able to seize the opportunity provided by China’s decoupling from the low-skill manufacturing industry between 2015 and 2022.
- Even though China’s overall share of the low-skill manufacturing of apparels, leather & textiles and footwear has declined, countries like Bangladesh and Vietnam along with more developed economies such as Germany and the Netherlands have benefited significantly from the shift.
Rise in Global Capability Centres
- As the manufacturing, especially in the sectors that were initially very labor intensive in labor, has been cooling down, India has evolved as a preferred destination to set up data analytics and software development centers by the leading multinationals, because of the availability of large numbers of IT engineers in the country.
- These facilities – now termed Global Capability Centres (GCCs) – have emerged mainly in India with nearly 1,600 such centres of multinationals in all industries. Thus, though transitioning from early BPO days to IT services and GCC model has created high skill jobs it has not been able to provide employment to the low skilled workers who lost their jobs due to the dwindiling traditional manufacturing industries.
Widening Skills Gap
- The stagnation in manufacturing, coupled with the rise of the services sector and high-skill manufacturing, has led to a widening skills gap in the Indian job market. The Economic Survey 2023-24 states that India needs to create nearly 7.85 million jobs annually in the non-farm sector to accommodate the growing workforce.
- However, the Centre for Monitoring Indian Economy reported that the national unemployment rate surged from 7% to 9% in June 2024.
- To overcome this problem, the Centre has initiated the following measures, including the sanction for establishing seven PM Mega Integrated Textile Region and Apparel (PM MITRA) Parks aimed at creating well-equipped infrastructure for the textile sector with an expense of Rs 4,445 crore up to 2027-28.
- Besides, in the same year, the Cabinet Committee on Economic Affairs led by Prime Minister Narendra Modi had cleared the establishment of 12 industrial smart cities under the NICDP with an overall estimated cost of Rs 28,602 crore.
Conclusion
It is important to note that the separation of high-skilled and low-skilled jobs in India is a topic that cannot be solved with a single solution. Whereas the sector and high skill manufacturing have offered well paid employment to a part of the population, the slow down of the traditional manufacturing industries has left millions of low skill people jobless. Therefore, for India to fill this gap, it has to reform its manufacturing base and enhance the labour-intensive industries to support employment for its population as well as provide a better business environment for investors. Also, funding of skill enhancement measures and vocational training may assist in building human capital that would be adequate for the existing job environment. If these challenges are successfully addressed, the position of India can be strengthened and the job market can be made more inclusive and equal thus, helping the country’s economy reach a level where everyone who wants to work can find employment and the overall development of the country can be enhanced.
Source: The Indian Express