Events & Issues

New Delhi, 19 October 2015

Employment Generation

FOCUS ON MSME SECTOR CRUCIAL

By Dhurjati Mukherjee

Employment generation is a vital facet of any country’s development strategy. This is more so in the case of India where population growth has been quite high and over 65 per cent of the population reside in rural areas.

India’s labour force has also been growing at a brisk pace despite the fact that more young people are increasingly opting to prolong their years of education. Nearly half the addition to the Indian labour force over the next 15 years will be in the age group of 30 to 49 years even while the share of this age group in China, Japan and South Korea will be decreasing. It is estimated that by 2030 the country’s workforce would be larger than that of China.

Presently a dimension of the unemployment problem is the inequalities and disparities that exist in access to employment opportunities across regions and social groups. According to the India Labour & Employment Report 2014, States such as Bihar Odisha, Uttar Pradesh and Madhya Pradesh which are generally considered backward face the worst on all indicators of good quality employment as the historically deprived groups – SCs and STs – reside in these States.

Obviously, the need of the hour is labour intensive industries and this has been harped again and again. In this connection, it is significant to mention that micro, small and medium enterprises (MSMEs) have urged the Government to provide them tax breaks based on employment generation for a large number of people. The MSME Ministry is also holding fairs across the country to push employment generation. The job fairs work on the model of employment exchanges.

The MSME sector contributes about 8 to 10 per cent to India’s GDP and has been recommended a capital infusion of Rs 24,000 crores under the 12th Five Year Plan. But though its growth is imperative for balance economic development, there is perverse incentive in replacing jobs with capital-intensive automisation, following the model of Western countries, where labour is in short supply and its costs are inordinately high.

However, in recent times some encouragement is being given to this sector and the SBI chairman recently stated that the MSME units, who are either not able to get loans and have to depend on unscrupulous lenders can now get hassle-free loans at a very competitive pricing. Online sanction process in this regard is also being considered.

The development experience of Asian countries like South Korea, Taiwan, China and also Japan in their later phase shows that the MSME sector with government’s help and direct involvement has been the key to economic prosperity. Also other South East Asian nations like Thailand and Malaysia followed the same strategy of the above countries. The question arises whether the Indian government can emulate their experience and achieve success?      

In such a situation, the recent report by industry body, Nasscom – Perspective 2025 – has been a cause for concern. It stated that while three million jobs were generated in reaching the first $100 billion revenue by 2014, the same will not be possible in doubling the turnover and only 1.2 to 2 million jobs can be added only. “In the new digital environment, productivity is being driven by technology improvements, rather than labour growth, and this de-coupling of revenue from headcount is likely to continue”, the report added.

Automation would obviously be an obstacle to job creation in the coming years. Moreover, the staffing pattern in IT companies would possibly change with induction of specialized professionals having “doctorate degrees in graphic design, humanities, sociology and security”.

The report referred to the need to retrain existing manpower to tune them to digital realities. While this may be necessary, what the report may have overlooked is the fact that spread of IT to the remote villages – which is steadily gaining momentum now – may not need automation to the scale envisaged and proper training would suffice.

There is need to ensure a balance between automation and manual operations through the use of computer facilities in various sectors. It is in this context skill development through intensive training is, no doubt, very much necessary and such training has to be imparted both at basic and also advanced levels. The massive Skills India Mission, announced by the Prime Minister recently, should go a long way in imparting all types of training geared towards skill development and the IT and various other sectors would greatly benefit from this. But lot of investments would be required and the Government should make the resources available.

Thus, it goes without saying that appropriate policies and measures to address the issue of education and skill acquisition and of skill mismatches need to be urgently put in place which the Mission is expected to tackle. While it is good news that an India Skill Development Service has been proposed with the Cabinet giving its initial consent, how fast it is pushed and made practical is a key question.

The Chinese experience may be an example fir India. Good monitoring, financial subsidy to students, varied job opportunities and periodic change of study materials, as per needs and demands of the industry are some of the factors in achieving successful skill development by our neighbour, where low-cost products of various items have flooded the international market. 

One needs to point out that apart from services, sectors like infrastructure, real estate, textiles, gems and jewellery are too labour-intensive. But most of these are unfortunately not growing to the desired extent. Textiles and gem and jewellery, to a large extent, are export dependent and the share of these exports is unfortunately falling.

However, according to an estimate by Manpower Group India, job generation is likely to be 3 to 4.5 lakh with majority demand from e-commerce, hospitality and retail industry while Indian Staffing Federation (ISF) estimated that there would be 30 per cent more jobs than last year. Though both the estimates appear quite optimistic, only the results will tell whether this has been achieved by the year end. 

In evolving an effective strategy to boost up employment generation, the MSME proposal has to be seriously considered in the coming Budget. Added to this is the need to diversify products of khadi and village industries and market these overseas with the Government’s active help and support. Though the Ministries concerned have decided to take these up, unless aggressive marketing is organized, their revival and growth may not be possible.

Finally, there is the need for a long-term employment strategy whereby the organized sector, particularly manufacturing, grows more rapidly than in the past, as suggested in the recent India Labour Report. All these measures if implemented effectively with political will and support could partly help in enhanced job creation and utilize the youth in a gainful manner. Time is the essence. ----INFA

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