Learnings for India
Vietnam’s manufacturing and exports success has been one of the key reasons for its growth. This is where India lags. India has still not been successful in moving people out from low productivity agriculture into manufacturing. I believe there are four reasons which need to be tackled. First, there needs to be a much greater on-ground ease of doing business. Laws, politicians and bureaucrats connive to make doing business hard. Second, there needs to be a strong emphasis on improving education. Under successive governments, education has been politicised and controlled. India needs to free its education sector. Third, India’s policymakers falling in love with tariffs need to realise that a tax on imports is a tax on exports. Finally, there needs to be a focus on encouraging labour-intensive industries to absorb people wanting to move out from villages and agriculture.
What India is missing is quality jobs paying Rs 40-50,000 a month with a promise of upward mobility as a reward for hard work. Today’s India seems stuck between the sub-Rs 20,000 job and the high-end job in IT and specialist functions paying upwards of Rs 100,000 a month. The chasm in the middle needs bridging. This will need a disciplined focus on education, manufacturing, free trade, contracts enforcement (a legal system that works), and removal of restrictions that hinder doing business on-ground. Simply creating more PLI (production-linked incentives) schemes is not the solution to creating hundreds of millions of jobs which ensure that tomorrow’s life will be better than today for aspiring Indians.
The Indian Express explains India’s jobs crisis:
The movement of workforce from agriculture that India has witnessed over the past three decades or more does not qualify as what economists call “structural transformation”. Such transformation would involve the transfer of labour from farming to sectors – particularly manufacturing and modern services – where productivity, value-addition and average incomes are higher.
However, the share of manufacturing (and mining) in total employment has actually fallen along with that of agriculture. The surplus labour pulled out from the farms is being largely absorbed in construction and services. While the services sector does include relatively well-paying industries — such as information technology, business process outsourcing, telecommunications, finance, healthcare, education and public administration — the bulk of the jobs in this case are in petty retailing, small eateries, domestic help, sanitation, security staffing, transport and similar other informal economic activities. This is also evident from the low, if not declining, share of employment in organised enterprises, defined as those engaging 10 or more workers.
Simply put, the structural transformation process in India has been weak and deficient.
India needs to prioritise economic growth. It needs policies which free businesses, people and trade – and get the government out of business. With many countries and continents under economic duress, this is a unique moment in time for India to shed the baggage of the past and reverse policies that have kept people poor. (800 million Indians are still dependent on free food from the government for their survival.) Politically-induced poverty needs to be replaced with freedom-driven prosperity. If the politicians don’t do it, middle-class Indians need to rise and set the agenda. It is their future that is at stake. Can India, learning from countries like Vietnam, set itself on a Nayi Disha? It was these thoughts that were uppermost in my mind as we landed back in Mumbai from Ho Chi Minh City.
