India must focus on job creation to become a developed nation by 2047: Report
The Competitiveness Roadmap for India@100, released on Tuesday by the Economic Advisory Council to the Prime Minister, pointed at regional disparities and unequal income distribution as key challenges, while also appreciating India’s current social policies.
India needs to focus on creating competitive jobs for those who are currently outside the active labour market to achieve the status of a developed nation by 2047, “The Competitiveness Roadmap for India@100” report said pointing at regional disparities and unequal income distribution as key challenges.
“The pandemic has pushed millions back into poverty, at least for now. Social progress is lagging behind average prosperity, with dramatic weaknesses in environmental quality and the quality of basic education,” the report released on Tuesday by the Economic Advisory Council to the Prime Minister (EAC-PM) said.
It, however, appreciated India’s current social policies, which have become “less distortive, more targeted, and more focused on mobilising bottom-up upgrading”. It acknowledged that poverty in India has fallen over time, although “inequality has increased, with very high gains at the top” of the income distribution. A report on poverty by the United Nations Development Programme (UNDP) last month predicted that “barring India”, 71 million people in the developing world would sink into poverty as a result of the rippling effects of the Ukraine war and global inflation. The report said targeted subsidies to the poor worked for countries like India.
The report on the road map, which is a part of the India Competitiveness Initiative, was released in the presence of EAC-PM chairman Bibek Debroy. The collaborative endeavour between the EAC-PM and Institute for Competitiveness, is developed by the institute’s chair Amit Kapoor, economist Michael E Porter, and Christian Ketels of Harvard Business School.
The report recommends a road map for India’s journey towards its centennial year. Addressing the nation from the ramparts of the Red Fort on August 15, Prime Minister Narendra Modi resolved to make India a developed country by 2047. “My dear fellow citizens, now, when it is the first morning of the ‘Amrit Kaal’ of Independence, we have to make India a developed nation in next 25 years, he said adding that the road to the development will be “human-centric” and aimed to meet people’s aspiration. Amrit Kaal is the name the government has given to the 25 years in the run-up to 2047, the centenary of India’s independence.
The report released on Tuesday said while India’s productivity growth has been robust, labour mobilisation is extremely low, especially for women, and has been falling over time, especially since 2005 when job creation dramatically decreased. “Structural trends are holding India back: The sectoral transformation from agriculture to industry has been relatively slow, especially in terms of employment. Large firms have driven productivity growth but not job creation and the majority of employees are stuck in small, low productivity, and low growth firms, while there is a significant ‘missing middle’,” it said.
The report also highlighted regional disparities. “A small group of regions accounts for a large share of national output and overwhelmingly dominates activities like exports and innovation. A large number of less prosperous regions appear largely unconnected to the modern Indian and global economy.”
It diagnosed three “particular challenges” that India will have to address in the next 25 years: “ shared prosperity , jobs , and policy implementation”. Even as India’s headline GDP growth has been strong, weak social progress, rising inequality, and a lack of convergence across regions suggest that this growth has failed to translate into the expected improvements in quality of life for many Indians, it said.
“ India has a vast demographic opportunity with a young and growing working-age population. But it has increasingly struggled to create jobs for a large part of its labour force, especially women and the less skilled,” it added, referring to the jobs challenge.
On policy implementation, it said, “India’s government has pursued an ambitious agenda of economic reforms, largely focused on the relevant issues and based on mostly sound conceptual principles. But the impact on job creation terms of job creation and the growth of firms has fallen short of ambitions.”
“In addition, India is facing a shifting external environment with rising geopolitical tensions and changing patterns of globalization, climate change and policies to achieve the transition to net zero, digital transformation and other technological changes all embedded in a complex macroeconomic context,” it added.
In order to achieve its ambitious goal India will have to focus on social progress, regional balance, sustainable environment, and resilience to external shocks, the report said recommending two key principles — the integration of the social and economic development agendas and structural transformation.
Commenting on the first principle it said: “The India@100 strategy views these agendas as mutually reinforcing and fundamentally connected through job creation. India needs to focus on enabling the creation of competitive jobs for those currently outside of the active labour market. Jobs that provide pathways to higher productivity will over time enable individuals to earn their own livelihoods and become self-reliant.”
“Second, Structural Transformation 2.0 as a portfolio-based approach for driving job creation across a number of service and industrial sectors. Changes in technology and the structure of the global economy have reduced the power of the traditional growth model based on export led industrialization alone,” it added.
The immediate priority is to identify sectors with an ability to provide entry level opportunities and growth opportunities for those currently outside the active labour force, particularly low-skilled workers and women, the report said.
“While these jobs will initially have limited productivity, they provide the critical first step on a pathway to better jobs. A second focus is on the need to systematically develop sectors aligned with India’s current and future competitive advantages. While these industries will not provide jobs to the unskilled today, they will provide the source of jobs for a better skilled India tomorrow,” it said.
Finally, there needs to be a set of policies targeted at children and young adults to provide them with the appropriate skills and capabilities for succeeding in the labour market.
The road map was presented by Ketels. He highlighted the importance of building a complete understanding of India’s strengths and its unique advantages, which can help enhance the country’s overall national value proposition. “Understanding India’s competitiveness challenges and opportunities also help gain insights into the challenges and opportunities that the world is facing. How India manages to address its major challenges will have a bearing on how the world tackles these challenges. India’s performance matters,” he said.
In his keynote address, Debroy said: “If India’s development trajectory has to emerge faster, higher, and stronger, both government policies and the enterprises and markets functioning in the environment set by the former, are of great significance”.
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