India cannot give jobs to more people? Think again, you may have been misinformed; here’s why

The prediction that job percentages will go down is a hollow argument because it is blind in extrapolating the labour market context of a developed country like the US to a developing country like India (regarding per capita income).

Several experts believe that employment in India's IT and manufacturing industries have peaked and it can no longer rise. But there is a flaw in this argument, especially in a low-income low productivity country like India. (Image: Reuters)

Several experts believe that employment in India’s IT and manufacturing industries have peaked and it can no longer rise. Meanwhile, only 0.7 of India’s labour force work in IT and 11 percent in manufacturing, and this, according to the pundits it the highest we can go. The reasons cited include automation and anti-globalisation rhetorics. But there is a flaw in this argument, especially in a low-income low productivity country like India.

The prediction that job percentages will go down is a hollow argument because it is blind in extrapolating the labour market context of a developed country like the US to a developing country like India (regarding per capita income). The reason the US is a rich nation because its land and labour are highly productive and its markets are efficient. Meanwhile, the reason India is poor is that according to government data half of the labour force produces only 11 percent of the country’s GDP. Also, only 18 thousand companies can boast of a paid-up capital of over Rs 10 crore, IE reported. This means, US’ bigger problem is avoiding poverty of people and that is a smaller task than India pulling up people from being poor.

Technological changes, which the experts believe to be the reason of a fall in jobs, actually take a lot of time to occur. If we get rid of the ‘presentism’ theory, history shows us that whenever there has been a big change in technology it has taken a lot of time to completely take over the world. This essentially means that, at the rate with which India is developing, industries will have a lot of time to adapt to the changes and at the same time look after its workforce. Carlota Perez, in his book called ‘Technological Revolutions and Financial Capital’ wrote: “The full fruits of the technological revolutions that occur about every half century are only widely reaped with a time lag.”

India has a brilliant ecosystem of IT industry and a massive domestic market for manufacturing. Our country is still at the rank one position in the world in terms of inward Foreign Direct Investment, and that is because a huge amount of money is agglomerated in manufacturing for sectors where domestic consumption is reaching the required size. Meanwhile, India, because of its huge number of engineers, is as good in its software industry as China is in hardware. So the more there is a change in technology, there will be a further rise in the requirement of software professionals. Our ideas of lower-hanging and obvious solutions is an alternate reality in a world other countries are getting worried about deflating employment. In terms of numbers, India has more engineers than the US and China together, so the anti-globalisation rhetoric will fall flat soon.

While most of the developed countries in the world have a really low population, India’s scale alone can mean ample opportunities. With India being a distance away from the productivity frontier of the developed world, and the government’s ten-year plan to create a middle class of 800 million, we have all the more reasons to trust that the next generation will have better standards of living. In a book called ‘Population Bomb’, famous economist Paul R. Ehrlich in the 1970s had suggested that “there is no rational choice except to adopt some form of the Paddocks’ strategy as far as food distribution is concerned.” The Paddocks’ strategy meant a system of “triage” that would end food aid to “hopeless” countries such as India and Egypt. But then Green Revolution happened and India emerged again.

However, we must accept that India needs to work a lot on increasing productivity by building infrastructure, more regulations and improving human capital.

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