1. Services and Digitisation: The next big engines of job creation

Services and Digitisation: The next big engines of job creation

But we must build the skills that will be required for the workplace of the future.

New Delhi | Published: March 21, 2018 3:37 AM
Digitisation, job creation, jobs With 80% of India’s population not yet covered by any health insurance, the potential for job creation in this sector is immense. (Express photo)

Over the last few years, the phenomena of jobless growth has been avidly debated by economists and interested parties across the political spectrum. The NSSO survey from 2009-10 to 2015-16 and Quarterly Economic Surveys (QES) from 2016 onwards have all been used to come up with contradicting inferences—some claiming the job creation rate has exceeded job seekers during the last eight years, while others showing that jobless growth is a reality in smaller time windows, during this period.

Gross employment figures also hide the fact of underemployment, i.e. many jobs are low-paid or informal sector jobs that are taken up only because there is no other alternative. Whatever the period of analysis, sources of data and position on political spectrum one takes, most would agree that employment generation to channelise India’s demographic dividend is the most pressing challenge facing us.

The latest figures from the Labour Bureau’s sixth QES, published February (for April-June, 2017), add further fuel to the raging debate and also some interesting insights. While only a sample survey of eight sectors, it may offer a glimpse of a potential blueprint of the future.

* Among the eight non-farm sectors that make up the survey, education, healthcare and trade outperform other organised sectors in job creation.

* Jobs in manufacturing, which makes up 50% of total jobs, have actually declined in this period.

While India has traditionally looked at manufacturing as the prime source of non-farm employment, we must accept that technological change is enhancing productivity levels, and make manufacturing less labour-intensive and employment-generating. In fact, a recent PwC’s Strategy& study indicated that India will need to create 10 crore net new jobs to harness the new entrants to the workforce over the next 10 years. Job creation of this magnitude can be achieved by two fundamental shifts in investment focus—policy making and mindset.

* Look beyond traditional avenues of employment generation in the industrial manufacturing sector, and target a step change in job creation in services sectors.

* Leverage digitisation and automation as opportunities, rather than a threat. Plan and assess the impact of digitisation in every sector to help build the right skills for a digital future.

Healthcare and education

In a post-industrial economy like the US, the Bureau of Labor Statistics has forecast that nine of 10 jobs projected to be added over the next 10 years (up to 2026) will be in the services sector. Of these, one-third of all new jobs will be in the healthcare and social assistance sector. Goldman Sachs estimated that every one percentage point increase in health insurance coverage is associated with a 0.6% rise in healthcare employment.

With 80% of India’s population not yet covered by any health insurance, the potential for job creation in this sector is immense. The National Health Protection Scheme announced by the government, targeting to cover 10 crore families with health insurance coverage and establishing 1.5 lakh health and wellness centres, can provide a big boost in this direction.

In the services sector, education is the largest employer, accounting for about 24% of total jobs and also the largest contributor to new job creation as per the latest QES. India is still projected to be the “youngest” country on the planet, and with more than 10 lakh youth entering the workforce, every month. Therefore, reform and investment in education assumes critical importance not only for aggregate job creation, but also investing in the right types of skill building that will impact job-ready skills in other sectors. Revamping curricula and human resource polices to attract good talent to the education sector must be a priority.


India’s first big boom in services jobs—in the IT and BPO sectors—was catalysed by the internet and communications revolution of the mid-1990s. This boom is now tapering off. Many jobs that were offshored to India to reduce costs—whether it is filing a tax return or answering an online customer query—can now be made redundant, as a digital bot can do the work of several human data processors.

While digitisation in its various forms has raised the spectre of accelerated job losses in both services and manufacturing sectors, it offers a tremendous opportunity for new job creation and upgrade of jobs from the informal to formal sector.

The creation of new digital business models in transportation (Uber) and hospitality (AirBnB) has demonstrated the power of digital to create or formalise new jobs at scale. Ola and Uber together were estimated to have more than 10 lakh drivers in India in 2017. It also enabled entrepreneurship at scale and speed, changing potential job seekers to job creators. While many of these start-ups may fail, a vibrant start-up ecosystem is an essential component for sustainable job creation in the new economy.

The skills to survive and prosper in the future will be very different from what they are today. Our schools and colleges need to prepare the youth for a very different economic and digital world. Business and corporates that are leading this change must work closely with both the governments and academia to build the skills that will be required for the workplace of the future.

By Deepak Malkani, Partner & leader, Management Consulting, PwC India

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