With technology changing fast, no one clearly knows where will the jobs of the future come from and what will they be like. (Image: Reuters)
The recently appointed Economic Advisory Council (EAC) to the Prime Minister, led by economist Bibek Debroy, has a tough job at hand—to propel economic growth in a fashion that will create jobs. During the first quarter of 2017-18, India’s growth rate slumped to 5.7%, a three-year low. Popular press attributed this to the aftermath of demonetisation, implementation of GST and slowing exports. However, there is more than meets the eye.
Per-capita income in India is $1,700 per year—around 16% of the world average. India’s labour productivity—economic output per hour of work—is just 15% of the US levels. Falling productivity is slowly marking its presence in India’s export growth. Some think that exchange rate factor is behind India’s exports slowdown, but it is not entirely correct. This year, the yuan appreciated against the dollar by 6%, yet Chinese exports grew at an average of 8%. China is a good comparison, as both India and China compete in the world market in many price-sensitive items such as apparels and leather footwear. Indian economy is hit by a technology bug and that is more worrisome than anything else.
Technology and investment: Data suggests that, in India, gross fixed capital formation is falling—from a high of 17.5% during 2004-08 to a low 4.3% during 2014-16. A part of the fall in value of investment has to do with lower input costs. Technology has made sure that inputs come at a cheaper price. This has reduced price of private investment. Another part of investment slowdown has to do with the aftermath of stalled big infrastructure projects during the latter part of the UPA rule—when the marginal value addition of government investment fell drastically. Rather than expediting stalled investment projects and tackling scams and corruption charges, the UPA focused on unproductive subsidies to woo voters, which didn’t auger well with economic growth.
Technology and job-creation: During last century, technology complemented workforce by making them more productive—electricity, combustion engines and refrigeration aided economic growth. Now things are different. In this age of Big Data Analytics, machine and deep learning, machines are increasingly taking away human jobs. With technology changing fast, no one clearly knows where will the jobs of the future come from and what will they be like. For example, US regulators have approved smart pills that send accurate diagnostic information from inside a patient’s body to doctors via Bluetooth; computing power of a mobile handset is equal to that of the human brain; Tesla has an engineless electric car that costs only $35,000, changing the dynamics of the auto industry. A societal dislocation is waiting to happen. The government acknowledges this—reacting towards the advent of driverless cars, roads minister Nitin Gadkari had said, “We won’t allow any technology that takes away jobs.”
Technology and education: This year, there was no Indian university in the top 200 Times Higher Education World University Rankings. This comes as a nasty surprise to those who believed in the prowess of India’s scientific, technological and managerial manpower. Our curriculum is mostly archaic—there’s little connect with the modern industry. Ergo, fewer jobs are getting created, with less few graduates having the ability to execute. If corporates figure out that potential candidates cannot execute or deliver, then demand for hiring will be less. During 2015-16, employment generation in the organised sector fell to just two lakh jobs a year, which is less than 25% of the annual employment generated before 2011. Daily, less than 2% of Indians who apply for jobs get it. India (like elsewhere) is transforming into a gig economy where the labour market is increasingly characterised by prevalence of short-term contracts or freelance work as opposed to permanent jobs.
Technology and agriculture: In India, farming is extensive rather than intensive. Indian farmers grow crops using more land, labour and animal inputs, rather than use of technology. For a long time, output per hectare, a common measure of agriculture productivity, remained low. In potato farming, the productivity of Indian farmer is less than half of his counterparts in the US, Germany and the Netherlands; in case of rice, it is less than half that of US and Egyptian farmers; and for wheat, it is less than half that of the UK and Egypt. The problem gets aggravated as 83% of Indian farmers are marginal and small (less than two hectare of landholding), and do not have the wherewithal to understand technology. This prevents them to enter into contract farming with corporates such as ITC, Coca-Cola, etc, as they are not sure about the quality aspect of the output.
Reforming agriculture cannot happen without embracing technology. Thanks to MSP, they prefer growing low-yielding, less remunerative crops such as wheat and rice. With nearly 50% of the Indian population still earning livelihood from the agriculture sector, a low productive agriculture sector means adverse income distribution.
Technology and income distribution: New World Wealth, a Johannesburg-based research group, published a report which noted that India is the second-most unequal country in the world, with millionaires controlling 54% of the wealth. In Japan, the most equal country, millionaires control only 22% of national wealth. With agriculture sector not performing well, there is an increasing propensity to migrate from rural to urban areas. During mid-2000s, the construction sector in urban India was able to absorb agricultural labourers as construction workers. But now even the construction sector is not doing well.
A concomitant rise in income with an adverse income distribution will lead to splintering effects where newer type of jobs such as housekeeping, security services, etc, will get created. This is a good thing as the average income of the poor will also increase. But what is worrisome is if this trend of income inequality continues to a level that is not sustainable. As experience from Brazil suggests, a country that neglects rising income inequality cannot sustain its economic growth in the long term.
Technology—key to raising productivity—is here to stay. As much as 90% of the increase in per-capita income comes from technological innovation. We must plan a strategy that makes technology inclusive.
