India is at a crossroads. It has the largest young workforce anywhere in the world, and is the fastest growing economy today. At the same time, the economy is not creating enough jobs, and therefore not fully harnessing its “demographic dividend” in preparation for the “Fourth Industrial Revolution”. To create more and better jobs, certain fundamental realities need to be recognised—the untapped opportunities in the services sector, the imperatives of policy and regulatory stability, and the welfare needs of a new workforce. After briefly analysing the supply-side context (the characteristics of the so- called “demographic dividend”), this paper outlines a basic strategic roadmap for the demand side with a focus on constituents of the new economy (the industries that will have to generate new employment). It concludes with recommendations that can help bridge supply-side gaps, and demand-side imperatives.
India requires a balanced approach to harness the potential of the digital economy. India’s unique workforce is young, under-skilled and largely informal. Appropriate focus is needed on both the supply side and demand side considerations outlined here. The services sector will have to be at the centre of this demand-supply matchmaking – given its structural importance in the economy, the prospects of greater integration with various value chains, and potential for job creation. This will require greater supply chain efficiency and improved standards. The scale of the challenge is daunting and exciting at the same time. It reflects an opportunity to upgrade supply chains, industrial and regulatory efficiencies, and of course, the young, under-skilled and informal workforce.
Some specific recommendations towards this include:
Servicing ‘Make in India’: The Indian government’s flagship ‘Make in India’ policy of promoting indigenous manufacturing is premised on the assumption that there is no alternative for large scale employment generation. However, given that the services economy is an intrinsic part of manufacturing processes, and that here is an increasing “servicification” of trade globally, policy- makers must consider adding a strong service component to this policy vision. One concrete step towards this could be to build private sector awareness about the importance of supply chain standards, and for the government to develop a large range of service sector standards. Requisite infrastructure expansion (including digital infrastructure) will also have to accompany this focus, and so will forward and backward integration into GVCs.
Policy Stability and Innovation Centricity by Design: The Indian government will have to get serious about stability in policies and regulations, particularly those targeted at industries and sectors that constitute the digital economy. In practice, this would mean that India must conceive of a long-term digital economy vision, which balances imperatives of public access, innovation and growth, in a way that is fundamentally different from how this balancing act has panned out for traditional sectors that are no longer competitive in the global economy context. Regulatory institutions will also need to build capacities to scale with the digital economy, and will need to adopt a nuanced, light-touch approach as new markets develop. Towards this, there is no substitute to establishing inclusive multi-stakeholder processes, such as co-regulation, and regulatory sandboxes, that can also help counteract any hasty decisions.
Policy processes must also respond to uniquely Indian conditions. India’s expanding digital economy will touch many areas that are unregulated. The temptation of burdening such areas with adapted templates from legacy regulations and licensing frameworks will have to be resisted. These areas would include critical aspects such as data protection or regulation of services delivered through the internet. Policy-makers and regulators will have to juxtapose the imperatives of creating reasonable safeguards for citizens, preserving national security and institutions, with the need to propel innovation that can underwrite future infrastructure as well as generate the conditions for a new formality of the Indian workforce. India’s integration with regional value chains and GVCs will also be premised on this.
Reimagining the Digital Workforce: In 2009, the erstwhile government had set a skill development target of training 500 million people by 2022. The approach was premised on private sector participation. Many years since, the Modi government has actualised a new skill development policy with a similar private- sector oriented approach. Indeed, it is here that the large private sector’s intervention is desperately needed, and the government mustallowforittohavethebandwidthtorespond. Forinstance, the private sector has historically under-invested in preparing workers for responding to global supply chain standards. The result has been an inability to cope with new norms and compete in GVCs. The government has a role to play in reversing this vicious cycle, by allowing for creation of surplus value that can be reinvested in capacity building of workers, through adaptive learning and other available means discussed earlier.
Overall, a new approach is required to address new challenges linked to the future of the Indian workforce, and improving both quantitative and qualitative benchmarks through which future “work” itself is measured. India must adopt a policy approach that is holistic. It cannot afford anything less at this critical stage in its development trajectory, where there is a clear risk of institutions, and the overall political and administrative machinery, being overwhelmed by the sheer scale of the employment challenge. This means giving space to multiple stakeholders, fresh perspectives, and as inclusive a policy approach as possible, without diluting the impetus for an urgent response.
Chosen excerpts by Job Market Monitor. Read the whole story at The future of the Indian workforce: a new approach for the new economy