 "No shortage of jobs in India but a shortage of ‘right jobs’ due to a big gap between degrees and skill: Shamika Ravi")
Shamika Ravi needs no introduction. A member of the Economic Advisory Council (EAC) to the Prime Minister, she is a brilliant and a prolific scholar, a public policy wonk and a teacher honing the brightest of minds for over two decades. Her research focuses on economics of development including areas of finance, healthcare, urbanization, gender equality, and welfare and poverty. Firstpost caught up with Dr Ravi on the sidelines of the recent Raisina Dialogue and she held forth on a number of key issues including the debate on manufacturing and services, unemployment crisis, PLI schemes and more. The interview is being reproduced verbatim with only light edits made for brevity and grammar.
My first question to you. Is the debate between manufacturing and services in India a false debate?
It is indeed a false debate, and it’s quite a naive debate. We in the last 10 years of the Modi administration have basically been correcting this settled ‘wisdom’. Which is not only in Delhi, but I think across states as well as far as policies are concerned that ‘India has missed the manufacturing bus’… We would hear this all the time. That India is going to be a ‘unique model’ of development where we are going to transition from agriculture, which is unskilled, to services. And that will be our unique model. This is something that some people continue to say even today.
The point is you have to look at it strategically. One, from the point of view that if 500 million is our workforce, to transition such large numbers from unskilled agriculture to relatively skilled services sector, is not easy. There is a reason we have never seen this (phenomenon) in history anywhere.
More importantly, you have to look at the market for manufacturing. The thought process seems to be that since China, and subsequently smaller economies like Vietnam and Bangladesh have flooded the world market with manufacturing… So how are we going to catch up… and therefore we have missed the bus. That is the thinking.
Impact Shorts
More ShortsThe point is, the whole world economy is increasing… It’s growing. As the world economy grows, Latin America will grow, Africa will grow, so too the rest of Asia. Which means the demand for simple manufactured items will continue to grow for the foreseeable future.
What do I mean by simple demand? Simple manufactured items like electronics, furniture, leatherwear, garments… All of this will continue to grow. The Chinese are losing their labour advantage and cost advantages, but I would say even if they weren’t… They can’t possibly be the only factory of the world which happens to be now consuming more, and it is likely to continue demanding more.
So, it’s a very naive thinking that ‘we have now missed the bus’, now what do we do? We will do services… No.
Not only is global demand increasing, we have the workforce and we are making an effort to give them that kind of semi-skilled or the kind of skill required to succeed. Therefore, the big push for ‘Make in India’, and Make in India for the world, but also for India.
Because if you look at the kind of things we have been traditionally importing from China… they’re not very high-end, hi-tech products. Umbrellas… Sofas… Kitchen knives… Cutlery… I mean, come on! These are not terribly, you know, high technology. So, the point being that we will, and we can (manufacture) if you shift the focus towards livelihoods. We have to manufacture now for the world, yes, the way the Chinese have, but also for ourselves, for India and for the rest of the world which has been part of the emerging and the underdeveloped part. But manufacturing demand is only going to grow.
A lot of PLI schemes are under way. The policy is to give a boost to manufacturing, but would you say that in the other sectors it has been as successful as it has been in the mobile phone manufacturing segment?
The thing about industrial policies is… PLI (Production Linked Incentive) is just one of the industrial policies… We have others. We have export promotion and there is Make in India Defence… which has its own story evolving. There you have to gauge its performance from various different metrics. And again, not only is the size of growth of the firm itself — so that they can compete in the global market — the other thing is also what share… How much are we seeing this kind of import substitution because now domestically you are able to provide for these kind of things… What impact is it having on jobs?
These are the kind of evaluations or assessments that we must do to gauge the final impact of the industrial policy, which by the way is a very recent thing. We are reversing the gaze, if you consider that we had already given up on manufacturing… And industrial policy globally right now is becoming protectionist, right? The Chinese spend 1.7 per cent of their GDP on industrial policy, which by the way is much more than what they spend on defence.
The Americans, with the Make in America in the form of Chip Act is pushing for manufacturing. We are seeing country after country is beginning to realise that you can’t just look for efficiency, meaning where can I get cheap imports? That may be good for my consumers… but the offset is what about livelihoods? People need cheap and good quality product, but people also need jobs!
That’s why every country today has a version of Atmanirbhar Bharat unfolding within. So, one is a strategic interest. Don’t just look at Make in India from a short-term, or one or two metrics. That’s why it’s a vector of many outcomes we’re looking at and that is how we have to evaluate these.
On jobs, would you accept that there is a jobs crisis in India, or do you think there is a crisis of well-paying jobs in India?
I think it is the latter. I’ll tell you why. The question also is how well-paying should it be? What is the right wage, etc, etc… That’s the big debate. If you look at… first of all… the unemployment rate, don’t just look at national level. India is a Union of 28 vibrant state economies. A lot of what happens in terms of labour market are unfolding at the state level, right? Beyond the all-India unemployment rate, if you begin to look at state-level unemployment rate, then you see that Karnataka, Gujarat, Chhattisgarh… These are states which have very low unemployment rate. Single digits, that too like one-one-and-half or two per cent and then you have Kerala which has 13 per cent.
The question you have to ask is, what is leading to job creation? It’s very evident from the data that wealth creation or economic growth is leading to job creation, right? Therefore, states have to become business-friendly and they have to foster and support wealth creators. They must support private sector firms, etc., to not just establish business but also to grow existing businesses. Jobs are coming from there. That is number one.
Number two… look at the demographics, the age profile… you’ll find that people under 30 (18-29 age bracket) have an unemployment rate which is almost four times as high as the unemployment rate of people above the age of 30. So, what is happening at the age of 30 that suddenly they all seem to be getting a job?
Well, the point is that now, as the country becomes affluent or we are less poor, we are willing to wait. We are taking exams… Our expectations are far higher now… It’s not just an Indian problem, it’s a global issue. And the IMF and the OECD call this ‘youth inactivity’. It’s a nice euphemism for saying that the youth are inactive. They’re not really creating any value. They’re right now sitting idle. They’re unemployed.
But that is not… you know, it’s not a happy choice because we are saying maybe it’s okay for the OECD guys to have this kind of an issue but for us, we want people to create value… But there is one further insight, because if it were only shortage of jobs then after 30 also you would not get those jobs. So clearly, it’s not shortage of jobs, but it is a shortage of the ‘right job’ for me.
People have expectations which are different… Wages are one part of it. But there is more than wages. Even amongst the youth… your most highly educated… meaning people who are graduates or hold degrees above it… Sabse zyaada educated people among the youth population in the country… their unemployment rate is almost five times as high as the people who have primary and below education. So, your uneducated people are all working and your graduates, by and large, are waiting for the right jobs.
So yes, there is a big gap today in the market… Because your industry is repeatedly telling you that finance is not our constraint anymore, skilled manpower is our constraint. How do these two things coexist, that your most-educated youths are sitting at home and your firms are not able to find skill? It is because there’s a big gap between degree and skill. Market values skill, not degrees.
Therefore, reskilling and skill mission (Modi government’s National Skill Development Mission) and why we need to really provide skills to people which can help them get the right job.
What is the policy prescription here? Skill India?
Oh, Skill India! And the New Education Policy (NEP). You’re basically saying now… academia or classrooms must work closely with the firms to give the right skills because that is what is going to make them employable. So, there are nuances to this story. And expectation management is definitely a very big part of it. We also have a very large segment that continues to take exams in the hope of making it to a government job.
I was going to ask you this… So, is the crisis being exacerbated by the fact that the security and stability that is provided by the government sector job, and the social and the economic perks that are perceived to be there in government jobs, is that what is adding to the problem? Because if you get a government job… you are set for life… your value goes up in the marriage market, etc…
You see that is part of the culture… the society. The point being that this is a shrinking problem because you also have the largest growth in startups. In fact, the joke is that when we were in college, all the cool kids used to carry guitars. Today, all the cool kids have startups… Go to business schools. Those are the places where I’ve been teaching for 20 years… (You’ll find) startups, experimentation, incubation of new ideas, applying technology solutions to multiple problems in the society — education, health, mobility… These are also being tried out. So, the two things coexist. You have a segment that is only waiting for government jobs, but you also have people who are willing to try new things. And I think a growing economy needs risk-taking appetite.
But the problem with startups is that 95 per cent will fail. So, we also have to embrace failure, because if you’re not going to try, you are not going to succeed, right? You’re not going to see the kind of growth… Risk-taking appetite in the country and in the community as a whole has to improve. I have a feeling… that with economic growth, you will see growth of risk-taking appetite. And the that hunger for government jobs will continue to come down.
Now the problem is… We are also faced with the crisis where we have huge vacancies in the government and the government must also expand. Because with more complex economy and the global economy becoming more… our relations with countries becoming more complex, every segment of the government must also keep up with what is required of the administration.
So they have to be rescaled… capacities have to be created and more people have to be hired. You need more teachers, more policemen, more nurses in the public hospitals, etc. All those things coexist. I think…one simple narrative trying to explain all labour markets in India is futile.
Because they’re all contemporary problems. But we do need the hunger in certain segments for government jobs to come down, but also notice where do people take these exams the most? They tend to be typically in states which are backward. Those are also states which are not growing economically. This is why they are waiting for the right jobs and so on. You also have to understand that there is a right size of the government. We also have to look at it from that side. Economies which have a very large percentage of population employed in government, first of all they’re not fast-growing. They tend to be places where it’s very difficult to reform.
But how do you explain China?
Yes, but China is a one-party system and by the way, unlike what we believe, they do have a lot of competition within the party and their incentives are aligned in such a way that leaders have equity in a lot of ways which are quasi private sector. The growth of the economy is directly linked to their growth in stature and power. We are not China, thank god for that.
But I would like to think of a country like Sri Lanka… One of the reasons why reforms are difficult in Sri Lanka, is because nearly 10 per cent of the Sri Lankan population is employed with the government. That’s a very large number. Ours is around five per cent… five-to-six per cent.
So, we also have to think of those things like government jobs… also how much government job? That’s a macro problem. But if you look at it from the (perspective of) labour market and expectation… then the risk-taking appetite needs to be there… And people become risk taking when their basic needs are met. That is the direction in which the Indian economy is moving in.
Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views.
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