Source: IE
Context: The Lewis Model, which envisioned the shift of surplus labour from agriculture to manufacturing, hasn’t played out in India as expected.
What is the Lewis Model?
The Lewis Model, developed by economist William Arthur Lewis, proposed that in underdeveloped countries with a surplus of low-wage labour in agriculture, industrialization could lead to economic growth.
This model suggests that as long as the wages in the industrial sector are marginally higher than subsistence wages in agriculture, surplus labour can transition to the industrial sector, boosting economic development.
Why does this model work in China but not in India?
The Lewis Model worked in China but has faced challenges in India due to differences in industrialization, technological advancement, and labour transitions.
In China, the model was successful because of its ability to absorb a massive surplus rural labour force, turning China into the “world’s factory.”
In contrast, India faces hurdles in implementing the Lewis Model because manufacturing is becoming more capital-intensive and reliant on labor-displacing technologies like robotics and artificial intelligence. This shift limits the ability of labour-intensive industries to absorb surplus agricultural labour.
Additionally, India is experiencing disguised unemployment in the agricultural sector, which complicates labour transitions.
As a result, Niti Aayog is exploring new models for job creation in and around agriculture, focusing on value addition and agribusiness as potential sources of employment. Bio-fuels, bio-based products, and sustainable agriculture practices are seen as potential areas for employment generation, offering alternatives to traditional farm-based jobs.
