GS Paper 3
Syllabus: Inclusive Growth
Source: TH
Context: The article is based on the book “Breaking the Mould: Reimagining India’s Economic Future” and recommends departing from manufacturing and prioritizing the export of high-end services, challenging conventional economic approaches.
What is Inclusive growth?
Inclusive growth, as defined by OECD and UNDP, refers to fair economic growth that involves and benefits all segments of society, ensuring equal opportunities and outcomes irrespective of socio-economic factors.
India’s post-reform era, characterized by economic liberalization and globalization, has seen significant economic growth. However, this growth has not always translated into robust employment generation.
Factors that hindered India’s employment growth during the post-reform era:
- Structural issues: India’s economy continues to be characterized by a large informal sector with limited job security and social benefits. This has hindered inclusive employment growth as a significant portion of the workforce remains vulnerable.
- g. 80 % workforce is employed in the informal sector.
- Skill mismatch: The skill gap between the education system and industry requirements has led to unemployment among the youth. India’s education system often fails to equip students with the practical skills demanded by the job market.
- g. Only 2.5% of engineers in India possess artificial intelligence skills while only 5.5% are qualified with basic programming abilities.
- Labour market regulations: Labour market regulations and inflexibilities have impeded employment growth. Stringent labour laws, although intended to protect workers, can discourage formal job creation, making employers hesitant to hire.
- Example: The Industrial Disputes Act and other labour laws.
- Technological disruption: The job market in India is outgrowing traditional job roles with the advent of new-age tech and in the next five years, 40% of Indian employees will need reskilling and 60% will need to upskill to be market-ready.
- Gender Disparities: Gender disparities in employment persisted, with women often facing limited access to job opportunities, wage gaps, and social barriers to workforce participation.
- g. decline in female labour force participation rate from 34.8% in 1990 to 20.3% in 2020.
- Public Sector Employment: The expansion of public sector employment, a traditional source of stable jobs, slowed down due to fiscal constraints, reducing opportunities for government jobs. E.g. Increased disinvestment and Privatisations of PSUs.
- Slow Industrialization: The pace of industrialization and the growth of labour-intensive manufacturing industries, crucial for absorbing a sizable workforce, lagged behind the demand.
- Although the service sector expanded, it mainly generated employment in specialized fields like IT and business process outsourcing (BPO), excluding a significant portion of the workforce.
Measures to be taken:
| Measures | Description |
| Rethinking of Developmental Models | Consider reevaluating the traditional industry-led growth model and exploring an agri-centric model to create more employment in agriculture. |
| Shift Focus | Move away from policies solely focused on building the manufacturing sector and instead prioritize exporting high-end services. |
| Localized Economic Activity | Promote economic activity in rural areas and around farms through small, labour-intensive enterprises for processing agricultural produce. |
| Decentralization of Industries | Promote the decentralization of industries to ensure rural areas benefit from development and reduce migration pressure on urban jobs. |
| Equipping Education Required by Industry | Provide education that aligns with market demand, emphasizing vocational and technical education to improve employability. |
| Investment in Infrastructure | Invest in infrastructure development, which can serve as an engine for job creation. |
| Support Small-Scale Manufacturing | Avoid neglecting the small-scale and informal manufacturing sector, recognizing its importance in providing employment opportunities. |
| Cluster Development of MSMEs | Encourage cluster development to support job creation in micro, small, and medium enterprises (MSMEs) concentrated in specific geographic areas. |
The World Economic Forum suggests boosting social inclusion and economic growth through three practical ways:
- Increase investment in citizens’ capabilities to lift productivity growth.
- Upgrade national rules and institutions related to work, in collaboration with governments, employers’ organizations, and workers’ organizations.
- Increase investment in labour-intensive economic sectors with broader societal benefits, including sustainable infrastructure, care sectors, rural economy, and education.
Conclusion
The government has taken various steps to tackle the issue of unemployment. Schemes like Pradhan Mantri Kaushal Vikas Yojana, Apprentice Protsahan Yojana, The National Career Service etc. are welcome steps in this regard
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