Rising gap between Low- & High-Skilled Jobs

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Context:

Over the past two decades, India’s economic growth has increasingly been driven by the services sector, particularly in Information Technology (IT), banking, and finance.

Job creation scenario in India

Dominance of Services Sector:

• India's economic growth has largely been driven by the services sector, notably in IT, banking, and finance, which has led to increased job creation and higher income levels for skilled professionals.
• Services sector contributes over 50 per cent to India's GDP.

Decline in export oriented jobs:

• A new World Bank report identified that export-related jobs in India have been declining over the past decade. Direct employment linked to exports peaked at 9.5 percent of total domestic employment in 2012 but fell to 6.5 per cent in 2020.
• The World Bank attributed this decline to the dominance of the service sector and high-skill manufacturing in India’s export basket.

Decline in Traditional Industries:

Traditional industries like apparel and footwear, which provided many low-skilled jobs, have seen a decline, exacerbating the divide between high-skilled and low-skilled employment.

Stagnation in manufacturing sector:

The manufacturing sector remains stagnant at about 14% of GDP, which fell short of the 25% target, which has contributed to the slow creation of low-skilled jobs and hindered overall job growth.

High tariffs on input materials:

• The WTO Tariff Profile for 2022 indicates that India’s average Most Favoured Nation (MFN) tariff increased to 18.1 per cent, up from 17.6 per cent in 2019 and 13.4 per cent in 2016.
• Since 2017, India appears to have reversed the tariff reductions initiated in the early 1990s, now imposing higher import tariffs than its peers.

Competitive Disadvantages:

• India's manufacturing sector has fallen behind other countries in textiles, machinery, and electronics.
• This is partly due to weaknesses in manufacturing that prevent it from capitalising on shifts in global markets.

Concerns for India

Missed Opportunities in Low-Skill Manufacturing sectors:

• India has failed to fully benefit from China's reduced role in low-skill manufacturing.
• Countries like Bangladesh, Vietnam, and even advanced economies have gained market share in sectors where India lagged.

Low participation in Global Value Chains (GVCs)

• Low participation in Global Value Chains (GVCs) is one reason India has struggled to generate sufficient trade-related jobs, according to the World Bank.
• Around 70 per cent of international trade involves GVCs, but despite rapid economic growth, India’s trade in goods and services has decreased as a percentage of GDP, and its participation in GVCs has declined over the past five years.

High Unemployment rates in India

• According to the Centre for Monitoring Indian Economy (CMIE), India's unemployment rate in June 2024 was 9.2%, which is an increase from 7% in May 2024. This is an eight-month high for the country.
• India's employment scenario is impacted by global economic factors, such as geopolitical shifts and trade dynamics.

Way Ahead:

Manufacturing Sector Growth  impetus:

• Increase investment in traditional and emerging manufacturing sectors to boost job creation.
• The Make in India initiative and Foaxconn’s manufacturing units in India are contributing to job creation.

Promote Entrepreneurship and Small Businesses 

• Simplify regulatory processes and improve access to capital for small and medium enterprises (SMEs).
• Small and medium-sized enterprises (SMEs) account for over 45% of India's industrial output and 40% of exports.

Expand Global Value Chain Participation 

• India's participation in Global Value Chains (GVCs) has declined, with a drop in export-related jobs from 9.5% in 2012 to 6.5% in 2020.
• There is a need to reduce tariffs on intermediate goods and simplify trade procedures to enhance competitiveness and invest in logistics and infrastructure to lower costs and improve efficiency in global trade.

Strengthen Skill Development Programs 

• The National Skill Development Corporation (NSDC) has trained over 5 million people through various programs and The Pradhan Mantri Kaushal Vikas Yojana (PMKVY) has been successful in creating small scale jobs in India.
• Similar skill initiatives such as Vocational training, can be imparted at mass level.

Leverage Technological Advancements 

• Adopt Automation and Digital Tools and utilise the technology to improve efficiency and create new job roles in tech-driven sectors.
• Provide training in digital skills to prepare the workforce for technology-oriented jobs.

Government Initiatives:

Among others, following are important initiatives towards job creation in India.

PM Mega Integrated Textile Region and Apparel (PM MITRA) Parks

National Industrial Corridor Development Programme (NICDP)

Pradhan Mantri Rojgar Protsahan Yojana (PMRPY)

Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)

Pradhan Mantri Garib Kalyan Rojgar Abhiyaan (PMGKRA)

For other important initiatives please refer:

https://www.iasgyan.in/daily-current-affairs/initiatives-for-employment-generation

Sources:

https://indianexpress.com/article/business/economy/low-high-skilled-jobs-gap-rising-as-manufacturing-stagnation-continues-9569727/