Ignore the jobs doomsayers

Notion that India has peaked in manufacturing & IT employment is at best premature, at worst, dishonest

Written by Manish Sabharwal | Published: May 30, 2017 12:05 am
demonetisation, demonetisation effect, jobless, no jobs, revenue dip, small scale industries loss, company loss, AIMO, all india manufacturers organisation, SME, indian express news india news The jobs doomsday prediction is ahistorical because it suffers from the “presentism” disease identified by historians as a belief that the times we live in are unique. (Representational)

Einstein said that if you judge a fish by its ability to climb a tree, it will live its life believing it is stupid. Only 0.7 per cent and 11 per cent of India’s labour force work in information technology (IT) and manufacturing and yet, many pundits predict that India’s IT and manufacturing employment has peaked — let’s call it the jobs doomsday prediction — because of automation, robots, the immigration backlash and anti-globalisation driven-trade barriers. I believe this prediction is wrong for a low-income and low-productivity country like India and am willing to wager that in five years, IT employment will rise from the current 3.5 million to 6 million; in 10 years, manufacturing employment will rise from 10 per cent to 20 per cent of the labour force. I’d like to make the case that this jobs doomsday prediction is shallow, ahistorical and impulsive.

The jobs doomsday prediction is shallow because it blindly extrapolates the labour market context of a rich country like the US (with a per capita income of $45,000) to a poor country like India (with a per capita income of $1,500). America is rich because it has highly efficient and productive land, labour and capital markets. India is poor because 50 per cent of our labour force produces only 11 per cent of our GDP and we only have 18,000 companies with a paid-up capital of more than Rs 10 crore. Preventing people from falling into poverty (the US’s problem) is a more difficult problem than pulling people out of poverty (India’s problem).

The jobs doomsday prediction is ahistorical because it suffers from the “presentism” disease identified by historians as a belief that the times we live in are unique. History acknowledges that technological change is powerful but it takes more time than people think. Carlota Perez’s wonderful book Technological Revolutions and Financial Capital says “The full fruits of the technological revolutions that occur about every half century are only widely reaped with a time lag. Usually decades of turbulent adaptation and assimilation elapse, from the moment when the set of new technologies, products, industries and infrastructures make their first impact to the beginning of a ‘golden age’ or ‘era of good feeling’ based on them”. Technological change is not a bulb that goes on but a gentle sunrise.

The jobs doomsday prediction is impulsive because it does not fully process the implications of India’s huge domestic market for manufacturing and the hard-to-replicate ecosystem for India’s IT industry. India retained the top spot globally for inward Foreign Direct Investment because the $60 billion is clustered in manufacturing for areas where domestic consumption is reaching critical mass; Make-in-India could be Make-for-India till the global storm passes.

India’s IT industry has network effects in software that parallel China’s in hardware; we produce more engineers than the US and China combined. Also, the passing shower of H1B visas pales compared to the climate change in technology — all companies are technology companies, all hardware has a layer of software, data and smartphone costs are cratering, etc. And Bangalore and Hyderabad are probably the only cities in the world where you could hire 1,000 Hadoop programmers in a week.

It’s not my case that India is immune to the march of technology or that India’s economic renaissance is a given; just that since we are so poor and come so late to the productivity party, our solutions are more obvious and lower-hanging. Wutburger — the German compound word for angry citizen — is a Western political reality because it’s unclear what can be done about technology deflating employment in countries used to high incomes (video rental chain Blockbuster’s 83,000 employees have been replaced by 2,000 people at Netflix).

Technology’s deflation does raise the question of whether India will ever be able to get to the per-capita levels of America, but India is far from the productivity frontier, policymakers finally have a 10-year plan to create a middle class of 800 million, and many Indians believes that the next generation will have better lives than them. India is more than a country; it is a

continent that may already have the world’s highest population. A new book called Scale by Geoffrey West is a wonderful meditation on the non-linearity and exponentiality that arises from size. Scientists experimenting with drugs killed the elephant Tusko because the 297 mg dose they injected was calculated by extrapolating from earlier research on cats. Actually, despite the huge difference in mass, non-linearity meant that the right dose for the elephant was only a few mg more than the cat.

India is an elephant; most data and anecdotes for the jobs doomsday prediction come from countries that are, relatively speaking, cats, if not mice (Rajasthan is bigger than Germany and UP has more people than Germany, France and the UK combined). India’s scale has delivered in the past; remember how the Green Revolution trumped Stanford economist Paul Ehrlich’s suggestion in the 1960s to let Indians die of starvation because the world was running out of food?

We optimists know that pessimists will always get more intellectual respect because they sound wiser. And only a fool would believe India will create enough good jobs without finishing the huge tasks of building infrastructure, reducing regulatory cholesterol and raising human capital. But the jobs doomsday prediction of India having peaked in manufacturing and IT employment is at best premature, and at worst, dishonest. And therefore, it is crucial for policymakers to realise that if we lose our 800 million middle-class-creation battle, it will not be because of automation or protectionism but our own inability to make our land, labour and capital markets more productive.

The writer is with Teamlease Services

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  1. S
    Samrat Chandra
    May 31, 2017 at 9:56 pm
    Mr sabharwal's optimism is not supported by the present day state of affairs. Industrial output has not risen sufficiently despite the make in india talk.job creation has fallen to record low. With increasing mechanisation and greater role of artifical intelligence, the immediate future doesn't seem too rosy.
    1. O
      Onkar Singh
      May 31, 2017 at 4:10 pm
      The writer of this article is another day dreamer who sees stars in the daytime.Good,Sir.No harm in dreaming.The Niti Ayog team is awaiting your arrival their.Have a nice day.And wish you "achhe din" award from the Modi Sarkar!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!If this govt creates 2 crore jobs the God looking after the Unemployment department will s his full and complete blessings on you.Wish you GOOD luck!!!
      1. A
        Arun Sharma
        May 31, 2017 at 1:04 pm
        I agree with your thesis. Employment India will grow in near future
        1. S
          May 31, 2017 at 10:54 am
          After reading the article and the comments on the article one gathers an impression that the crucial inputs to have a strong economic growth are beef eating, anti Hindu and anti Modi rhetoric mongering, economic populism in the form of fake job creation racket,hur statistics saturated with abuses at each other etc etc without ever offering the wisdom which can fathom the riddle in the defeat of Sonia hi if so much of job were created on the ground really and not by jumlabazi or statistical jugglery.One gets to know how lies were rampant during those golden years when one considers how Banks balance sheets were made to appear so y that they could justify the laying down of the foundation for creation of trillion rupees worth bank nonperformin ets which blew up in all its nastiness on the face of Modi as soon as he took over. Was the Kingfisher airline the flagship model for sustainable job creation? Why not stan because you get all those crucial inputs at the tap.
          1. Gopalkrishnan Nair
            May 31, 2017 at 9:04 am
            When INDIA got freedom, we where a very poor country. Some very intelligent people who loved this country made it to progress by hard work and sacrifices. In a democratic set up the power is to change hands. But when a new dispensation take over, it is to continue with the good work in progress. Today in India the case is different. Prrsently all the efforts are to prove that nothing has happened since independence and the avatat is everything. Sorry friends, the country has progressed from a very sorry state. When a bunch of incompetent with no vision of ideas in sight they are sure to pull it down. Efforts will be concentrated and resources will be spent on silly things like COW-DUNG, Yoga, temple etc..etc. They will destroy the total education system. They wii divide every section of society they will demolish the our beloved idols. They will abrogate the idols ideas and heroes from others because they don't have any of this as their own. A big tragedy is awaiting. Get ready.
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