India should shift focus to low-end manufacturing like China to take full advantage of its demographic dividend to avert an unemployment crisis, a state run Chinese daily said. “China lifted millions of people out of poverty in the last three decades by focusing on developing its own manufacturing industry”, an article in the state-run Global Times said.
“Whether India’s fast pace of growth can persist depends on how quickly it realises that the feasible route to inclusive growth is not by skipping past industrialisation but by relying on the manufacturing industry to create more jobs, reduce poverty and create a middle class that can drive consumption,” it said.
India should be realistic in addressing its employment issue and focus more on developing its low-end industries to create more jobs. “Such urgency has been raised because there is scepticism about whether India can efficiently utilise its demographic dividend – the country is set to have the world’s largest working-age population by 2020,” it said.
“Given the fact that India will soon or later have the world’s largest working population – people aged 15 to 64 years – this observation doesn’t seem like an exaggeration,” it said.
“There has long been a myth in India that the world’s fastest growing economy could skip being a manufacturing base and move directly into a sustainable growth model relying on services”.
There have even been calls for renewed focus on the services sector in India after a report released earlier this year suggested that the services sector contributed more than 60 per cent to GDP in the 2015-16 financial year. But this conception should be considered wrong and dangerous, it said.
“Not only does this argument push back against the “Make in India” initiative launched by Prime Minister Narendra Modi in 2014 – which aims to transform India into a manufacturing powerhouse – but it also, in practice, may lead India into a trap where its huge population dividend cannot materialise,” it said.
Citing research reports it said the services sector absorbs only about a quarter of the labour force in India despite the fact that it accounts for more than half of GDP. “On the other hand, manufacturing accounts for about 15 per cent of the country’s GDP and employs 11 per cent of the labour force, a job absorptive capacity that is greater than the services sector,” it said.
“For the sake of creating more jobs to accommodate the growing working population, India should not neglect the manufacturing sector, especially low-end labor-intensive industries. This could also help absorb a large number of workers who are employed in unorganised sectors,” it said.