Statistics put out by the Centre for Monitoring Indian Economy (CMIE) show that 19 lakh people had lost their jobs in August 2021 alone; of this, 10 lakh was from the industrial sector. In July, eight lakh people in this sector lost their jobs.
The current plight of the industrial sector is not just due to the Covid-induced economic crisis. Job creation in the sector was low even before the pandemic..
India’s industrialisation has been different from that of the rest of the world. The World Bank has calculated that the industrial sector, which contributed 18 per cent to India’s GDP in 1995, is now contributing only 13 per cent. In other countries, there has been no such reversal in contribution. For example, China moved the largest number of workers from farms to factories and became a manufacturing hub of the world.
In India, CMIE statistics reveal that employment in agriculture, which accounted for 35 per cent of total employment in 2017-18, increased to 39.5 per cent in 2020-21. Due to Covid, many industrial units have closed down and pressure on agriculture has increased. As a result, incomes in villages are falling and the purchasing power is weakening.
Reforms should be introduced to shift workers from low income agriculture to the high paying industrial sector. To achieve double-digit growth in the industrial sector, the Centre rolled out the ‘Make in India’ scheme. Along with this, a favourable environment should be created for domestic business to start and grow with ease.
Doors should be opened for new investments. Physical and social infrastructure should be expanded. Only when the Central and State governments do so, the industrial sector will witness smooth growth.
In India, crores of youth need to be given employment fast. The service sector, which accounts for 54 per cent of the country’s GDP, and provides the highest number of jobs, has been hit hard by the epidemic — lakhs lost their jobs due to the collapse in the aviation, hotel, entertainment and tourism sectors.
The industrial sector should plug the employment gap. By providing quality products, the sector should grow to a level where it can gain a large share of the international market and provide employment to lakhs of people. The government should identify the problem areas preventing such growth and remove them quickly. For the industrial sector to boom, favourable policy measures should be taken.
Quality should be crowned
Quality products are always in demand in the international market. Chinese industries have ramped up the quality of their products, boosting, in the process, exports to American and European markets. India should establish quality centres across the country soon.
Micro, small and medium enterprises (MSMEs) should be supported in these hubs by providing adequate investment and skill training. At present, the Central and State governments provide various subsidies to encourage setting up of industries. Henceforth, the more jobs the industries create, the more subsidies should be given. Also, subsidies should be given on the basis of production achieved in a given period and the quality of goods manufactured. Similar subsidies can be provided to service sector units that are closely linked and coordinated with the industrial sector.
With these incentives, the industrial sector can be transformed into a major employment generator. India cannot achieve balanced and well-rounded development without propping up the industrial sector.
The writer is Professor of Finance, Amity Business School, Amity University, Gurugram