The government’s Skill India mission dovetails perfectly with the Make in India policy. The manufacturing sector at this point seems to be the only viable frontrunner as far as job creation for the teeming masses is concerned. But the world has changed since the East Asian and Chinese economic miracles.

As the RBI governor Raghuram Rajan had pointed out, the labour-intensive, export-oriented model is probably not replicable anymore. But the concern for India is its vast young population, which can turn out to be both a dividend and disaster.

Growing redundancy The Skill India mission also reflects a policy thrust towards organised manufacturing. The unorganised sector is not only too large (more than 90 per cent of the total), but an equally large share of its constituents is untrained. The intention of Skill India aiming to train 400 million people is perfectly laudable.

Globally, machines substituting labour and computers standing in for humans have for long exposed labour to vulnerability and uncertainty. The pace of skill development has seldom matched that of technology. In the American context, C Frey and M Osborne predict in their paper ‘The Future of Employment’ that several jobs would be susceptible to computerisation/automation in the next two decades. For machinists, accountants, typists, for instance, the probabilities are 0.65, 0.94 and 0.81 respectively, where a probability of 1 indicates certainty.

The Indian context too reveals a structural change in the job market. In July 2015, economists Kunal Sen and Deb Kusum Das point out in an article in the Economic and Political Weekly that the labour intensity in Indian organised manufacturing has been steadily going down, which means less labour and more machinery for one unit of production. The “standard explanations” for this phenomenon include stringent labour laws, weak infrastructure and lack of skills in the workforce. The authors draw our attention rather to another factor – “a sustained rise in the real wage to rental price of capital ratio” which in turn is attributable to the decline in the relative price of capital goods following liberalisation of trade post 1991.

While the Modi government seems to be working towards all the standard explanations — making labour laws flexible and business friendly, beefing up infrastructure and of course Skilling India — the fact that the price of machines have been falling steadily relative to that of labour and thus substituting the latter, is a puzzle in the context of Skill India.

Adapting to change If the very incentive structure of firms has been undergoing a steady change in the face of labour-saving technical change, will Skill India, after all, achieve what it is setting out to, that is, employability and job creation? The decline in labour income share in India’s value added manufacturing between 1980 and 2009 is actually higher than that in the services sector.

Given the trend, one must be sure that resources are not invested in imparting a skill that can soon be made redundant by a machine or an application available at a much lower price. Skill India needs to be constantly upgraded in line with latest emerging trends. Courses in Industrial Training Institutes (ITIs) should be periodically revised and the capacity of ITIs to stay abreast of latest offerings must be beefed up.

India’s skill development agenda should aim to prepare the youth for a modern labour market. Already the developed world is engulfed under the flood of cheap technology that is perfectly capable of replacing humans. India should be doubly well prepared to battle the storm.

The youth should be geared to see themselves as potential job-creators. The vitality of entrepreneurship in every village, town and city should be acknowledged by policymakers. This is where Start-up India comes in.

The writer is a development consultant

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