What is the issue?
- Job creation rates have been dismal for years now.
- The government has been espousing the need for a new industrial policy to address the flaws of current liberal economic structure.
How are economies engineered?
- The Concept - The process of industrialisation is one of acquiring capabilities to produce more complex products that before.
- Workers learn newer advanced skills and policymakers work to create conditions conducive for the advancement of industries.
- While, a competitive world enhances growth, policymakers should ‘nurture’ necent domestic sectors by following protectionism until they are strong enough for more open competition.
- Indian Context - Until the 1980s, the Government closely managed the flow of investments into selected industrial sectors to nurture their development.
- From the early 1990s onwards, the Washington Consensus model of liberal markets has been dominating both Indian & global economic policies.
- After the 2008 slowdown, it is now felt that the present pattern of economic growth is not producing sufficient jobs – calling for structural reforms in the economy.
How has the Indian industrial sector fared?
- Free market approach was embraced with the expectation that market forces would accelerate growth.
- But, India’s manufacturing sector, which should’ve been a principal driver for job creation & growth didn’t meet expectations.
- While the services sector grew, overall job growth hadn’t keep pace with population growth.
- India’s capacity to produce capital goods was as strong as China’s in 1991 because of compulsions due to foreign exchange shortages.
- But by 2009, Chinese capital goods production capacity was about 50 times as large as India’s.
What are the other issues hindering job creation?
- Skilling policy - The skills people need are the ones that industry demands and hence large scale coordination is required.
- So, dedicated ministries for promoting programs for skilling like in India are bound to fail.
- Effects - This approach has resulted in the mismatch between the output of the skilling programmes and requirements of industry.
- While, less than 20% of the millions trained by the government’s skilling missions have been able to find suitable jobs, enterprises complain that they don’t have people with the requisite skills.
- Therefore, policies for developing skills must mesh with policies to stimulate growth of enterprises.
Source: Businessline
