Thinking outside the manufacturing box

We need to create jobs beyond, not just in, factories

August 27, 2017 12:15 am | Updated 12:42 pm IST

Vector illustration of a business team

Vector illustration of a business team

Last week, Arvind Panagariya, the outgoing vice chairman of NITI Aayog, organised what was perhaps the most innovative and inclusive effort yet to make Prime Minister Narendra Modi’s vision of ‘Make in India’ a reality. Two hundred of India’s best and brightest young CEOs — apart from a handful of exceptions, almost all of whom were under 50 years of age — were invited by the government’s think tank to brainstorm over a day and a half and come up with ideas and solutions for making India a manufacturing hub of the world.

At the end of the ‘Champions of Change’ programme, the CEOs were expected to come up with short presentations covering possible solutions, cutting across the six core themes of the conference: New India by 2022, Doubling Farmers’ Incomes, creating Cities of Tomorrow, Make in India, Reforming the Financial Sector, and building World-Class Infrastructure.

The reality of jobless growth

While the themes address the core policy thrust areas of the Modi administration, it was pretty clear which problem the government would really like to see addressed. Speaking to the gathering, both Prime Minister Modi and Panagariya said pretty much the same thing: think of ways to create large numbers of productive, well-paid jobs.

The reason why jobs are top of mind for those who are running the government — even Finance Minister Arun Jaitley, while releasing the NITI Aayog’s three-year plan on August 24, chided India Inc. for its “reluctance” to invest in labour-intensive sectors — is not hard to fathom. The spectre of “jobless growth” is real, and as millions continue to join the workforce every year without finding enough ‘good’ jobs, jobs or the lack of them could become a make-or-break issue at the next general elections, approaching with gathering speed.

India is doing fairly well on the growth front: the overall economy is growing at 7.1%, while the services sector, which accounts for over 53% of the gross value added, is clocking 9% growth, the highest in the world in the services sector among major economies, according to the Economic Survey. The trouble is, this is not translating into an adequate number of jobs.

Even Labour Minister Bandaru Dattatreya admitted as much recently. Speaking at one of the events to mark three years of the Modi government in May, he said: “The current growth is a jobless growth. Many European and Asian countries, including India, are facing it. Growth is being reported but it is not reflecting in employment generation.”

The numbers don’t really matter. The reality is that the number of jobs created — over 6 lakh according to Dattatreya and just 1.35 lakh jobs in three years according to the Centre for Equity Studies’s India Exclusion Report 2016 — pale in comparison to those being added to the workforce. It is no wonder that the Prime Minister is constantly urging India Inc. to rise to the challenge.

The trouble is, that is an ask which practically any modern, globally competitive manufacturing industry — in India or anywhere else in the world — will find pretty difficult to deliver on. In order to be globally competitive, any large-scale manufacturing — in India or elsewhere — is now increasingly automated, with more robots than people. Last month, for instance, I visited Hyundai’s manufacturing plant near Chennai. Its new second manufacturing line produces a car every 72 seconds — but is 95% automated.

The only way to stay competitive is greater investment in technology and automation. In other words, fewer jobs. What, then, is the solution?

Creating a circular economy

Maybe it’s time to revisit Mahatma Gandhi’s idea of a circular economy. Increasingly, the world is coming to an understanding that the manufacturing-led “take, make, dispose” model is simply unsustainable from both an economic and ecological point of view.

As the focus necessarily shifts to a more circular, “take, make, refurbish, repair, reuse” model, the manufacturing sector could look at how it can create jobs around the products it makes, rather than find ways to create more jobs making those products. Every car Hyundai or Maruti makes creates dozens of jobs down the line — from drivers to mechanics to spare parts and fuel shops to even car cleaning. A single mega factory can manufacture all the denim needed for all the jeans worn by young people in the world — but it would still take millions to convert cloth to clothes, to sell them, to repair zips and buttons, and eventually, when they are worn, to recycle them.

The Prime Minister is banking on the manufacturing sector to solve the jobs problem. The sector can do so, but only if it thinks out of the manufacturing box. Maybe that’s the real challenge we should be looking at. It is time our young CEOs turned their attention to how the products and services they deliver can create jobs outside the factory — and come up with innovative solutions and skills programmes to make that happen. India may not become the ‘making’ capital of the world — but it can become the ‘remaking’ and ‘reusing’ capital.

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