- India Matters
- May 10 2017
The manufacturing sector being the main sector which offers the best job opportunities for skilled and unskilled workers, the NDA government is currently ‘rebooting’ the national manufacturing policy. Taking stock of the manufacturing sector and reviewing the previous UPA government’s manufacturing policy (2011) is perhaps due on account of new schemes introduced under the Modi government like ‘Make in India’ and ‘Digital India’. However, the focus on increasing the share of manufacturing in the GDP to at least 25 percent from the current 18 percent is likely to remain the same.
Problems in the manufacturing sector are indeed difficult to solve because the UPA government did make big pronouncements of increasing the share of manufacturing without a clear road map for it. Many National Investment and Manufacturing Zones were created without thought to their viability and nearness to ports and facilities for other modes of transports. If the NDA government can correct such wrong designing, it would help in creating a more competitive manufacturing base.
Recently, Commerce Minister Nirmala Sitharaman emphasised the need to take into account the dynamics of the Fourth Industrial Revolution that is taking place in the world today and which began in late Twentieth century. Perhaps, the mechanics of the Fourth Industrial Revolution are difficult to understand for the lay person because it is about the increasing use of robots, big data and artificial intelligence in manufacturing industries to increase productivity manifold.
The First Industrial Revolution took place in the late eighteenth century after the invention of the steam engine and important inventions in the textile industry in England. It brought about a massive wave of unemployment causing huge social change. It was missed in India because of historical reasons. The Second Industrial Revolution happened on US soil, that was ushered in by Henry Ford in the 1920s with his assembly line manufacturing and mass production. This was also missed by India. The Third Industrial Revolution, supposedly taking place in the 1970s, was also not all pervasive in India though it has managed to catch up on IT and digital technology rapidly, especially in large scale production processes in recent times. But we have not gone extensively for the latest technological innovations like 3D printing, a manifestation of the Third Industrial Revolution.
The Fourth Industrial Revolution is possible in India, according to official sources and industrialists like Mukesh Ambani, because of the huge increase in data usage and the Digital India campaign. India is the second biggest user of mobile phones in the world. But it is much more complicated than that and is marked by a fusion of technologies that straddle the physical, digital and biological worlds. The speed of change will be unprecedented and it will lead to transformation of entire systems of production, management and governance.
In India, are we prepared for the Fourth Industrial Revolution, when in fact 90 per cent of the manufacturing units are still working in the informal and small and medium enterprises (MSMEs) which contribute 46 per cent of India’s exports and 8 per cent of the GDP? They also contribute to 45 per cent of total industrial employment.
The Commerce Minister has rightly pointed out that the MSME sector is very important and should be focussed upon. Many large scale organised sector manufacturing units are using the latest robotics and digitalisation and are already heavily into capital intensive production processes, as a result of which India has witnessed jobless growth in the past. But the problem will arise when more and more people are rendered jobless as the latest technology will replace human labour extensively. Where will the displaced labour find jobs? Providing jobs to about 1 million people entering the labour force is going to be the main problem that India will have to face in the future.
Small scale manufacturing faces deep infrastructural problems and many have inadequate power and water supply as well as inadequate access to credit. It is difficult to imagine the MSMEs going for nano technology and capital intensive investments any time soon. They will still remain open to the youth looking for jobs. But they can adopt SMAC — Social, Mobile, Analytic and Cloud technology and can leverage it to increase their productivity as many Start-Ups seem to be doing. The ongoing ‘Skill India’ campaign will also be producing lakhs of skilled people who will have to ultimately find jobs in MSMEs. Many will remain low paid. Thus, the Fourth Industrial Revolution, if it takes place in India in a big way, will produce more inequality of income. The highly educated and technically skilled people will command huge salaries in large manufacturing enterprises using robotics and artificial intelligence and there will also be a vast pool of workers available for absorption in MSMEs.
Unfortunately, the manufacturing industries in developed countries are also undergoing change and are adopting ultra high technological innovations which will render many jobless. In countries that use a lot of immigrant labour from India, such latest tech operations will force the emigres to return. They will create additional problems for the manufacturing industries in India.
The MIT Sloan School of Management economists have already warned that the fourth revolution, using extensive artificial intelligence, will affect India and other developing countries by cutting into their cheap labour advantage. They have also reiterated that inequalities will rise. Increasing inequality is already visible in Digital India and will be accentuated in the future which will increase social tensions. India’s large number of low skilled youth will also face major challenges in big industries as well as MSMEs because product cycles will become very short and this will lead to a lot of uncertainty and unpredictability.
India has to gear itself to the future challenges and make the infrastructure for MSMEs stronger so that the trained and unskilled youth find jobs in them. The Fourth Industrial Revolution may enable a small number of big companies to become world class and they will seek the highest paid CEOs with special qualifications and abilities. Already, Infosys CEO’s total remuneration (ET Intelligence Group 2015-16 Annual report of top 500 Nifty companies) is Rs 48.7 crore which is 935 times the median of the rest of the company’s employees’ salaries. Such disparities will be more visible in the future with all its accompanying social problems.
The views expressed above belong to the author(s).