On an official exchange rate basis, with a GDP of nearly $ four trillion, Bharat has become the world’s fifth largest economy, surpassing the UK, France, Brazil, Italy and Russia in the last ten years. But in manufacturing, India still has only 3.3 per cent share in the world. Despite experiencing a high GDP growth, we could not improve India’s contribution to manufacturing in the world. Even in our GDP, the share of manufacturing is hardly 16 per cent, whereas in China, it is 26 per cent.
Unemployment is not an unknown word, even in the history of the developed countries of the world. Economic activities are subject to upheavals caused by the business cycle. Whenever there is a recession in industrialised nations, unemployment is its natural outcome. Unemployment increases with recession and as the business cycle turns to recovery from recession and then to boom, unemployment starts receding. Thus we can say that unemployment is due to the business cycle. In developing countries, unemployment is primarily due to lack of industrial development. Unemployment found there is not cyclical unemployment but is structural to some extent. This unemployment could be reduced only with improved economic activities, in the form of manufacturing and services growth. But employment is created more by manufacturing as compared to the service sector generally. India’s lack of sufficient growth in manufacturing is also a major cause of our unemployment.
Negative Attitude of Colonialists
If we look at the history of the industrial development of the country, we see that during prolonged foreign rule, the attitude of the foreign Government for development was not only indifferent but negative to a great extent. Most of our traditional industries were closed due to the loss of patronage due to decline of domestic rulers, competition from cheap machine made foreign goods, negative policies of alien rulers and forced export of raw materials to feed industries overseas. Although entrepreneurs in the country lacked resources for investment, after the Swadeshi movement of 1905, some of our industries started getting established, which included textiles, jute, iron and steel etc. Under the influence of the Swadeshi movement, the Government later agreed to impose protectionist tariffs, to protect some selected Indian industries from foreign competition, and as a result many industries including iron, steel, cotton textile, jute, sugar, paper etc flourished. Due to the decline of traditional industries, most of the population of the country became dependent on agriculture. Due to the indifferent and negative attitude of the Government, productivity in agriculture had also reduced considerably. With overburdened agriculture, the only way through which we could provide employment to increasing population was through promotion of new businesses including industries.
Although entrepreneurs in the country lacked resources for investment, after the Swadeshi movement of 1905, some of our industries started getting established
After Independence, the country’s economic policy makers needed to pay attention to this issue. In such a situation, the then Jawaharlal Nehru Government thought that the country’s development was not possible in the long run without developing the basic and capital goods industry in the country. In the name of Mahalanobis strategy, planning was rolled out, in which the public sector was given the dominant role of controlling the commanding heights, say major and basic industries. But at the same time, the Government’s indifference towards the consumer goods industry, small and cottage industries, agriculture and allied activities etc, which could have provided significant employment opportunities, actually killed the aspirations of the country. In such a situation, the leading economists of that time,
CN Vakil and PR Brahmananda had clearly warned the Government about the ill-effects of this type of economic policy, and presented an alternative wage good model. Seeking employment in public sector enterprises, administration and later in Government banks, became the first choice of the youth of India. In the industrial policy adopted by the Government, the role of the private sector was very limited. Since the public sector was given the lead role in industrial development, very few industries were left for the private sector. The Government’s thinking about the private sector was that the private sector neither had the resources nor the ability to take risks. The Government was also of the opinion that the private sector could not take much risk, and they did not want to enter such industries, which were less profitable. On the other hand, the Government had a huge obsession towards planning and control. Therefore, wherever the private sector was allowed to operate, conditions like licensing and quota were imposed and factories were strangulated with the presence of a big number of inspectors. In other words, the License-Quota-Inspector Raj had become the dominant feature of our industrial policy. In such circumstances, where the Government could provide employment to hardly five per cent of the workers’ and agriculture was already overcrowded, strangulated development of the industrial sector, in which the role of the private sector was made extremely limited, it was not possible to generate, required number of new employment opportunities . In such a situation, during the tenure of Indira Gandhi, a slogan was given in the name of ‘Garibi Hatao’, under which it was said that now there is a need to directly attack poverty and unemployment. Rural employment and sometimes urban employment schemes were started. First such scheme was the food for work programme. The name of this programme kept changing, but characteristic remained the same; and today Mahatma Gandhi National Employment Guarantee Act is the latest avatar of the same. The employment programmes of the past and the MNREGA programme of the present symbolise the fact that even today there are not enough means of employment in the country, and hence employment guarantee has to be provided to the people with Government assistance. This is what the current Prime Minister Narendra Modi has called MNREGA, ‘a monument of the wrong economic policies of the previous governments’. That is, the MNREGA type programmes have to be run in the country because the Governments have failed to provide remunerative employment to the people in the country.
We need to understand that due to the neglect of the private sector and undue protection of Indian industries, our industry became inefficient and lagged behind in global competition. While in 1950-51 India’s share in global exports was 2.1 per cent, it decreased to only 0.4 per cent by 1980-81. Whatever was produced in Bharat was only for the Indian markets, as there were no takers of Indian goods. Despite all efforts, towards industrialisation and self-reliance, the share of manufacturing in GDP could reach only 18 to 19 per cent.
New Economic Policy: To introduce economic reforms in such a situation, the New Economic Policy, also known as economic reform, started in 1991. By 1991, the situation was such that due to the huge difference in imports and exports, India became a victim of a huge payment crisis. Our foreign exchange reserves were not even sufficient for a week’s imports. We had to send our gold to the Bank of England as security to reassure the creditors. In such a situation, the Government, under Prime Minister PV Narasimha Rao and Finance Minister Manmohan Singh, declared that the country’s industrial development had been affected due to wrong policies earlier; and policy of liberalisation, privatisation and globalisation (LPG) was the only way forward. In this policy, privatisation was generally limited to handing over of the public industries to private hands. The policy of licensing was abolished but more attention was paid to inviting foreign companies in every sector. Opening various sectors for foreign investment came to be called economic reform. The system of hiring and firing of private sector workers at any time was called labour reforms. Under this policy, by signing the WTO, the country’s borders were opened for imports at minimum tariff. Non-tariff barriers were also abolished and foreign investment was given a free hand. Imports from China put a halt to Indian enterprises even before they could start. Active pharmaceutical ingredients (APIs), chemical industry, machinery industry, electronic industry, toy industry, telecom industry etc. were all affected and the share of manufacturing in the country’s GDP decreased from 19 per cent to only around 16 per cent in the next 30 years. The situation of unemployment became more acute due to the closure of industries due to unequal and fraudulent competition from China. In 2014, the total imports in the country were worth 528.9 billion dollars, of which 51.4 billion dollars were from China alone. By then, the country had become largely dependent on imports from China, and this dependence was fast increasing too.
As soon as the Narendra Modi Government came to power, the first policy it adopted was Make in India. After that, Startup India policy and many other schemes were also launched. The objective of these policies was to somehow develop entrepreneurship in the country and reduce dependence on foreign countries, especially China. Although some good efforts were made, due to which production in the country started increasing, production of electronics and telecom, machinery, textiles etc. improved, but dependence on China couldn’t be tweaked. In such a situation, when the country faced the worst pandemic of the century, it was realised that dependence on foreign countries, especially China, is extremely dangerous. The Government made a major policy change, and launched Aatmanirbhar Bharat policy. Under this policy, efforts are being made to produce all those goods in the country, production of which was hindered due to unequal and fraudulent tactics of China. Initially, 13 industries were chosen to provide Production Linked Incentives (PLIs) and later on more industries were added. Chemicals, APIs, mobile phones and other telecom and electronic equipment, furniture, textiles and apparel, paper, toys, bicycles, machinery, LED, laptops, solar, semiconductors and a few other industries were the beneficiaries of the scheme. It is expected that through this policy, the industries which have suffered due to Chinese competition can be re-established. It has to be understood that today’s Aatmanirbhar Bharat (ANB) policy is completely different from the policy of self-reliance of Pandit Jawaharlal Nehru. The present ANB is aimed at encouraging domestic production and making it globally competitive. The increasing exports of mobile phones, toys, defence equipment and chemicals are telling the success story of this policy. Building the industrial base in the country is important to reduce dependence on other countries. But at the same time, we need to understand that building new industries and infrastructure does create jobs. But, looking at our requirements, this may not be sufficient. Along with substituting imports by domestic production and building new industries in the process may not be sufficient. We have to make a judicious mix of big and small industries; and choose appropriate technology to boost employment. In this regard, Artificial Intelligence and Robotics pose a big challenge, as many are losing employment due to the same. Fiscal measures of incentivising labour intensive technology could be helpful.
Change in the Mindset
But, the permanent solution lies in the mindset of the youth, to go for their own enterprises. Youth will have to come out of the mindset that jobs, that too the Government and MNCs, is employment. If youth chooses to start their own ventures, say enterprise, start up etc, then it is a better alternative. But, it’s not automatically possible. Apart from a change in the mindset of the youth, that ‘don’t be a job seeker, be a job provider’, society has to come forward. Industry leaders, business organisations, scientists and opinion makers, banks and other financial institutions, scientists, thinkers and the Governments of all levels will join hands to make this resolve a reality.
