India has to start the process from primary level it self by revamping courses
By Nilanjan Banik
A recent report published by the International Monetary Fund (IMF) claims that technology in the form of Artificial Intelligence (AI) is set to affect nearly 40% of all jobs. What is more worrisome is that AI is going to impact the low-skilled jobs, that is, the income of people in the low-income bracket, further accentuating the already skewed income distribution. This may be a cause of concern for a young age-populated country like India. Every year around 10 million people enter the labour market, looking for jobs. Most of these jobs are low-skilled gig-type, and urban construction labour types jobs. This also explains why India, despite being the fifth largest economy (in terms of nominal GDP), continues to rank lowly in terms of per-capita income.
Per capita income in India is $2,200 per year, around 16% of the world average. India's labour productivity – economic output per hour of work – is just 15% of the US levels. As wage rate and labour productivity are directly related, it is not surprising that a low-productive work force will result in a lower per-capita income. The advancement of technology is going to create problems for further job creation.
A closer look at data suggests that in India, gross fixed capital formation is falling. Growth in capital formation has fallen from a high of 17.5% during 2004-2008 to a lowly 8.3% during 2020-2021. A part of the fall in value of investment has to do with lower input costs. Technology has made sure that inputs come at a cheaper price. This has reduced the cost of private investment.
During the last century, technology was complementing India's workforce by making it more productive. Electricity, combustible engines and refrigeration aided economic growth through a more productive labour force. Unfortunately, things are now different. In this age of big data analytics, machine and deep learning, machines are increasingly taking over jobs performed by humans. With technology changing at a rapid pace, no one knows where jobs of the future are coming from and what do they look like. US regulators have already approved smart pills that send highly accurate diagnostic information from inside the patient's body to doctors via Bluetooth.
Computing power of a mobile handset is already equal to that of the human brain. Tesla has recently announced bringing out an engine-less electric car that costs only $35,000. This may change the entire dynamics of the automobile industry. A significant societal dislocation is waiting to happen. The government acknowledges this. Reacting towards the advent of driverless cars in India, road and transport minister Nitin Gadkari had said, “We will not allow any technology that takes away jobs”.
Although the Indian government has opened a bunch of newer IIMs and IITs, there is still a dearth in the supply of quality skilled labours, who can make better use of the technology. Even now, very few Indian university ranks in the top 300 of the Times Higher Education World University Ranking. This comes as a nasty surprise to those who believed in the prowess of India's scientific, technological and managerial manpower. The truth is that the curriculum taught in most Indian universities is stuck in the past, with little relevance to modern industry. Hence, fewer jobs are getting created, with less few graduates having the ability to execute.
If corporates figure out that potential candidates do not have the power to execute or deliver, then the demand for hiring will be less. During 2015 and 2021, employment generation in the organised sector fell to less than two lakh jobs a year, which is less than 25% of the annual employment generated before 2011. Daily, less than 2% of Indians who apply for jobs get them. Presently, India (like elsewhere in the world) is slowly transforming into a gig economy where the labour market is increasingly characterised by the prevalence of short-term contracts or freelance work as opposed to permanent jobs. A study by KellyOCG, a global recruitment company, shows that 56% of Indian companies have more than 20% of their workforce as contingent workers.
Recognising a sorry state of affairs and to make Indian universities world-class, the government has decided to give autonomy and Rs 10,000 crore (around $1,540 million) funding to India's top ten public universities as well as to ten private universities. A better idea would be to facilitate stronger linkages between India's universities and the private sectors. For instance, the UK government is promoting robotics, 5G wireless internet and smart technologies while asking private sectors to sponsor 300 master students and 200 doctoral students in artificial intelligence every year.
In India, farming is extensive rather than intensive. Indian farmers grow crops using more land, labour and animal inputs, rather than using technology. For a long period of time, output per hectare, a common measure of agriculture productivity, remained low in India. For example, in potato farming, the productivity of an Indian farmer is less than half of that of the US, Germany and Netherlands. In case of rice, it is less than half of that of the US and Egypt, and for wheat, it is less than half of that of the UK and Egypt.
The problem is aggravated as 83% of the farmers in India who are marginal and small farmers (someone with less than 2 hectare of landholding) do not have the wherewithal to understand technology. In fact, this has prevented many farmers from entering into contract farming with corporates such as ITC, Coca Cola, etc., as they were not sure about the quality aspect of the crop produced. Reforming agriculture sector cannot happen without embracing technology. Bottom line, farmers are not realising remunerative price and thanks to Minimum Support Price, prefer growing low yielding, less remunerative crops such as wheat and rice. With nearly 50% of the Indian population still earning their livelihood from the agriculture sector, a lower productive agriculture sector means an adverse income distribution.
New World Wealth, a Johannesburg-based company, published a report where it claimed that India is the second-most unequal country in the world, with millionaires controlling 54% of the wealth. In Japan, the most equal country in the world, millionaires control only 22% of the national wealth. Interestingly, in India with an uncertain business outlook and a falling interest rate regimes, a substantial portion of corporate and high/middle income savings are now finding its way to the stock market. Mutual funds investment through systematic investment plan (SIP) touched a record high in 2023, with stock market scaling all-time high in January 2024. Even now, less than 5% Indians participate in the stock market, flagging another reason for the rising income inequality.
Technology, which is the key to raising productivity is here to stay. As much as 90% of increases in per-capita income come from technological innovation. There is a need for government to give more importance to primary education, and if possible raise the amount of scholarships starting from the mid-school level to attract talent. The success of the Chinese and South Korean economies is attributed to their increased government spending on primary education. Although the impact will not be immediate India's young population can hope to tackle the advancement of technology better with a robust primary education system in place. (IPA Service)
(The author is Professor, Mahindra
University, Hyderabad).
