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.
