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India needs growth in labour-intensive manufacturing

Niti Aayog optimistic of 7% economic growth
Last Updated 25 July 2017, 18:47 IST
Reforms in areas of skill development, infrastructure, labour laws and the Land Acquisition Act of 2013 are far from complete, Centre's policy think-tank Niti Aayog has said in its 12th Five-Year Plan (2012-17) appraisal document.

However, it has sounded optimistic of over 7% economic growth in 2016-17 due to several reform measures undertaken by the government including GST.

"The key lacuna in the Indian growth story has been slow growth of manufactures in general and labour intensive manufacturing in particular. In every country that has achieved rapid transformation from traditional, rural to modern, urban structure, manufacturing has led the way. In Taiwan and South Korea in the 1960s and 1970s and in China in the 1980s, 1990s and 2000s, manufactures grew at rates approaching or exceeding 15%, with labour intensive manufactures growing especially rapidly.

"The accompanying increase in incomes led to increased demand for and hence accelerated growth in services as well. In turn, workers in agriculture migrated to these sectors to take advantage of the employment opportunities so created. Within a matter of two to three decades, this process led to the countries transforming from primarily agrarian and rural character to modern urban ones. India has not experienced similar rapid growth in manufactures," " the Aayog said in its appraisal.

On the contrary it said, India’s growth has been its concentration in capital-and skilled-labour-intensive sectors.

The fast growing sectors have been auto and auto parts, two wheelers, machinery, chemicals, petroleum refining, telecommunications, software and pharmaceuticals. None of these sectors employs low skilled workers in large numbers, it said.

As a result, the vast majority of Indian workers remain concentrated in agriculture, unorganised industry or low-paying services, the Niti Aayog said.

"The movement of workers out of agriculture into industry and services jobs has been especially slow. In turn, this means that despite 65 years of development efforts, a little less than half of Indian workers remain in agriculture".

“Therefore, India’s challenge is not just rapid growth in manufactures in general but also ensuring healthy growth in labour-intensive sectors such as clothing, leather manufactures, food processing and electronic assembly. Growth in these latter sectors would help create good jobs for workers with limited skills,” the government's think tank said.
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(Published 25 July 2017, 18:45 IST)

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