India must focus on skilled and un-skilled labour for inclusive growth: Economic Survey

The Dollar Business Bureau Ahead of the Union Budget for FY2015-16 on Saturday, the Economic Survey said on Friday that India can herewith concentrate on increasing investments instead of depending on borrowings. The Survey also stressed on the role of Make in India and the government’s supposed objectives to be achieved under that initiative. In this regard, the survey raised point on what should be India’s focus under ‘Make in India’, referring to two aspects of manufacturing and services. Pointing to the categorization of manufacturing in formal and informal sectors, the Survey suggests that in order to achieve expansion and a structural transformation, India need to concentrate on unskilled labour, which is its dominant resource. While mentioning that the registered manufacturing which includes formal sector contributes to higher productivity, the Survey also points to India as lagging behind in the sector compared to other nations. Stating that the States recorded decline in the share of manufacturing in their GDP, the Survey identifies the registered manufacturing inefficiency in bridging regional disparities in India. The Survey says that registered manufacturing involves much of skilled labour in contrast to the India’s dominant resource of unskilled labour. Indian manufacturing sector expecting many results from the skilled labour may be productive, but there is an immediate need for equal or even more concentration on unskilled labour of informal sector to expand its manufacturing productivity. Pointing towards the inclusive growth, the survey says that in India, the service sector has a great potential for domestic growth convergence across regions when compared to that of the manufacturing sector. However, it identifies that service sectors like financial services, business services, which accounts for higher productivity, are unlikely to ensure inclusive growth, for the reason that they are highly skill intensive, which differs with actual skill profile of the Indian market. On a question whether India should concentrate on sectors with intensive non-skilled labour or the development of sectors with intensive skilled labour, the survey suggests that India should undergo a growth scenario where the availability of low skilled labour remains in balance with the skill development. To achieve a better growth in the manufacturing sector under Make in India policy, India should expand the limits of registered manufacturing sector towards better utilization of services from India’s abundant unskilled labour, added the survey report.  

This article was published on February 27, 2015.