By Praloy Majumder and Ashish Kumar Singh:
Over 4 million Indians join the labour force every year. And with many young people coming in every month, the question on everyone’s mind is if there will be enough jobs for them.
The first stage of economic growth was driven by the discovery of steam engine followed by a second round of economic growth in the USA. The third round of economic growth was driven by the market economy post-World War II. All the previous three phases of economic growth was driven by the developed nations. However, this fourth round of economic growth would be driven by Asian countries, and hings will be fundamentally different. The question, however, is if India (and other Asian countries) are ready to change their way of seeing things
During previous rounds of economic growth, population and natural resources were not constraints. Today, developed nations are at an advantage, because of the capital formation of first and second round of economic growth. Social security was not a problem as the population at the time was not large. Due to the presence of social security network (in the form of unemployment allowances and other measures) the income disparity was not a severe problem. However, all of that is changing with an increasing amount of unemployment even in the developed countries. Now imagine the situation in a country like India. Income inequality is a major problem due to the absence of a proper social security network, as well as a strong, effective judicial system. Here, crony capitalism has increased the economic disparity too a great extent, disrupting the social fabric of the countries which would drive global growth. If left unaddressed, this problem could turn into a monster.
The fundamental ways to reduce the income inequality is to increase the income for a large number of people by creating more jobs. At the same time, we must grapple with the fact that the world has moved towards embracing automation in a big way. The advent of Artificial Intelligence (AI), and robotics threatens lower-level jobs. These lower-level of jobs are crucial to generating sufficient employment for a large workforce, made up of people who do not have specialised skills, and pale in comparison to AI and robotics.
Entrepreneurship is one of the possible solutions to this problems. If more and more entrepreneurs are created, then more and more jobs will follow. However, entrepreneurship creation is a serious business even on a small scale, and today the requirement is on a massive scale.
To achieve this objective, we must have a methodical approach. This is not just a question of providing wage employment, but creating an entrepreneurial society, working towards the solution of employment-related problems. Several factors play important roles in developing entrepreneurship in a country, and identifying these is of crucial importance. In India, for example, the caste-class-religion nexus may or may not play a crucial role in a specific sector. Gender also becomes an important factor. Others include government rules and regulations, availability of funds, training, nurturing and incubation.
The “National Knowledge Commission Report to the Nation 2006–09” has two chapters worth mentioning. Emphasising the importance of Vocational Education and Training (VET), the National Knowledge Commission (NKC) consulted with different stakeholders to provide some short- and long-term strategies. The report suggested the formation of the National Institute for Vocational Education Planning and Development, under the Ministry of Human Resource Development. The report also suggested finding links between mainstream education and VET, which, to some extent, seems to be currently fulfilled by National Skill Development scheme.
The demand for both skilled and unskilled labour has increased in recent years. The report says that in order to have sufficient supply of labour, the government should take innovative steps such as distance training, decentralized delivery, and public-private partnerships. A focused approach is required to enhance the training options for the unorganized and informal sector. The report provides various recommendations for strengthening the existing institutional infrastructure of Industrial Training Institutes (ITIs) and Industrial Training Centres (ITCs). The report further recommends the formation of an independent regulatory agency. This means providing a license to accreditation agencies and prescribing standards for certification. While talking about the current certification system the report asks for more efficient means, probably electronic identification as well.
The NKC report in its chapter on entrepreneurship states that it is important to recognize the importance and significance of entrepreneurship in wealth creation and employment generation in India. To accelerate its growth, the report recommends creating a supportive business environment by simplifying processes, curbing corruption, and improving delivery time. Establishing newer institutional mechanisms to rebuild the structure and ambiance required for the growth of entrepreneurship in India. Facilitating information flow is also crucial to this process. There should be an increased awareness of and emphasis on providing early stage finance. For entrepreneurship, seed capital plays a key role, and the report recommends developing new institutions and instruments for start-up funding. The role of business incubation before market entry is considered a primary factor, which also affects the success and viability of an enterprise. And last but not least, the report suggests that successful entrepreneurs be recognise and rewarded.
While at the societal level, the majority of India faces challenges on an everyday basis. Having a possibility of income generation (or regular income) may not solve all the problems, but it can certainly reduce the pressure. Entrepreneurship today is neither limited to being a characteristic of a certain class or merely a buzzword in roundtables. There is much to do in this direction.
As Ejaz Ghani puts it, “The two most consistent policy factors that predict overall entrepreneurship in a district are its local education levels and the quality of local physical infrastructure. […] The future of jobs remains positive, given that India is starting from a low base in entrepreneurship. India’s strength in entrepreneurship lies in its small enterprises. They are now well integrated with global supply chains. Last but not least, women-headed entrepreneurship will become the new driver of job growth in the future. The policy message on entrepreneurship and job growth is simple. Local governments wanting to promote pro-entrepreneurial growth should focus less on firm-casing—attracting large mature firms from somewhere else—and focus more on encouraging entrepreneurship in their community. This link between entrepreneurship and job growth is not automatic. Places with a higher level of local education and better quality of local infrastructure will attract many more entrepreneurs and create many more jobs.”
It needs a meticulous approach with proper checks and balances in place.