Economic Survey 2020: Jobs as an outcome of an exports strategy

The Economic Survey suggests that India can grow jobs by strategically focusing on exports. It suggests integrating a “Assemble in India” with the “Make in India” scheme. The suggestion draws entirely from China’s experience and further suggests that India should leverage China’s losing attractiveness as a production centre. US-China trade war is leading to major adjustments in global value chains and India should exploit these to its advantage.

The Survey analyses India’s export performance vis-a-vis China and finds that India has gained an advantage in relatively low and middle income countries at the cost of losing bigger markets in richer countries. Its fast-growing exports are not in labour-intensive industries but in capital- and skill-intensive industries. On the other hand, China's export performance is driven by a high level of participation in the global value chains, high level of specialisation in labour-intensive production activities, large scale in the chosen sectors of specialisation and a high level of export penetration in rich country markets.

The Survey suggests that India should focus on traditional labour-intensive sectors such as textiles, clothing, footwear and toys and on increased participation in global value chains. The value chains in these industries are controlled by buyer-driven networks in developed countries. 

The major suggestion, however, focuses on making India a major hub for final assembly in a range of products that it calls as network products (NP). These are producer-driven networks, whose products are not made from start to finish in one country. Such countries specialise in particular stages of production.

The Survey has made calculations that show that if India focuses on NP exports, total number of jobs attributed to exports of NP will go up from 4.4 million in 2020 to 14.3 million in 2025 and 25.5 million in 2030. This implies that NP exports alone can create 10 million jobs in five years and over 20 million jobs in ten years.

To place these numbers in perspective, we may point that India’s total employment is a little over 400 million and salaried jobs are of the order of 86 million.

But, the Survey states there are second order effects of this strategy which could create an additional 38.5 million jobs in the next five years.

Effectively therefore, the Survey suggests that if India focuses on an export-driven strategy based on network products inspired by China’s experience and leveraging China’s potential downturn, it could create 40 million jobs in the next five years.

If Chapter 5 of the Economic Survey was written to address the problem of jobs in India, then it is a rather narrow and clinical approach on the subject. Jobs, here, are an outcome of an export-driven growth strategy. This is fine. But, an export-driven growth strategy is a lot more than merely copying China.

Here is a worry. It is not unreasonable to assume that the proposed strategy of the Survey will not be implemented or be implementable in the next few years. If so, where will the jobs come from?

The Survey does not address the problem of jobs comprehensively. Volume I does not use any data on jobs at all.

Volume II of the Economic Survey shows that according to the Periodic Labour Force Survey (which shall eternally remain not strictly comparable to earlier surveys of the NSSO unless such comparisons are found to be useful for a particular argument), there has been an increase in the share of formal employment as captured by regular wage/salaried, from 17.9 per cent in 2011-12 to 22.8 per cent in 2017-18. Interestingly, according to CMIE’s Consumer Pyramids Household Survey, this share was 21.3 per cent in 2017-18. This is interesting because two completely different surveys conducted by different agencies, using different samples and methodologies over a very large and diverse country like India, produce estimates that are very close to each other. This demonstrates the power of large scientifically produced household surveys.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel