A push for labour-intensive Manufacturingtelcos?

Context: A push towards labour intensive manufacturing is required in order to recover from immediate job crisis due to COVID induced lockdowns.

Challenges in labour and employment: 

• Unemployment: 

• The unemployment rate was 5.8 per cent and 8.8 per cent by usual status and current weekly status, respectively. - Periodic Labour Force Survey 2018-19
• Due to COVID induced lockdown, about 122 million jobs were lost in April 2020 – Centre for Monitoring Indian Economy (CMIE).

• Informal Nature: Work arrangements do not offer security of tenure and continuity of income; also, there is no luxury of work from home.

• Amongst the regular salaried workers, 69.5% had no written job contract with respect to duration of employment.

• Idiosyncratic structural transformation: India has leapfrogged the phase of manufacturing, consequently the share of manufacturing has remained constant at 12%
• Poor law enforcement: Firms have often resorted to strategies like hiring of contract workers and outsourcing activities to unregistered units to bypass regulations and reduce costs.
• Restrictive Industrial policy: The goal of achieving self-sufficiency in capital goods after independence restricted labour intensive manufacturing to small scale industries.

• The Small-Scale Industrial Policy (1967) effectively banned the entry of medium and large enterprises in the production of certain items
• Even today, apparel industry over 50 per cent of employment continues to be accounted for by enterprises hiring one to nine workers, mostly unrorganised
• Low Capital to labour ratio:  Small firms have limited ability to absorb the large numbers of workers at the bottom of the education and skills ladder.

Way Forward: 

• Industrial Policy focusing labour intensive manufacturing: 
• The policy needs to designed keeping in mind both exports and domestic demand.
• Utilize untapped labour demand: India still being a low-middle income country (per capita income $2000 annually), can capitalize over low cost labour.
• Avoid import substitution: Past experiences show that import substitution policies inhibit small business to realize their potential.
• Devise compatible tariff policy: to enhance competitiveness of labour intensive industries.

• High tariffs may hurt competitiveness as seen in apparel industry due to increase in input costs for synthetic fibers.

• Provide Social Security: This will ensure labor’s well-being and increase productivity consequently leading to reduced labour market disparities.
• Public welfare programmes: Strengthening, expanding and effectively implementing the Mahatma Gandhi National Rural Employment Guarantee Act Scheme and establishing an urban employment guarantee scheme.