Editorial 1 : Fill the skill gap
Context: Enhancing the skills of Indian Workers
Labour Mobility Arrangement: Israel and India
- Indian workers were deployed in Israel to plug the labour shortage in its construction sector that arose after a ban on Palestinian workers.
- This labour arrangement is under strain due to a glaring skill mismatch between the workers’ abilities and the expectations of them.
- The mismatch does not take away from the benefits for Indian labour that stem from such work agreements.
Opportunity for Indian Labour
- Indian labour, both unskilled and skilled, will be increasingly in demand across the world, especially in regions characterised by an aging workforce and labour shortages.
- Sectors like construction, trade, health and social care, etc. are indicative of the sources of labour demand across the world.
- Some in the western world are advocating for temporary work contracts to meet the labour shortages.
Tackling the skill and education issue
- For Indian workers to productively engage in the global labour market, it is critical that they receive the necessary education and training in the skills that are needed.
- Only a small segment of those in the age group of 15-59 years have received formal vocational/technical training.
- National Skill Development Corporation (NSDC) can play a key role in this situation.
- The focus should be on the entire ecosystem, encompassing the technical and training institutes, the trainers, and also the curriculum, among others, in order to ensure that the skills imparted are in line with what the market demands.
- Example: Sri Lankan approach of ensuring workers receive a few weeks of additional training before their departure.
Way Forward
- Considering that an educated and skilled work force is critical for reaping the demographic dividend, the focus should be on ensuring that those entering the labour market receive appropriate training, and that their skills are constantly upgraded to adapt to an ever-changing work environment.
- Pacts that facilitate labour mobility between countries need to be advanced, while plugging the skill gap to advance the economy.
Editorial 2 : When rich states get richer
Context: Why inequality between South and West India, and North and East could grow and the dangers that carries
A tale of two states
- In 2023-24, the average income of a person in Andhra Pradesh was roughly four times that of someone in Bihar.
- If both states will continue to grow at the same pace they have over the past decade or so, then the gap between an average person’s income in the two states would only rise further to around 4.5x by the end of this decade.
- If Bihar grows at the pace that Andhra Pradesh has and Andhra grows along at the pace Bihar has, then even after 15 years of sustaining this growth trajectory, an average person in Andhra would still be three times richer than one in Bihar.
- Andhra and Bihar are just examples. We can replace Andhra with the other southern states, and Bihar with some of the northern, central and eastern states.
Reason for divergence in growth trajectories
- Developing manufacturing and services ecosystem in the southern and western states.
- the underlying growth structure of the economy
- The southern region benefited from historical incidents, as well as government policies and market forces.
- The skill-intensive IT sector emerged and is still largely concentrated in the southern states.
- The advantages that the southern and western regions enjoy, the agglomeration effects that stem from an existing manufacturing and services base, a skilled workforce, financial networks and infrastructure, have allowed them to leverage their strengths, making them the centre of economic gravity at both the production and consumption ends of the spectrum.
Evidence
- A significant share of the global capability centres that are being set up are located in the cities of Bengaluru, Hyderabad, Chennai, Mumbai and Pune.
- The new bursts of manufacturing activity, a consequence of policies like the production-linked incentive scheme, are also found to a larger extent in the southern and western states.
- Apple Ecosystem – Foxconn is largely located in these regions.
- Of the five semiconductor projects approved by the Centre, four are in Gujarat.
Data tells the story
- The five southern states account for 37% of all factories as per the Annual Survey of Industries.
- Of the top 20 exporting districts in the country, 18 are located in western and southern states.
- The five southern states also account for 33% of all formal sector employees (those contributing to EPFO).
- In the early ’90s, these states accounted for less than a quarter of the Indian economy. By 2022-23, their share had risen to roughly a third.
Beyond Data
- Not only are these states richer, but the people living in these states are more likely to live longer, they are more likely to be better educated, and their children are more likely to have better health.
Consequences of the divergence
- It will increase the impetus to migrate from poor to rich regions.
- It implies that the pressure on the already creaking infrastructure of the few big cities in the north and the ones in the west and the south will grow further.
- The influx of migrants is likely to lead to even more vociferous calls for reservation, including in the private sector, from local communities in the richer regions.
- Similar demands may be made by various caste groups in the lower-income states because of lack of jobs.
- Governments will respond by placing greater emphasis on populism, opting for more fiscally imprudent transfers to compensate for their inability to generate low-skilled jobs at the scale required, squeezing out allocations for more productive forms of spending.
- The diverging growth trajectory makes it more likely that the transfer of fiscal resources from the southern states to other parts of the country will continue.
Way Forward
- The task of effecting structural transformation is tough but the government needs to intervene to address the structural impediments to growth in the lesser developed parts of the country.
- This will help in realising the dream of a truly Viksit Bharat by 2047.