Topic 1 : Job number one
Introduction: India is the fastest growing economy in the world, with one major problem- it is not producing enough jobs. The working-age population that is actually working is 46.6 percent, in other economies this percentage is close to 70 percent.
Did India commit a mistake by emphasizing service sector jobs?
- The answer requires reconsidering India’s original bet against the Asian formula for development: Conduct land reform, move excess labour from farms to factories, manufacture stuff with that abundant labour force, sell to the world.
- Instead, India’s bet was on services.
- In exporting services, it graduated from the 1990s call centres to the early 2000s outsourced IT and back-office services to a fuller menu of technology-enabled services offerings today, employing 5.4 million people.
- It’s useful to remind ourselves that the working-age population is about 950 million strong.
- Jobs in high-end services require workers with requisite skills; however, the 2023 India Skills Report points to a massive skills deficit with only half of young Indians employable currently.
- This means that for the foreseeable future, low-skilled services remain the default labour absorbers.
The IT sector shrank for the first time in 25 years
- The jewel in the service's crown, the IT sector, shrank for the first time in 25 years.
- As automation and artificial intelligence pick up pace, many jobs in IT will become redundant.
- The slowdown is showing in cutbacks and slow hiring.
- As for the rest of those “employed” in low-skilled services, earnings are so low that after the long march back home to the villages during the Covid lockdown, many preferred to remain there.
- Sixty million more people are in agriculture than they were four years ago.
- If India was planning to write its unique development story countering conventional wisdom of moving from farms to factories, it has certainly torn up that playbook with a vengeance.
There is a need for multiple job creation vectors
- With an employment picture this grim, the government that comes to power after these elections needs to make job creation its job number one.
- It also needs to re-think the de facto singular bet strategy — manufacturing’s share has shrunk to 13 per cent of GDP with all hopes riding on services.
- It can be argued that given the number of people who need employment, multiple job-creation vectors are essential.
- They need policy support, co-investment — especially in education, skill-building and jobs-preparedness — and tax and regulatory incentives to employers.
Several promising vectors for job creation
1. Potential in Global Capability Centres (GCCs)
- In high-end services exports, there’s potential in Global Capability Centres (GCCs) — offshore units of MNCs that provide services to the parent that range from finance, legal and HR to high-tech innovation clusters in cyber, analytics and AI.
- There are already over 1,500 GCCs employing 1.6 million people, expected to grow to 4.5 million by 2030.
- Services out of such centres could become one of India’s biggest exports, generating incomes and demand for even more services from lower-skilled tiers.
2. Exploit India’s tech startups
- There is unrealised potential in India’s tech startups.
- If they can scale up, they employ many people directly and indirectly.
- Back in 2021, hot money was seeking refuge from an unfriendly China and India provided a convenient destination.
- Early investors drew in others who feared they were missing out.
- Successive investors were pressed to overvalue a company to get in on the deal, often ignoring market fundamentals, regulatory uncertainties and talent shortages.
- Fast forward to now: Many high-flyers — Paytm, Byju’s, Oyo — have crash-landed and investments in Indian startups have fallen to their lowest levels since 2015, while write-downs have surged.
- Consider this a second chance — with fresh lessons — for Indian startups.
- There are growing needs in AI, SaaS, defence and greentech – solid industries that play to India’s strengths.
- But founders have to be mindful of their seemingly reflexive capacity for hubris at the first signs of success and not assume that regulations will bend for them.
- As these startups grow, they will hire more people; creating a skilled talent pool is essential.
3. “Green economy” jobs in India
- Consider India’s urgent need for a green transition.
- As the third-largest energy-consuming nation, it is already fourth in the world in renewable energy installed capacity.
- It plans to install 500 gigawatts of renewable energy capacity, producing 5 million tonnes of green hydrogen annually, cutting emissions by 45 per cent by 2030.
- The World Economic Forum projects 50 million net new “green economy” jobs in India.
4. Manufacturing sector must be revived
- Given the size of the jobs deficit, we cannot afford to slam the door on manufacturing.
- We must look beyond the high-profile plans for manufacturing iPhones, Teslas, and semiconductors and enable small and medium manufacturers, who are likely to be less automation-intensive and more reliable labour absorbers.
- India’s digital public infrastructure — possibly using the Open Network for Digital Commerce that connects market players on a single protocol — can be leveraged for access to credit, resources, logistics, warehousing, and customers.
- This can help small-and-medium manufacturers replicate the benefits of larger players.
Conclusion: We are staring at an employment crisis, which could get worse. But with policy support that could change. With an employment picture this grim, the government that comes to power after these elections needs to make job creation its job number one.
Topic 2 : Problem with coal
Introduction: According to the International Energy Agency (IEA), coal power plants produce a fifth of global greenhouse gas emissions, more than any other single source. Reducing the use of this fossil fuel is one of the most contentious issues in global climate change negotiations. The growing power station pipelines in China and India have, for long, been seen as the biggest hurdles in phasing out coal use.
The latest US-based think tank (Global Energy Monitoring) report
- The latest report of the US-based think-tank, Global Energy Monitoring, shows a rise in the number of thermal power plants in the two countries.
- China alone accounted for two-thirds of the world’s newly operating coal plants last year.
- The country augmented its coal power capacity at a rate not seen in the past nine years, despite promises “to contain” the use of fossil fuel.
- Also worrying is the slowing rate of coal power plant decommissioning in the US.
- At 9.7 GW, the country contributed nearly half of the capacity retired in 2023, but this was a drop from the 14.7 GW decommissioned last year.
- All this means that the coal-fired power capacity grew 2 per cent last year, the highest annual increase since 2016.
- This does not augur well for meeting the Paris Climate Pact’s target of limiting the rise in global temperatures to less than 1.5 degree Celsius.
Are we on track to meet the goal of phasing out coal capacity by 2040?
- To meet the goal of phasing out current coal capacity by 2040, the world must retire an average of 126GW of coal power plants every year for the next 17 years.
- Barely a sixth of that capacity was retired last year.
- China has committed to retiring 30 GW by 2025.
- But last year, it decommissioned only 4 GW.
- The US, too, has much work to do. The country plans to retire 5 GW this year, the lowest since 2008.
- However, experts believe that competitive natural gas prices and expanding renewable generation capacity will lead to an appreciable reduction in coal installations in the next two years.
- The US Energy Information Administration estimates a 10 per cent reduction in coal use by 2025.
What can be done to accelerate the green transition?
- There cannot be a one-size-fits-all approach to the green transition.
- Emerging and developing economies are faced with the task of lifting large sections of their population out of poverty.
- Some of them, like India, have made appreciable strides in installing renewable energy.
- However, the growth of green energy hasn’t kept pace with the rise in demand for electricity.
- In several of these countries, the coal sector is a big employer.
- The IEA has advocated fitting power plants “with systems that can capture carbon emissions before they are released into the atmosphere”.
- The use of this technology has been debated for more than a decade.
- However, it’s a costly proposition. Developmental finance institutions — national and global — have to work with key players to mitigate the social and environmental impacts of coal energy.
- The UNFCCC processes haven’t given adequate importance to roping in these institutions to address one of the most vexed issues related to climate change.
- With global temperatures surging to record levels last year, this task cannot be postponed for long.
Conclusion: The Global Energy Monitoring Report showing the increasing global capacity of plants running on fossil fuel does not augur well for meeting the Paris climate pact target. The world must emphasize more on the green transition of the economy. The emerging market economies must be helped to conduct a smooth transition towards a green economy.