[op-ed snap] A global opportunity for the Indian workforce

Image source

Note4students

Mains Paper 3: Economy | Development & employment

From UPSC perspective, the following things are important:

Prelims level: Global Economic Prospects report, Gini coefficient, Annual State of Education Report, World Development Report

Mains level: Ways to improve skill development and employment


Context

Global Economic Prospects report

  1. The World Bank’s latest “Global Economic Prospects” report shows that the second wave of change in the global labour market will play out over the next two decades
  2. Developing economies will be contributing to all of the addition in the global skilled labour force
  3. This is because the number of skilled workers in advanced economies is expected to decline

Global workforce and skilled workers

  1. Skilled workers have been defined as those having at least nine years of education
  2. The global skilled workforce is likely to increase from 1.66 billion workers in 2011 to 2.16 billion by 2040

What will this lead to?

  1. Improvement in the level of education and skill tends to increase income
  2. Rising income in the developing world will lead to a reduction in inequality
  3. The global Gini coefficient is estimated to decline from 65.8 in 2012 to 62.6 by 2030

Gains depend on adjustments

  1. India has benefited by integrating with the global economy
  2. The next wave of gains will depend on how well it adjusts to the changing economic and technological environment
  3. Policymakers will need to work on different levels to be able to create a competitive labour force

What needs to be done?

  1. First, India urgently needs to focus on education and skill development
  • The “Annual State of Education Report” periodically shows the depressing state of education in Indian schools
  • The World Bank also highlighted the problem in its “World Development Report” last year
  • Outcomes in education could be improved by better use of technology

2. Second, the World Bank in its analysis assumes that additional workers will get employed

  • India has not been able to create enough employment opportunities for people moving out of agriculture
  • The basic reason for this is India has not capitalized on labour-intensive manufacturing
  • Recent research shows that India’s competitive advantage in some of the labour-intensive sectors has actually declined in recent years
  • The legal and regulatory requirements in markets like land and labour make it difficult for firms to grow and take advantage of economies of scale
  • To be able to absorb its rising workforce, India needs to remove impediments in the manufacturing sector

3. Third, inequality has gone up in advanced economies

  • Even though inequality at the global level declined in recent decades, it has gone up in advanced economies as the national income share of wages came down
  • Therefore, the lingering risk of protectionism is unlikely to dissipate in a hurry
  • India will need to protect its interest in such an environment and look for opportunities to increase trade at both bilateral and multilateral forums
  • Adequate attention should be paid to currency management in the world of volatile capital flows
  • It will be difficult to grow at a faster pace without the backing of strong exports as exports are an important driver of growth and job creation

Way Forward

  1. An increasing number of skilled workers not only raises the potential growth but also reduces inequality within the country by reducing the skill premium
  2. A skilled labour force along with a focus on manufacturing and exports will help India grow at a faster rate in the medium to long run

Back2Basics

Gini Coefficient

  1. Gini Coefficient is a popular statistical measure to gauge the rich-poor income or wealth divide
  2. It measures inequality of a distribution — be it of income or wealth — within nations or States
  3. Its value varies anywhere from zero to 1
  4. Zero indicates perfect equality and one indicates the perfect inequality
  5. Gini Coefficients can be used to compare income distribution of a country over time as well
  6. A general rise in Gini Coefficient indicates that government policies are not inclusive and may be benefiting the rich as much as (or even more than) the poor
Skilling India – Skill India Mission,PMKVY, NSDC, etc.
  • Subscribe

    Do not miss important study material

Leave a Reply

Please Login to comment
  Subscribe  
Notify of