India’s Big Government

by Vivek Kaul

  Now what do we mean by median value? As John Allen Paulos writes in Beyond Numeracy: “The median of a set of numbers is the middle number in the set.” Let’s go back to the bar example. Let’s say the eleven individuals in the bar are made to sit in the ascending order of their income. The individual setting on the sixth stool would represent the median income of the group. Thus, the median annual income of the eleven men (which includes Gates) is $35,000.

  Now let’s get back to the penis example. The average length of a man’s penis is 13.24 centimetres. But the median value is 13 centimetres. What does this mean? As Matthews writes: “First, it shows that the global distribution of penis sizes is skewed towards smaller values, and second, that most men really do have below-average-sized [emphasis original] penises.”160

  This basic point, i.e., that the median value can be lower than the average value, becomes very important when we talk about a concept like per capita income. Per capita income is basically the average income. The average income also includes the income of the rich. As Wheelan writes: “The mean, or average, turns out to have some problems in that regard, namely, that it is prone to distortion by ‘outliers’, which are observations farther from the center.”

  So, basically, the Ambanis, Adanis, Birlas and Tatas of the world, essentially India’s rich, push up the average income of India, i.e., the per capita income. As Wheelan writes: “The average income… could be heavily skewed by the mega-rich.”

  In this scenario, the average income does not give us a correct picture. Hence, it is safe to say that the income of the average Indian is lower than the average income of an Indian. The same logic applies to the per capita income of a farmer. It includes the income earned by the rich farmers as well, and hence, does not give a correct picture.

  What we need to look at is the median income of the Indian farmer. The trouble is that such data is not available. But what we can safely say is that the median income of the Indian farmer is lower than the average income of Rs. 31,797. This tells us how dire the situation is for Indian farmers. It also tells us why people need to be moved away from farming and agriculture as a way of making a living. Of course, this doesn’t sound politically correct, given that we Indians have been brought up on the spin of “ Bharat ek krishi pradhan desh hai [India is primarily an agricultural country]”. But employment in agriculture is not really a solution for India’s burgeoning demographic dividend.

  As the 12th Five-Year Plan document points out: “Agriculture cannot be expected to provide more jobs. Manufacturing must provide a large portion of the additional employment opportunities required for India’s increasing number of job seekers. Unless manufacturing becomes an engine of growth, providing at least 70 million [7 crore] additional jobs, it will be difficult for India’s growth to be inclusive…. [We must] increase the rate of job creation in manufacturing to create 100 million [10 crore] additional jobs by 2025.”

  While the Planning Commission was disbanded in 2014, the broader point it made about creating jobs outside agriculture remains valid, i.e., people need to be moved away from agriculture. This is a very obvious thing. But the problem is that even low-end manufacturing jobs need people to have some basic education. As we have seen in Chapter 3, close to 10 crore individuals who had passed out of primary school between 2006 and 2015 do not have basic reading skills or the ability to do basic mathematics.

  And this is where the Indian education system is likely to fail the Make in India programme, which was launched with great fanfare by Narendra Modi after he became the Prime Minister in May 2014. The programme was launched in September 2014, but is yet to take off. And when it does, it will soon find it difficult to find individuals with some basic education who can actually work in a manufacturing firm.

  Furthermore, given the fact that a huge proportion of the individuals coming out of the Indian education system continue to remain unskilled and lack the basic capability to read and do maths, their employability in even the services sector remains low. The Big Government that operates in India is responsible for this, first by ignoring primary education, and then by coming up with the Right to Education Act, where physical infrastructure is more important than learning outcomes.

  As Robert H Frank writes in The Darwin Economy—Liberty, Competition, and the Common Good: “The mere fact that a market outcome is less than perfect does not mean that government intervention would necessarily lead to a better outcome. Governments are imperfect, too. The important point is that the ultimate decision about whether regulation makes sense should hinge on purely practical questions about [the] efficacy of [the] proposed regulatory remedies.”161

  The ‘regulatory remedies’ that the Right to Education Act came up with ended up making the situation worse instead of improving it.

  The larger point being made here is that moving people from agriculture into other areas is not so easy. In fact, other countries which have grown at a very fast pace in the past have experienced the same phenomenon. Take the case of Thailand. Agriculture still constitutes close to 40 per cent of its workforce. Or China, which has become the factory of the world. Around 35 per cent of the workforce is still engaged in agriculture, even though it produces just 10 per cent of the Chinese economic output.162

  Hence, the disguised unemployment in Indian agriculture is going to remain high, and that’s not something that is going to change quickly. And India’s demographic dividend is going to have problems finding jobs in the years to come. That remains India’s biggest social, political as well as economic problem. The irony is that no one is even talking about it. We are all caught up in the spin that India is destined for bigger things in the days to come. The numbers clearly don’t suggest that.

  viii Data from the Centre for Monitoring Indian Economy.

  ix World Bank data, which differs a little from the unemployment data shared later in the chapter.

  5. WHY ENGINEERS AND MBAs WANT TO BECOME PEONS AND SWEEPERS

  Papa kehte hain bada naam karega…

  Koi engineer ka kaam karega.

  – MAJROOH SULTANPURI

  In the previous chapter, we saw a number of estimates for the number of individuals expected to enter the Indian workforce in the years to come. Based on these different estimates, it is safe to say that around one million new individuals are entering the workforce currently every month. And they will continue to so in the years to come.

  In fact, in January 2014, CRISIL Research, one of India’s premier research companies, made another estimate of the number of jobs being created and the number of Indians entering the workforce every year. While it is similar to the earlier estimates, they nonetheless made a few other interesting points as well.

  In this report, titled ‘Hire & Lower—Slowdown Compounds India’s Job Creation Challenge’, CRISIL said that, between 2004-2005 and 2011-2012, around 52 million (5.2 crore) jobs were added to India’s industry as well as services sector. This pulled nearly 37 million (3.7 crore) individuals out of agriculture and thus brought down the disguised unemployment in agriculture. But this pace is unlikely to be maintained between 2011-2012 and 2018-2019. During this period, around 51 million (5.1 crore) individuals will have entered the workforce.

  The CRISIL number is lower than the one million per month number that almost all other projections had come up with. Against the 51 million individuals entering the workforce, only around 38 million (3.8 crore) jobs are expected to be created. The remaining individuals will either stay unemployed or join the agriculture sector.

  With more individuals working on the farms, the disguised unemployment figure is likely to go up. The data between 2004-2005 and 2011-2012 clearly shows that, if there are sufficient job opportunities going around in the other sectors, the number of people working in agriculture can actually come down. In fact, if the proportion of the Indian workforce working in agriculture has to come down from 50 per cent to 25 per cent, then the industrial sector would have to increase its labour demand to 274 million (2
7.4 crore) in 2030 from 119 million (11.9 crore) in 2010.163

  This means the creation of 155 million (15.5 crore) jobs, and that is a huge number. But this is necessary, given that, as we have seen in the last chapter, the average per capita agricultural income is Rs. 31,797. The median per capita income is even lower. The point being that agriculture cannot take on any more people than it already has. And the only way this is going to happen is if jobs in other sectors are created.

  Also, just creating jobs is not going to be enough. People need to have certain skills to carry out these jobs, which is something they currently lack. The Economic Survey of 2014-2015 summarises the situation best: “As per the Labour Bureau Report (2014), the current size of India’s formally skilled workforce is small, approximately 2 per cent; this number compares poorly with smaller countries like South Korea and Japan, which report figures of 96 and 80 per cent, respectively. At the all-India level, around 6.8 per cent of persons aged 15 years and above are reported to have received / are receiving vocational training.”

  The size of the skilled workforce does not include those skills that are informally acquired.164 But the skill rate is still very low. Furthermore, the proportion of people receiving vocational training is not high either.

  Interestingly, most people trying to move out of agriculture (even temporarily) target the construction sector. This is primarily because low-end jobs in the construction sector do not really need much of a skillset. The sector created close to 4.5 crore jobs either directly or indirectly during 2012-2013.165

  Most of these workers taking up jobs in the construction sector are unskilled. They lack education as well as formal training. They pick up skills on the job from peers as well as supervisors. This obviously means that their performance is not up to the mark and their productivity is low. Among the 10 per cent of construction workers who happen to be skilled, emigration abroad (in particular to the Gulf countries) in search of higher wages is a common phenomenon. This creates a shortage for Indian firms, pushing them to import workers in order to complete their projects.166

  In 2008, DLF, which was among the biggest of the listed companies at that point of time, with its owner, KP Singh, even making it to the list of richest Indians, had to get skilled carpenters, steel fixers and electricians from China, Indonesia and the Philippines. This was done primarily because these individuals came cheaper and were more productive than their Indian counterparts. In fact, Reliance Industries did something similar when it hired nearly 4,000 Chinese construction workers for the construction of its oil refinery at Jamnagar.167

  This isn’t surprising, given the low-skill levels of the Indian workforce. In fact, one study on the skills of plumbers found that “55-66 per cent [of] candidates are unable to handle real-world plumbing situations”.168

  In fact, large Indian firms have been very vocal while complaining about the lack of skilled carpenters and quality masons. This lack of skill becomes even more important when one takes into account the fact that the “increasing use of technology and mechanisation is expected to reduce the requirement of unskilled workers on individual construction sites”.169

  Table 5.1: Incremental requirement for key skills in the construction sector in India by 2022.

  Profile Incremental Requirement (in thousands) Skill Level

  Project Managers and Engineers 473 Specialised

  Supervisors 473 Specialised

  Surveyors 47 Specialised

  Foremen 946 Vocationally Trained

  Crane Operators 7 Vocationally Trained

  Electricians 473 Vocationally Trained

  Welders 473 Vocationally Trained

  Plumbers 1,183 Vocationally Trained

  Carpenters 1,892 Vocationally Trained

  Others (including Painters & Equipment Operators) 459 Vocationally Trained

  Steel Fixers 1,419 Vocationally Trained

  Masons 1,419 Vocationally Trained

  Minimally Educated 38,038

  Total 47,302

  Source: Human Resource and Skill Requirements in the Building Construction and Real Estate Sector, NSDC-KPMG.

  Large firms in the construction business have been vocal about the negative impact of the lack of skilled carpenters and masons on the quality and delivery of projects. In fact, Table 5.1 shows the number of skilled professionals that would be needed in the construction business by 2022.

  The construction industry needs around 4.7 crore individuals by 2022. Of this, the industry needs 11.8 lakh plumbers and 18.9 lakh carpenters. From personal experience, I can tell you that trying to get hold of a good plumber who can do the most basic stuff properly is a struggle these days. In this environment, trying to get close to 11.8 lakh skilled plumbers is going to be a huge challenge.

  Another estimate puts the incremental human resource requirement in the sector at around 1.4 crore between 2013-2017 and 3.1 crore between 2013-2022.170

  Until a few years ago, the government dominated the low-end training space through the 8,500 Industrial Training Institutes (ITIs) spread out all across the country. The price of attending these institutes can be very low. But they really did not solve India’s skilling problem in any way.

  As Mihir S Sharma writes in Restart: “These are places with ridiculous entry-level qualifications… too-few seats and… overlong courses. But here’s the kicker: they’re unlikely to change, because they don’t really care about their students…. How can I make a claim so sweeping? As a simple deduction from the following fact…. Not one of the ITIs in India has a full-time placement officer. It isn’t the trainers’ job to get their trainees jobs.”171

  One estimate suggests that, at the ITIs, when it comes to construction skills, around only 3 lakh individuals can be trained every year. Hence, there is a limit to the number of people the ITIs can train for the construction industry. What does not help is that getting into these institutes to become a plumber or a carpenter requires educational qualifications which most people looking for such training do not really have.

  Take the case of the states of Uttar Pradesh and Maharashtra, two of the larger states. If you want to get into a carpentry course in an ITI in these states, you need to have passed Class VIII along with Science having been one of the subjects. The same requirement holds for those wanting to take up courses on plumbing or masonry.172 What does studying Science till Class VIII have to do with trying to become a carpenter or plumber, or even a mason for that matter? Beats me!

  It is important that the carpenter or the plumber or the mason be able to read and write and do certain basic maths that he would require during the course of his work. But how does it matter if he can’t define photosynthesis?

  The vocational training system offered by the government (or should I be saying Big Government?) the way it is structured targets less than 50 per cent of the entire working population of India.173 This is primarily because a huge proportion of students drops out of the elementary education system. The learning outcomes of those who stay on are nothing to write home about.

  Furthermore, those who manage to stay in school up to the secondary level (i.e., up to Classes IX-X) end up enrolling in a computer-related course because of the greater prestige associated with it as well as the perceived higher wages that come with anything associated with information technology in India.174

  Also, it is worth pointing out here that, of the 849 ITIs in UP, only 15 offer plumbing as a course. As far as masonry is concerned, not one ITI across the state offers training in it. The carpentry course is offered in around 10 ITIs, and building construction in just one. By comparison, 172 ITIs in Uttar Pradesh offer courses on becoming a computer operator or a programming assistant. This shows very clearly the great love that Indians have for an office job. Let’s look at the state of Maharashtra and see how things are there. The state has around 807 ITIs in total. Of these, plumbing is taught in 106 institutes, carpentry in 125, and masonry in 60. But 345 institutes offer courses for becoming a computer operator and a program
ming assistant.175

  An estimate suggests that Uttar Pradesh and Maharashtra are producing around 40,000 carpenters, masons and plumbers annually. And this is nowhere near what is required by the industry. It is just one per cent of the annual requirement.176

  The situation in Maharashtra is clearly not as bad as it is in Uttar Pradesh. Nevertheless, more institutes still teach the computer course. Skills like plumbing, masonry and carpentry are extremely important and need to be taught in almost every district of the country. But that is clearly not happening.

  This is another very good example of how Big Government makes a hash of things. By insisting on a certain level of education and not offering courses it should actually be offering, the government essentially ends up stifling something which it should instead be ensuring does well. It doesn’t take any complicated science to figure out that a country as big as India is and having as many people as India does cannot completely depend on the government in order to improve the skills of a large section of its population.

  Some companies have realised this and set up their own skill-training centres. Take the case of Larsen and Toubro. The engineering firm, which takes up construction projects among other things, set up the Construction Skills Training Institutes (CSTIs) in 1995. Currently, there are eight such institutes across the country. The training period varies from anywhere between 200 hours spread out over one month to 600 hours spread out over three months.177

  It is interesting to point out that the company hasn’t made the same mistake as the government. An individual interested in a carpentry or masonry course just needs to be able to read and write, unlike in an ITI, where he needs to have studied till Class VIII. Also, the ITI course normally lasts for three years. The courses offered by the CSTIs are from anywhere between one to three months. The training is delivered in the local language and the people passing out of the institutes are employed by the subcontractors of the company.178