Seven Decades of Independent India

by Vinod Rai

  Automation and Displacement

  The complexities of structural changes in India’s labour market and the employment prospects for millions of Indians have been aggravated by the rapid advent of labour-saving technologies, such as artificial intelligence and robotics. In this respect, India’s predicament is similar to that of countries in other parts of the world—developed and developing alike—and for policymakers, in all of which, automation is complicating the challenge of generating jobs and preserving employment. There is little doubt that policymakers across the world have been short-sighted in anticipating the impact of economic globalization and technological advancement on jobs. While the former, through fragmentation of production and relocation of its various stages in different countries based on comparative advantages of skills and wages, did generate jobs in several parts of the world through outsourcing, the latter has begun chipping away at existing jobs by shifting human functions to automation. The deleterious consequence of economic globalization and technological advancement on traditional jobs has been best described by celebrated physicist Stephen Hawking: ‘The automation of factories has already decimated jobs in traditional manufacturing, and the rise of artificial intelligence is likely to extend this job destruction deep into the middle classes, with only the most caring, creative or supervisory roles remaining.’11 Taken forward, the impact of ‘job destruction’ is grave from not only an economic perspective, but also in terms of the sociopolitical impact it would have on economies and societies, particularly those like India that are saddled with the limitation of weak governance.

  Businesses have responded to automation by downsizing labour-intensive operations. In India, the effect is being experienced across multiple industries and sectors that have typically been major employment providers. The IT industry is a relevant example of the impact of automation on India’s labour market. Hailed widely as one of the prodigious outcomes of industrial deregulation and economic liberalization since the early nineties, IT is one of those service industries that has generated jobs at various levels of skills for both men and women. Various studies and experts are repeatedly pointing to the employment contraction that the industry is suffering from and would experience in future. The views range from the industry losing 25,000–50,000 of new jobs each year currently being created along with displacement of middle-level managerial jobs12 to loss of more than 600,000 low-skill jobs in the foreseeable future.13

  These projections of job losses highlight the fact that a large number of existing jobs are getting redundant as human skills hardly fetch value in an environment where technological improvement is the key driver of productivity as opposed to more hands-on the jobs. The development has implications for the supply-side dynamics of the labour market, in the sense of new skilled entrants to the workforce, particularly the large number of engineering graduates, not being suitable for the new jobs. Globally, advances in automation have been accompanied by increasing redundancy of multiple skills—India’s IT/BPO sectors are major examples. Greater digitalization of functions, apart from displacing jobs, has generated demand for new skills consistent with, and required by, digitally run and managed industrial processes. The most hard-hit as a result have been clerical and low technology-intensive skills. Demand for these skills from the IT sector enabled a large number of urban youth, including women, to get employed since the final years of the last century. Now, however, the situation is markedly different with even graduate degrees in engineering (BTech) becoming increasingly irrelevant for companies as the latter focus on more specialized skills.14

  It is important to note the adverse ‘substitution effect’ that technological innovations like industrial robots and artificial intelligence have on the market. It is also not difficult to see why employers do not want to back off from inducting more of this in their businesses. Greater use of digital operations is firmly justified on the ground of efficiency notwithstanding the fact that the impact of these changes on employment is profound, particularly at a time when globally shares of wages in national incomes are either declining or remaining stagnant. Till some years ago, despite noting the advent of jobless growth, Indian policymakers and labour-market experts were content on rationalizing it as the traditional failure of the Indian economy to develop labour-intensive manufacturing and shift surplus agricultural labour to industry. Now, however, it is clear that even if manufacturing in India expands to contribute a much larger share of GDP than what it does now, it will be difficult to achieve high economic growth that is labour-intensive, given the advent of automation, which is fast replacing jobs from modern manufacturing. This phenomenon of premature deindustrialization is a major threat for developing countries and emerging market particularly populous nations like India.

  The evidence about premature deindustrialization and the growing inability of manufacturing industries to create jobs is best exemplified by India’s automobile industry. Beginning with the Maruti 800 in the eighties—the quintessential small car for the Indian middle class manufactured indigenously through Indo-Japanese collaboration—India’s automobile industry has become a global hub for assembling passenger and commercial vehicles with almost all major automobile assemblers (e.g. Toyota, Honda, Suzuki, Ford, Hyundai, General Motors) working out of India. The industry has generated considerable employment across different categories of functions and skills, including engineering, marketing and financial. For an industry that has been at the forefront of automation and cutting-edge technological innovation to reduce costs and improve operational efficiency, the advent of automation has led to major operational shifts in its functioning and sharply slashed its employment absorption capacity.15 The adverse substitution effect of labour-saving technological changes is also evident in industries and sectors connected to automobiles, such as transport services and engineering with large corporations like Larsen & Toubro shedding thousands of jobs for digitalizing operations and cutting costs.

  In a rather chilling portrayal of the prospects awaiting labour markets of emerging economies, the World Bank projects two-thirds of all jobs in the developing world to be vulnerable to automation.16 As the world’s most populous developing countries, China and India risk losing 77 per cent and 68 per cent respectively of their current jobs to automation (Table 2). The impact of automation on jobs in these countries would be felt across skills and organizations in both these countries as labour-saving innovations hasten. In addition to China and India, developing countries with comparative advantages in moderately skilled labour-intensive production like Ethiopia, Nepal, Cambodia, Bangladesh and Guatemala are also at significant risks of job losses from automation.

  Table 2: Countries and Their Jobs at Risk Due to Automation (per cent)

  Country Unadjusted Adjusted

  Ethiopia 84 43

  Nepal 79 41

  Cambodia 78 40

  China 77 55

  Bangladesh 76 47

  Guatemala 75 46

  El Salvador 75 46

  Angola 73 53

  Albania 72 52

  Thailand 72 51

  India 68 42

  Romania 68 49

  Ecuador 68 49

  Costa Rica 68 49

  Macedonia 68 49

  Note: Unadjusted and adjusted projections differ in terms of the latter being adjusted for slower pace of technology adoption; the former estimates do not account for such adjustment.

  Source: a) World Bank (2016), Figure 2.24, chapter 2, p. 129, and b) http://www.businessinsider.com/countries-where-robots-will-take-jobs-2016-3?IR=T&r=US&IR=T/#15-macedonia-1.

  The expected impact of automation on the labour market makes it evident that for an economy like India, it will affect not only low-skill, manual, blue-collar jobs, but also many of those that require more sophisticated skills. While on the one hand this vindicates the onset of premature deindustrialization, on the other, it creates new supply-side challenges, especially for skilling new entrants to the workforce, along with those displaced. Progre
ssive irrelevance of several skills and shrinking ‘employability’ augments the challenge of managing job prospects for Indian policymakers, given an economy rapidly adding large numbers of young people to its workforce.

  Looking Ahead

  Over the next couple of decades, India is widely expected to become one of the world’s largest economies and at the core of a new global economic order dominated by large emerging markets that include itself along with China, Brazil and Russia. These optimistic expectations about India’s economic prowess might not be accompanied by sustained improvement of the living standards of its people unless it can address the looming deficit of jobs. Unlike in the past, idle labour can no longer be absorbed, except for short cyclical bursts, through expansionary development programmes for building infrastructure and enhancing supply of public goods. Sooner or later, these programmes and projects would also be forced to reorganize into more automated managements entailing lesser employment and fewer jobs.

  India is not the only country affected by adverse employment prospects. But it is in a league of its own with respect to the complex implications of the jobs deficit given the fragility it nurses in its society and polity. Already, one can hear rumbles among the political class arguing for reservations in jobs in the private sector for addressing the deficit. Apart from fetching short-term political gains, such steps would only accentuate socioeconomic divisions further. India can barely afford such catastrophes if it is to emerge as a leading economic power. All stakeholders need to engage constructively in a productive discourse to see what could be the best options for creating more livelihoods in India.

  XV

  Challenges Facing Higher Education in India

  Sumita Dawra

  India has one of the world’s largest youth dividends, with about 140 million individuals in the eighteen to twenty-three year age group eligible for higher education (2011 GoI census). If this youth is not equipped with formal education and employable skills, India faces the risk of rendering them a liability rather than an asset for the nation. As a large proportion of this youth is increasingly going overseas to pursue higher education, so the nation now faces the policy dilemma of how to reform domestic higher education systems to compete with foreign universities and retain this domestic human capital. Towards this end, initiatives are being taken to overcome the various academic, administrative, financial, logistical and outreach challenges that the sector faces. Hence, the focus of the government is on equipping higher education institutes with trained and motivated faculty, industry-relevant curricula, merit-based leadership, centres of excellence, better budgeting practices, alternative sources of funding, and partnership with foreign universities and industry. Setting benchmarks through the National Institute Ranking Framework (NIRF) and policy reform to integrate multiple regulatory bodies into the Higher Education Empowerment Regulation Agency (HEERA) will also go a long way towards creating global standards in higher education. To summarize, in order to transform its higher education sector India needs to overcome the following challenges: encouraging research and innovation, attracting government and private investment, bridging the gaps between innovation policy and mentorship, and facilitating a quantum jump in the quality of higher education through curriculum upgrading, all of which need to be addressed by policymakers and practitioners.

  Large Higher Education Sector

  India’s higher education sector is one of the largest in the world, with a total enrolment estimated at 34.6 million. There are twenty-eight colleges on average for every 100,000 eligible people (i.e. in the age group of eighteen to twenty-three). With 799 universities, 39,071 colleges and 11,923 standalone institutions, not to mention an estimated 1.5 million teachers, India’s higher education network is indeed impressive. Gross Enrolment Ratio (GER) in the eighteen to twenty-three age group stands at about 25 per cent, with almost 80 per cent of students enrolled in undergraduate programmes.1

  System Bypasses Large Number of Eligible Youth

  However, despite strides made in setting up a massive number of higher education institutions, including premier national institutes, the improvement over the years in GER and the increasing participation of the private sector in higher education, the fact remains that a large number of youth in the country are outside the fold of the higher education system. Of the nearly 140 million young eligible population in the eighteen to twenty-three age group (2011 census), large numbers are excluded from the higher education system. This is not to say that they are undergoing vocational skill training either.

  Funding Constraints, Infrastructure Gaps and Huge Variations in Funding

  Funding is low and budgetary allocation for higher education at 3.6 per cent against the global average of 6 per cent leaves much to be desired. Most universities find it a challenge to fund basic infrastructure, such as big classrooms, laboratory facilities, journals and computers, leave alone building smart campuses with Internet access for all students. Similarly, funds availability remains a challenge with either no funds or delays in release of monies. This results in the universities not being able to operate and maintain facilities such as research labs or libraries in a timely fashion, and impacts the development of research and educational standards. Also, all over the country, there are huge variations in the availability of infrastructure and funding amongst the higher educational institutions. Premier institutions such as the Indian Institutes of Technology (IITs), Indian Institutes of Management (IIMs), Indian Institutes of Information Technology (IIITs), Indian Institute of Science (IISc) and so on have developed multiple sources of income through research consultancies, research grants, industry research contracts, alumni and CSR funding, which allow them more liberal funding than most other institutions.2 At the same time, many universities in the state sector pay millions of rupees as pensions to retired faculty, but do not utilize the services of many of these retired faculty members who would be willing to take up teaching assignments on an outsourced basis, which would help fill huge gaps in faculty vacancies.

  Unable to Self-Finance Beyond a Point

  Universities receive grants from the University Grants Commission (UGC), state-budgeted funding and also regular fees from affiliated colleges on various accounts, such as examination fees. In view of increasing demands for funds from educational institutions and constraints on the state’s ability to fund the universities beyond a point, higher educational institutions are being encouraged to raise their own funds. However, few have got down to formulating the means to do so, through focused executive education programmes, for instance, or evolving PPP models for infrastructure development, industry collaboration for research or establishing centres of excellence by accessing funding under corporate social responsibility (CSR) and so on.

  Indian universities can learn a lot in this regard through examples from the US. Since public funding to higher education institutes has declined significantly over the years, universities have adopted alternative sources of funding such as investments in endowment funds and online courses. This makes it possible for universities to raise their own funds and be self-sufficient. At the University of California at Berkeley only 13 per cent of the total budget comes from the state; till a few decades ago the share of state funds in their total budget used to 50 per cent.3

  Quality of Education

  Despite the size of the higher education system in India, the quality of education leaves much to be desired. There is no Indian institution of higher education (and this includes the heavily funded IITs) in the top 100 ranked institutes in the world. There are thirty Indian higher education institutes featuring in the top 1000 of the Times Higher Education Ranking, with the Indian Institute of Science being the topmost ranked Indian institute in the bracket 201–50. If we look at China, it has fared much better with sixty of its universities featuring in the top 1000 and its highest ranked institute, Peking University, at rank twenty-seven.4 While one recognizes that there are variations in quality, with premier institutes setti
ng the benchmarks for the country, most institutes face challenges in terms of quality and motivation levels of teaching faculty and interference from local politicians. The people at the helm of affairs in these universities are not sometimes occupying their positions strictly on merit but on several extraneous factors.

  Students’ gross employability ratio after graduation is woefully low at 7 per cent,5 while career counselling centres, attempts to institutionalize student internships with industry, or building a choice-based credit system (CBCS) and a semester system, which gives flexibility to students to pursue job-oriented courses, or gives credits for skills, is still not emphasized by most state governments. Curricula need to be updated to match the skill requirements of industry, markets and the service sector. For instance, the syllabus in information technology courses is not up to date with requirements of artificial intelligence, robotics, Internet of Things (IoT), automation, and so on.