Seven imperatives for job creation in India

Published: Friday, 02nd December 2016

Four critically important ‘what to dos’ for policy emerge from an analysis of India’s jobs ecosystem. Equally important are three ‘how to dos’ to accelerate the generation of more jobs and enterprises. They have been distilled from a systems analysis of India’s jobs ecosystem, supported by CII, in which over 150 diverse experts and stakeholders and young professionals participated over the past six months.

What to Dos

1.  Promote the growth of stronger clusters and networks of small enterprises

India has a surfeit of small and micro enterprises. Small and micro enterprises are desirable because they create more employment per unit of capital, because they enable citizens to create jobs for themselves and earn incomes with less state expenditure, and also because their growth can be widespread in all regions and in many sectors thereby making growth more inclusive.

The formal education system must be supplemented with affordable and accessible, ‘just-in-time, needs aligned’ learning modules. Such modules can be developed and offered by private enterprises. Government assistance should be directed towards enterprises that prove their capabilities to dynamically offer learning and skills that result in sustained employment, rather than payments for numbers of ‘skilled’ persons produced who may not be employed.

Small and micro enterprises can overcome limitations in accessing markets, in obtaining resources, and in developing their capabilities by organising into effective clusters (geographic and virtual), and also by connecting on technology enabled platforms. The quality of clusters and cooperative associations of enterprises in India is much weaker than in other countries where small enterprises have provided the backbone of their faster industrial growth. Digital technology platforms and communication networks are becoming further accelerators for the empowerment of small and micro enterprises.

In addition to ‘easing conditions for doing business’, government policies must promote the formation of strong clusters and networks. In many cases, large firms can be strong catalytic nodes in the networks.

2. Promote the growth of a ‘life-long learning’ system

The content of work is changing dynamically in many industries with new technologies and new forms of enterprises. The numbers of jobs of any type that will be available in the future are very difficult to predict. It is also difficult to reform formal education quickly (which is a challenge for all countries). Even mass skilling systems to produce large numbers of skilled persons risk turning out skilled yet unemployed people. (Such gaps are emerging in India).

The formal education system must be supplemented with affordable and accessible, ‘just-in-time, needs aligned’ learning modules. Such modules can be developed and offered by private enterprises. Government assistance should be directed towards enterprises that prove their capabilities to dynamically offer learning and skills that result in sustained employment, rather than payments for numbers of ‘skilled’ persons produced who may not be employed.

3. Develop better social security systems

Enterprises need flexibility to adjust their workforce to remain competitive in a dynamic environment. They must be given flexibility so that they can grow and create more employment in the long run. On the other hand, the government has the responsibility to ensure the social and economic welfare of citizens, and insufficiency of stable jobs is already creating social problems.

A test of the quality of governance at all levels of the system—at the center, in states, in towns and in districts—must be the ability to generate more jobs within their jurisdictions.

These two requirements—flexibility for enterprises and an adequate safety net for citizens—can be met with better social security systems. The design of the systems should also facilitate citizens to learn new skills so that they remain employable when jobs change.

4. Promote the rapid use of technology as an enabler

Digital technologies can provide more reach to small enterprises and increase their productivity too. They can enable the formation of platforms of enterprises including large ones; they can facilitate the development and delivery of ‘just-in-time, needs aligned’ learning modules; they can enable micro enterprises to access the formal financial system; and they can also enable delivery of better social security services.

How to Dos

1. A ‘whole of government’ approach is necessary to create jobs

Jobs cannot be sprinkled into the economy by the government. Jobs will emerge from interactions of many drivers in the economy—the growth of enterprises, life-long learning systems and social security, as well as the quality of physical infrastructure and the ease of doing business. Silo approaches will not produce the rapid change necessary in the jobs ecosystem. They can also back-fire, e.g. turning out many skill-certified persons who cannot find jobs; or concessions for flexibility to enterprises without providing social security which will lead to social and political complications.

Therefore job creation policies must be coordinated at the top of the system, at the level of the PMO at the center and chief ministers in the states.

2. Job creation must be a principal goal, if not the #1 goal for governments at all levels

Jobs are created in towns, in rural districts, in states, and in the country, by the improvement of ecosystems with many drivers. A test of the quality of governance at all levels of the system—at the center, in states, in towns and in districts—must be the ability to generate more jobs within their jurisdictions.

Since job creation is the #1 priority for the country, job creation must be a principal metric in performance score-cards for governments at all levels. Governments at all levels should manage systems’ improvements to enable the growth of more enterprises, jobs, and livelihoods.

3. Apply best methods for consultative policy development and implementation

Many government ministries and departments must cooperate to improve the jobs ecosystem. Many stakeholders must also support the changes in policies required so that they can be implemented faster. Speed is now of the essence in reforming and implementing the requisite policies for faster creation of jobs in India. Contentions amongst stakeholders impede policy formulation, and confusion amongst agencies delays their implementation.

Systematic methods must be applied by governments at all levels for consultative policy formulation and implementation. Systematic methods for multi-stakeholder policy formation, such as ‘regulatory impact analysis’ and the German ‘capacity works’, will speed up the production of outcomes. They will be the turbo-chargers for India’s jobs growth engines.

(The writer is a former member of the Planning Commission, former Chairman of the Boston Consulting Group and author of Discordant Democrats: Five Steps to Consensus)