Monday, June 26, 2017

Article on "Imperatives for Job Creation in India", by Vivan Sharan for The Pioneer, on 30 May 2017

Recent lay-offs of workers in India's cost-arbitrage driven Information Technology (IT) sector, and the Prime Minister Office's renewed emphasis on job creation have resulted in a much-needed public debate on the future of work. Automation threatens most jobs in India, according to the World Bank, which also maintains that the more widespread the use of technology, the more the impact on jobs. This argument can be challenged in the context of India's large informal workforce. Here, technological dispersion has created jobs through efficiency gains. Notably, in the case of the logistics sector, the use of tracking and communication tools (such as GPS-enabled mobile phones) has helped in the formalisation of supply chains, in unlocking value and in creating jobs. Indeed, very few deterministic assumptions are appropriate in India where 100 million broadband consumers were added in a short period between August 2016 and this February — denoting technological dispersion without precedent.
To grapple with technological complexities, policy-makers must look at the job discourse from a holistic vantage point. For instance, it may be tempting for them to pick winners when faced with technological uncertainties. Energy policy is an example of this — several international Governments have pre-empted technological choices of industries and consumers,with policies aimed at incentivising one technology over another. Empirical evidence, including from advanced industrial economies such as Germany, shows that this approach skews market incentives and yields suboptimal employment. For India, with limited technical resources and capacity of Government, a rigid approach is even more problematic. Our policy-makers must strive to be technology-agnostic while also continuously engaging with the private sector to address difficulties that limit value creation.
Instead of responding to new economic paradigms through knee-jerk protectionism, the Government should rapidly implement the many small, yet powerful interventions that can help the private sector survive technological disruptions. Generation of value and surplus — to invest into technology, upskilling and jobs is central to surviving disruptions across industries.
Inherently, resilient industries such as those within the ‘creative economy', which spans the entire media and entertainment sector, offers a good illustrative template for this. The creative economy has propelled multi-billion dollar brands, enhanced India's soft power projection, engaged thousands of entrepreneurs, provided platforms for timely dissemination of vital information and news and contributed significantly to service sector growth. Although its impact is felt globally and it employs over 6.5 lakh workers, the relative contribution of India's creative economy to the GDP (0.9 per cent), is much less than what is seen in most emerging market counterparts; such as Indonesia (over 1.5 per cent), South Africa (over three per cent) and Brazil (nearly 3.5 per cent). Advanced economies of course are in a different league altogether. Illustratively, Bollywood's annual revenues add up to less than a tenth of the size of the Harry Potter franchise.
The anatomy of low value addition in the Indian creative economy illustrates several elements of the job creation conundrum. The television market has been disrupted by technological change globally — online video, Direct To Home and other technologies have disintermediated downstream distributors and helped spread video on demand. At the same time upstream broadcasters in India, who underwrite most content on television and account for about half the economic size of the creative economy, face onerous price regulations. Successive Governments have chosen to protect distributors under the banner of consumer protection instead of letting an industry with proven job creation ability operate on market terms. In a competitive television market with nearly 1,000 channels and no dominance by any one stakeholder or channel, there is no economic case to be made for price regulation. The Government's own attempts at justifying otherwise have never relied on any economic rationale.
Owing to an inability to monetise high value content, little surplus is available in the industry for requisite technology and infrastructure investments required for seamless distribution of video on congested Indian wireless networks. Moreover, because of the current regime, most of the creative content on TV is aimed at garnering maximum eyeballs to keep advertisers happy. This limits the versatility of Indian content and if data remains cheap, discerning consumers will eventually be left with no option but to cut their cords. At the imminent inflection point where mainstream Indian content creators and distributors are forced to compete with global peers, the creative engine will struggle to keep going. It will find itself hopelessly short of funds, infrastructure, and workers with the wherewithal to augment their output to match global standards.
Such a vicious cycle can play out in most industries that depend on technology in some form. The Government should begin thinking of the future of jobs in terms of a virtuous cycle. That is progressive policies and regulations can potentially create the much-desired cycles of investments, innovation and consumption, which can in turn generate new jobs and secure existing ones through upskilling. Creation of economic value should be the mission statement of Government and towards this, it must not pre-empt technological change.
(The writer is a partner at Koan Advisory Group, New Delhi)

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