SME SECTOR TO PLAY A BIG ROLE IN JOBS CREATION

MODI GOVERNMENT HAS TO BOOST SKILL DEVELOPMENT

By K.R. Sudhaman

Prime Minister Narendra Modi announced from the ramparts of Red Fort on the Independence Day that the two mantras of his government’s economic strategy would be job creation and to tackle farmers’ woes. In a country, where 10-12 million enter job market every year, no government can ignore this fact and rightly Modi from the day he assumed office in May 2014, has been laying emphasis on job creation. This is all the more important as 65 per cent of the vast 1.25 billion population in the country are below the age of 35.

If India were to cash-in on this demographic dividend, it needed to give a fillip to labour intensive technology, infrastructure and micro, small and medium enterprises. The make-in-India campaign, the digital India coupled with Skill India launched by Modi is aimed at creating the much needed employment in the country.

The make in India campaign launched last year is aimed at India becoming a global manufacturing hub, particularly that of labour-intensive production like textiles, garments and small and medium enterprises. SME sector accounted for nearly 40 per cent of India’s GDP and 45 per cent of exports. Sectors like handlooms, handicrafts too had huge potential for job creartion apart from IT and IT enabled services.

But if these sectors were to flourish, the youth should possess necessary skills so as to be absorbed in for production activity. The education provided by Indian schools and colleges do not make them properly employable and hence required to be skilled. It is precisely for this reason Modi had decided to lay emphasis on skill development. The target is to provide skill development to at least 500 million people in 5-10 years, which is nearly half the population.

The government has also made it clear that here on all public and private investments that required its clearance or assistance, will have to make a commitment on the number of jobs that the investment would create. Modi followed it up with a meeting with Indian businessmen in October last in which he emphasised the need for pushing investment in private sector and job creation would be the thrust of such investments. He nudged the businessmen to invest in labour-intensive areas that included textiles. Government’s decision to encourage electronics industry in the country is also expected to boost job creation. Government proposed to encourage $400 billion in electronics, IT software and hardware, mobile manufacture and so on. His visits to Middleeast, US, UK, Japan, Canada, France, South Korea, Germany, China and more recently to South East Asia have set the stage for attracting more foreign investment into India.

At the moment, India is the only attractive investment destination with growth slowing down in many advanced countries. The growth has slowed down in China as well. With no growth potential in advanced nations, the large global companies see opportunity only in India for investment with ever growing middle class and young population. India is the only country that can witness consumer demand pick up in the coming years and decades.

This is also the time when India could step up infrastructure development. India had huge infrastructure deficit and with global commodity prices of crude oil, steel, coal, cement and other materials falling, investment in infrastructure will yield better outcome with costs coming down. This will also push up jobs in construction industry.

The Indian Railways is investing over Rs one lakh crore this financial year and proposed invest Rs 8.5 lakh crore in the next five years in modernisation of railways. This would create substantial jobs besides creating much needed rail infrastructure.

Government proposed to invest $1 trillion in infrastructure development in the next five years. These investments in ports, airports, highways, rural roads, housing, telecom and power will not only kick-start the sagging economy but also create employment. The proposal to create 100 smart cities in the country, promotions industrial clusters and food parks in the country too would generate additional employment.

The emphasis on renewable energy and raising the target of solar power generation to one lakh Mw and wind power to 60,000 Mw in the next five years entailing investment of $150 billion. Both solar and wind power generation is labour intensive particularly at the time of installation. Off grid applications are spread all over the country.

If India were to shine and growth has to become inclusive, rural India comprising six lakh villages will have to develop. The fruits of development have to percolate down to village level This will happen only if there are jobs in small towns. In this context government’s proposal to encourage industrial clusters will half employment generation.

Urban development initiatives – AMRUT, Smart Cities Mission and Housing for all unveiled by Modi recently are expected to help create additional 34 lakh jobs. The initiative to build 100 smart cities across the country is a “decisive step” and will create a significant multiplier effect for over 250 core and ancillary sectors including infrastructure, logistics and modern retail.

Weak external demand means growth in labour-intensive sectors like textiles and gems and jewellery that are dependent on exports for growth will not see a pick up in the near term. So government would have to focus on newer areas like food processing, urban and rural infrastructure, highway development for job creation. The kick-starting of stalled projects is another area, which is receiving great attention. At one point of time there were Rs 18 lakh crore worth of stalled projects. The previous UPA government cleared Rs six lakh crore of projects and the NDA government has cleared close to that amount in the last one and half years.

There is opportunity for the economy to reach a new high but this required big push to economic reforms to take advantage of foreign investors queueing up to invest in India. The rollout of Good and Services tax, a game changing indirect tax reform will push India’s GDP by 1.5-2 per cent by creating free movement of good and services in the country besides a uniform tax rate. Also ease of doing business, stability in tax laws are some the issues, which are a source of irritation to foreign investors.

Government has already taking steps to improve ease of doing business by simplification rules and states have started competing with each other to promote single window clearance to attract foreign investment. All these augur well for for the economy and it has to be constant endeavour to improve the situation on the ground, which government and states have started working on.

The business confidence is returning, the feel good factor among foreign investors is visible but the government needs hasten reforms to fully win back the trust of investors. India is set to achieve economic growth rate between 7.5-8 per cent this year. The improvement in the ease of doing business coupled with rollout of GST will push the growth rate to 9-10 per cent, which will close to India’s growth potential. Also with inflation moderating, fiscal deficit and current account deficit under control, surging foreign exchange reserves and falling interest rates, the investment would pick up with consumer demand surging in the country. (IPA Service)