Account for the failure of manufacturing sector in achieving the goal of labour-intensive exports. Suggest measures for more labour-intensive rather than capital-intensive exports. (UPSC IAS Mains 2017 General Studies Paper – 3)
A key lacuna in India’s growth has been slow growth of manufacturing in labour-intensive sectors and concentration in capital intensive manufacturing sectors like auto parts, chemicals, software and pharmaceuticals. None of these sectors employ low-skilled workers in large numbers.
The movement of workers out of agriculture into export oriented manufacturing industry has been especially slow due to requirement of a certain level of skill which is absent amongst most labourers – resulting in jobless growth. Lack of ease of doing business in India due to labour market rigidities, tax uncertainties, impediments to entrepreneurial growth have further hindered the expansion of a labour-intensive export manufacturing in India.
Measure to Promote Labour-Intensive Exports
- Ease Labour Law regulationssuch as wide-ranging and complex laws, mandatory contributions by low-paid workers, and lack of flexibility in part-time work etc. The government’s decision to rationalise around 38 Labour Acts by framing 4 labour codes is a positive step in this regard to encourage exporters to hire more labour.
- Promoting Labour-Intensive Sectorslike apparel sector, leather and footwear also have high export potential.
- Uninterrupted and Cheap Power Supplyfor labour-intensive manufacturers, who operate on low profit margins and for whom high electricity costs can be a make or break issue.
- Promoting the Role of SMEsas labour intensity of SMEs is four times higher than that of large firms by providing adequate state support. MUDRA Bank should be promoted for this.
- Skill developmentto fill the gap of semi-skilled and skilled workers that manufacturers in India face frequently.
Further, the tax rationalisation under GST as well as the push for Entrepreneurship under Start-Up India and Stand Up India can also provide a suitable and favourable environment for labour-intensiveexporters.
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