Labor-intensive Manufacturing Should Spearhead India’s Economic Growth: ILO

by IS_Indust

A report jointly prepared by the International Labour Organization (ILO) and the Institute for Human Development (IHD) emphasizes the necessity of prioritizing labor-intensive manufacturing employment to accommodate the substantial influx of unskilled labor alongside the emergent employment-generating modern manufacturing sector.

According to the “India Employment Report 2024,” there is “no alternative” for India but to foster growth driven by labor-intensive manufacturing for at least the next decade, in order to absorb the seven-eight million youths expected to enter the labor force annually. The report underscores the increasing uncertainties in the labor market due to rapid technological advancements, notably artificial intelligence (AI).

While acknowledging India’s initial progress, the report highlights the imperative for further preparations to confront the challenges posed by new technologies. It advocates for a focus on labor-intensive manufacturing to absorb unskilled labor, in tandem with the burgeoning modern manufacturing and services sectors. The report recommends a direct emphasis on micro, small, and medium-sized enterprises (MSMEs) through a more supportive and decentralized approach.

Additionally, the report proposes investments in green and blue economies, rural infrastructure development, and the establishment of integrated markets to rejuvenate employment in both farm and non-farm sectors in rural areas. It mentions potential disruptions in outsourcing due to AI, but suggests that India’s robust ecosystem of startups, tech developers, and digital infrastructure could mitigate job losses and create new opportunities.

While AI presents significant potential to enhance labor productivity and incomes, particularly for unskilled and semi-skilled workers, the report cautions that disadvantaged states are less prepared for this transition. It advocates for the formulation and implementation of active policies and programs aimed at training youths in these states.

Despite India’s demographic dividend, with the youth population expected to remain at 23 percent of the total by 2036, youth employment quality remains a concern. The report notes that employed youths are more likely to be in vulnerable occupations or in the informal sector, with lower wages compared to adults. Moreover, educated youths face higher levels of unemployment, particularly among women and those with graduate degrees or higher qualifications.

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