May 18, 2020

Preparing India For an Automated Future

Bishwa Pandey

Covid-19 has taken a sledgehammer to the global economy that was already shaky from increased private debt, income inequality and weak labour protections. Global economies did not stand a chance against the sustained shock to the real economy and are currently pumping in cash to keep vital economic indicators stable. Now as companies struggle to produce goods for the market and meet bottom-line projections, automation is seen as the saviour for many industries. The automation trend which was expected to still be a few years away is here now and is here to stay. In India, like in the rest of the world, policymakers will have a new challenge in the labour market, one that cannot be ignored in the digital millennia.

In their 2017 report, “Jobs lost, jobs gained: Workforce transitions in a time of automation”, McKinsey and Company predicted 30% of all jobs would be automated by 2030. Now as workers stay at home to protect themselves and society, corporate leaders are accelerating their plans for automation to meet production demands. Some 41% of respondents in a survey by the auditing firm EY said they were investing in accelerating automation as businesses prepared for a post-crisis world. With unskilled jobs the obvious targets for automation, the Indian workforce will feel the brunt of this automation blitzkrieg worse than others.

Over the last few years, the Indian economy has been on shaky ground. While the stock market has boomed, and we have had strong the GDP growth that has not translated into a healthy income for most Indians. According to the United Nations Human Development Report of 2019, the Indian economy is the second most unequal economy in the world, only behind Russia.

 

 

Source: World Inequality Database

 

And to compound the dropping income problems, we have a dropping employment problem as well. According to “The India Employment Report” by IMA India, over the last decade, India’s employment has dropped from 467 million to 462.5 million as of 2017. Most of the Indian workforce is currently employed by the service industry or performs manual labour. Although the service industry is the second-largest source of employment in India, most of the workers are from highly automatable sectors like wholesale and construction. Even the manufacturing sector has contracted over the last decade from 53million to 46 million and only 13.8 million Indians have formal employment in the manufacturing.

If the global automation predictions translate to the Indian market as well, much of the workforce could find itself without job-creating new complications in the economy. Mass unemployment caused by automation might improve the productivity of the industries, but it will have a majorly negative impact on the consumption trends of most Indians. With weak social security programs currently in place, the displaced labour force will struggle to make ends meet and aggravate the underlying fissures in the Indian economy. Especially hard hit will be the backward classes and less privileged sections of society. The SC/ST and OBC communities and economically challenged upper class are already on the back foot in terms of horizontal inequality and have limited exposure to quality education and digital technologies. This creates the perfect recipe for a large portion of the Indian populace to be left further behind in the Indian development story.

However, there is a silver lining in all this doom and gloom. Automation might be replacing many jobs in the workplace, but it is expected to create a plethora of new ones. The same McKinsey study from before, says India will need 242% more healthcare workers, 117% more builders (Building engineers, architects, surveyors, construction workers, installation and repair workers, etc), 208% more teachers and most obviously 129% more technology professionals in light of increased automation. The Indian government must now work to develop a plan for how technology can synergistically enable humans and emphasize the important role of continuous education.

Unfortunately, India has a long way to go in achieving this dream. As of 2018, India is 115 out 157 in the World Bank’s Human Capital Index ranking. This means Indians born today are only going to be 44% as productive as their counterparts in Asia. Additionally, 32% of children are expected to face cognitive or physical limitations that last a lifetime, 4 times that of our neighbour China.

This calls into question the two pillars of our society, Right to Education and Right to Health. The Indian education system is disproportionately based on rote learning, and our curriculum needs serious revamp to keep pace with the changing technology scenario. Our vocational training centres are too few, with only 13,348 such centres in India. India has the groundwork in place to overcome the impacts of the automation displacement. The Right to Education in 2009 to ensure every child between the ages of 6 to 14 gets access to education. The government should further extend this to help re-educate and train workers who will lose their jobs to increased digitalization. Additionally, we need to work to inculcate education for employment in our system.
Currently, the education system helps student engage with an ecosystem that is constantly in a status quo and does not prepare them to cope with any changes or disruptions. Unfortunately, we are living in a world that is changing at the flip of a coin and the average Indian student is not equipped with the tools to think and navigate these changes making it hard for companies to take a risk on employing the Indian youth. In fact, the employability for most of the Indian youth is below 50%, and in cases of arts and commerce drops as low as 30%. In such a state, with an increasing push for automation India will be left with a young population that is educated but not employed.
Even the agriculture industry that employs most of India is also primed for automation. If we do not help our farmers and the subsequent supply chains automate and improve, we are making them less competitive not just in the international but also in the domestic market. As the clamour to lure American companies away from China rises, we fail to realize our workforce may not be able to use the tools as well as our northern neighbours. There has been a clear digital divide between us and the faster and larger economies, and one that exists within the country itself. So, while new companies might relocate to India, will India be able to support their ambitions for speed, scalability, and digital optimizations. Even in terms of startups, our thinkers are miles behind the competition. Most of the major AI and blockchain unicorns are from either China or USA, showing us how far behind we are in the race to be digitally competitive.

Self-employment is also not accelerating at the rate needed. The government must also develop the regional industries that help migrant workers find jobs in the villages itself. The Indian villages are home to dying industries that can be revived with investment and attention. Focusing on village industries will have the dual impact of encouraging local industries while also alleviating the pressure on major cities to support the growing number of migrants who come in search of jobs, due to the lack of jobs in their hometowns.  The villages can also be the scene for the development of periphery industries that support the primary industries of the region. Lack of education has left the village class languishing as “unskilled labour” meaning they cannot demand better wages and this needs to change.

While Covid-19 has impeded our plans, it has given us a chance to see what is wrong in our system and what is the need of the hour. The Indian government now has the chance of the century to transform the Indian labour force from a cost centre and a haven for cheap labour to a skill centre and production powerhouse. We must now divert its attention from simply providing social security safety nets to the backward classes to truly uplifting them and making them the engine behind a holistic Indian growth story. India cannot develop as a nation if a majority of the country is languishing in economic uncertainty with limited mobility. The role of education and re-education is now more crucial than it has ever been, and India needs to relearn that time and tide wait for no man, and the global tide is changing.

Bishwa Pandey is M.Eng from  Boston University and Researcher in the Industry. Views expressed are personal.