Millennium Post

Technology bug & growth of economy

A strategy is needed to avert societal dislocation, analyses Nilanjan Banik.

Technology bug & growth of economy
The recently appointed Economic Advisory Council (EAC) led by economist Bibek Debroy, has a tough job in hand - to propel economic growth in a manner that will create jobs. During the first quarter of 2017-18, India's growth rate has slumped to 5.7 per cent, a three-year low. Popular press attributed the slowdown as an aftermath of demonetisation, implementation of GST, and sluggish export growth. However, the problem is more than meets the eye.
Per-capita income in India is $1,700 per year which is around 16 per cent of the world average. India's labour productivity - economic output per hour of work - is just 15 per cent of the U.S. levels. The case of falling productivity is slowly marking its presence in India's export growth. For those who see exchange rate factor playing out behind India's export slowdown, it is not entirely correct.
This year, Chinese Yuan has appreciated against the strong dollar by as much as 6 per cent, and yet Chinese export is growing at an average of 8 per cent. China is a good comparison, as both India and China compete in the world market in many price-sensitive items such as apparels and leather footwear. The Indian economy is hit by technology bug and that is more worrisome than anything else. Consider this.
Technology and investment: A closer look at the data suggests that in India gross fixed capital formation is falling. Growth in capital formation has fallen from a high of 17.5 per cent during 2004-2008 to a lowly 4.3 per cent during 2014-2016. A part of the fall in value of investment has to do with lower input costs. Technology has made sure that inputs come at a cheaper price. And this has reduced the cost of private investment. Another part of investment slowdown has to do with the aftermath of stalled big infrastructure projects during the latter part of United Progressive Alliance (UPA) rule. The marginal value addition of government investment fell drastically during thee second part of UPA. Rather than expediting stalled investment projects and tackling scams and corruption charges, the UPA government spent time on unproductive subsidies to woo voters, which didn't augur well for India's economic growth.
Technology and jobs creation: During the last century technology was complementing workforce by making it more productive. Electricity, combustible engines, and refrigeration aided economic growth through a more productive labour. Unfortunately, now things are different. In this age of big data analytics, machine and deep learning, machines are increasingly taking the jobs of humans. With technology changing so fast, no one knows where the jobs of the future are coming from and what they look like. U.S. regulators have already approved smart pills that send highly accurate diagnostic information from inside a patient's body to doctors via Bluetooth. The computing power of a mobile handset is already equal to that of the human brain. Tesla has recently announced bringing out an engineless electric car that costs only $35,000. This may change the entire dynamics of the automobile industry. A significant societal dislocation is waiting to happen as machines and robots take jobs of humans. The government acknowledges this. Earlier, reacting to the advent of driverless car in India, Road and Transport Minister Nitin Gadkari said, "we will not allow any technology that takes away jobs."
Technology and education: When it comes to the ranking of Indian universities globally, this year there as none in the top 200 Times Higher Education World University Rankings. This does come as a nasty surprise to those who believed in the prowess of India's scientific, technological, and managerial manpower. The fact of the matter is that the curriculum taught in Indian University is mostly archaic, with little relevance to modern industry. Therefore, fewer jobs are getting created, with fewer graduates having the ability to execute. If corporates figure out that potential candidates do not have the power to execute or deliver, then demand for hiring will be less. During 2015 and 2016, employment generation in the organised sector had fallen to less than two lakh jobs a year, which is less than 25 per cent of the annual employment generated before 2011. Daily, less than 2 per cent of Indians who applied for jobs get it. Presently, India (like elsewhere in the world) is slowly transforming into a gig economy where the labour market is increasingly characterised by the prevalence of short-term contracts or freelance work as opposed to permanent jobs. A study by KellyOCG, a global recruitment company, shows in India 56 percent of the companies have more than 20 percent of their workforce as contingent workers. Recognizing a sorry state of affairs and to make Indian universities world-class, the government has decided to give autonomy and Rs 10,000 crore (around, $1,540 million) funding to India's top 10 public and 10 private universities. A better idea is if government can facilitate linking universities to the private sectors. For instance, the U.K. government is promoting robotics, 5G wireless internet, and smart technologies while asking the private sector to sponsor 300 Masters students and 200 doctoral students in Artificial Intelligence every year.
Technology, which is the key to raising productivity, is here to stay. As much as 90 per cent of increases in per-capita income come from technological innovation. The question is how to look for a strategy that will make technology inclusive. IPA
(The writer is Professor, Bennett University. He is has authoredthe book "The Indian Economy: A Macroeconomic Perspective". Views are strictly personal.)

Nilanjan Banik

Nilanjan Banik

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