Divide Between High-Skilled and Low-Skilled Jobs in India

What’s in today’s article?

• Why in News?
• What is Happening in the Job Sector in India?
• Why are These Trends in the Job Sector Concerning?
• Way Ahead to Boost Jobs in India (Particularly in the Labour-Intensive Sectors)

Why in News?

• A country with a population of 1.4 billion cannot rely entirely on the services sector to contribute to job creation, since this will increase the gap between high-skilled and low-skilled jobs.

What is Happening in the Job Sector in India?

• Decline in labour-intensive jobs:
  • The Indian economic growth has increasingly been driven by the services sector, particularly in IT, banking and finance, over the past two decades.
  • This has coincided with a noticeable decline in traditional industries such as apparel and footwear, which provide livelihoods for millions of low-skilled workers.
  • The stagnation in manufacturing, which continues to remain at around 14% of GDP (well below the target of 25%), has exacerbated the divide between high-skilled and low-skilled jobs.
• Decline in export-related jobs:
  • According to a World Bank report, the export-related jobs in India have been declining over the past decade.
  • This is due to the dominance of the service sector and high-skill manufacturing in India’s export basket.
  • Since these sectors are less suited to absorbing large portions of the Indian workforce (India’s services exports constitute 4.3%, while goods exports 1.8% of the world’s), job creation due to trade has diminished.
• High tariffs on input materials:
  • Since 2017, India appears to have reversed the tariff reductions initiated in the early 1990s.
  • As per the WTO Tariff Profile for 2022, India’s average Most Favoured Nation (MFN) tariff increased to 18.1%, from 17.6% in 2019 and 13.4% in 2016.
  • High import tariffs on key intermediate inputs have raised production costs, making Indian producers less competitive in international markets.
• Declining participation in Global Value Chains (GVCs):
  • The Indian exporters with GVC linkages demonstrate stronger export performance and greater diversification in products and markets compared to those without such connections.
  • However, India’s participation in GVCs has been declining due to issues such as difficulties in procuring raw materials and high transport costs.

Why are These Trends in the Job Sector Concerning?

• High national unemployment rate:
  • According to the Economic Survey 2023-24, India needs to create nearly 7.85 million jobs annually in the non-farm sector to accommodate the growing workforce.
  • However, the national unemployment rate surged from 7 to 9% in June 2024 (as per the CMIE data).
• India has been unable to capitalise on the opportunity presented by China:
  • Between 2015 and 2022, China’s participation in low-skill manufacturing of apparel, leather, textiles and footwear has decreased.
  • Countries such as Bangladesh, Vietnam, Germany and the Netherlands (not India) have become the primary beneficiaries of China’s shrinking market share.

Way Ahead to Boost Jobs in India (Particularly in the Labour-Intensive Sectors):

• Steps taken boost scale in the Indian textile sector:
  • PM Mega Integrated Textile Region and Apparel (PM MITRA) Parks: In 2023, the Centre had approved the setting up of 7 PM MITRA parks to develop world-class infrastructure with an outlay of Rs 4,445 crore for a period up to 2027-28.
  • National Industrial Corridor Development Programme (NICDP): The Cabinet Committee on Economic Affairs recently approved setting up of 12 industrial smart cities under the NICDP with an estimated investment of Rs 28,602 crore.
  • Reducing tariffs and simplifying procedures: In the FY25 Union Budget, the government announced tariff reductions on various items, including medical equipment, critical minerals, solar energy products, leather and textiles, etc.
• Rise in Global Capability Centres (GCCs):
  • Even as manufacturing in traditionally high-labour-intensive sectors has slowed, India has emerged as a key market for MNCs to establish data analytics and software development centres.
  • Known as GCCs, these centres have proliferated in India, leveraging the large pool of qualified IT engineers in the country.
  • With close to 1,600 GCCs from MNCs across various sectors, India has become to the world what China is for tech hardware.

Q.1. What issues India's job market is facing?

With around 40% of India's 1.4 billion citizens under 25 years old and with millions of India's youths entering the job market every year, clear skill mismatches and a lack of suitable job creation for young Indians remain the biggest labour-market challenges.

Q.2. What is the Pradhan Mantri Kaushal Vikas Yojana (PMKVY)?

The PMKVY scheme is for imparting skill development training through Short-Term Training (STT) and Up-skilling and Re-skilling through Recognition of Prior Learning (RPL) to youth across the country including rural areas.

Source: Low- & high-skilled jobs: Gap rising as manufacturing stagnation continues