India has been facing ‘jobless growth’ which can rein in disaster in future with growing population and non-proportionate growing jobs options as well as opportunities. India needs to create 80 million new jobs over the next decade, double the number over the previous 10 years in order to keep up with the growing population. Therefore, the mode of job creation needs to be explored.
Going China’s way?
- China was the only country which faced similar problems as India.
- In the late 1970s, it was confronted with this issue due to rapid global trade growth.
- But China responded it by contributing to the global trade through which it gained.
- China’s annual growth averaged 10% since the 1970s due to a staggering transformation from agriculture to manufacturing (largely export based).
- But it is unlikely that same formula will be applicable to India.
- The world is seeing lack apsidal growth and more of inward-looking economic policies are emerging. For the first time in decades, global trade growth is running lower than global economic growth.
- Thus, there might not be anymore need of another export powerhouse in this period. And hence, India may have to rely more on domestic demand.
Domestic demand has austere future
- Agriculture is a low-productivity sector, but it employs half the labour force. On the other hand, sectors such as financial services are highly productive, but only employ a little percentage of labour force.
- Over the last decade, labour has been exiting agriculture but it is only going to construction and unregistered manufacturing, which are not noticeably better jobs.
- Also, service sector, where labour tends to be most productive, are not generating the additional jobs the country needs.
Chance of change through e-commerce
- The internet revolution has the potential to help India generate more jobs.
- Recently, one survey mentioned that 88% of Indians had access to mobile phones and 34.8% had access to internet.
- Thus, India could cope with China in e-commerce as it is lagging only 7 years behind it in terms of internet penetration and online purchases.
- Comparison with China is important because of the structural similarities with India. China’s lack of organised retail was overcome by e-commerce which then led to its increased adoption.
- India has around 10% of total retail activity as organised retail. Thus, it needs to put in more efforts to increase its e-commerce activity.
- This will be supported with a young population which is more open to technology, spurt in Internet-enabled mobile telephony, decreasing cost of smartphones and the ongoing digital payments revolution due to demonetisation.
- The e-commerce jobs are also touted as more productive as the employment will be generated in retail as well as transport services which are more productive than currently generated jobs in construction.
E-commerce: will it match the numbers?
- Currently, the local media has multiple stories of failing e-commerce ventures. And this is exactly why it needs to be put in context.
- Globally, a large majority of e-commerce businesses fail, and “creative destruction” is a vital part of that ecosystem because those that succeed become exceptionally large, often changing consumption patterns in economies.
- In terms of job creation, it is estimated that higher wages (on the back of rising economic growth) and the convenience of buying online can increase online sales 20-fold over the next decade.
- There will be jobs created through online sales in terms of average transaction value, parcels delivered per day, customer care per order and IT support ratios.
- Data suggest that e-commerce could create 20 million “gross” jobs at different skill levels—logistics and delivery (70%), and customer care, IT and management (30%).
- No doubt, there will be loss of jobs in brick-and-mortar businesses. But, if compared ‘with’ and ‘without’ e-commerce scenario, it is estimated that e-commerce could create 12 million net new jobs. In other way, for every job lost over the next decade, 2.5 jobs will be created.
- It is often argued that huge economies of scale require less labour inputs and thus e-commerce will not create jobs and is bad for growth. But this is incorrect as estimates show that the rise in consumption due to the convenience factor of buying online can in itself enlarge the transactions which will require larger labour force to serve.
- Also, currently e-commerce is focused in urban areas. When the rural areas will get accustomed to it, it will bring in huge benefits to countryside as well as economy.
- Rural areas will have village merchants who will take care of that side of demands and thereby create livelihood opportunities. Together with it, there will be reduced pressure on crowded cities due to scattering of markets.
E-commerce has slowly picked up in India and is expected to get necessary push post demonetisation. But for that, building the physical and digital infrastructure is a necessary condition to spread and raise wages that boost consumption demand.
Simultaneously, Make in India should also succeed as e-commerce will grow with decreased trade deficit and macro instability.
Together with it, now there is a need for health and education service providers who can cater to mass’s demand on click of mouse. These sectors together will bring in more job opportunities in India from India.