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What ails India's economic powerhouse

May 05, 2006 08:51 IST

Maharashtra is way ahead of other states in job opportunities. It has also consistently shown higher real per capita income than any other state. But the good news seems to end here.

The annual percentage GDP growth for Maharashtra at 3.16 per cent is considerably lower than the all-India average of 4.38 per cent. The state's ranking in terms of trend growth in real income declined considerably during 1994-95 to 2003-04 (ranked 11th amongst the 15 major states).

The most worrying feature is that the country's economic powerhouse is facing a paradox in terms of growth and employment realities as its manufacturing and service sectors have been exhibiting a good performance but without a corresponding increase in job opportunities.

This has led to a huge employability (the capacity of an individual to get and hold on to a job) gap. If such contradictions persist, the divergence between employment and output growth trends is likely to impact the livelihood of people in the state, warns a pioneering study conducted by the Tata Institute of Social Sciences for the Confederation of Indian Industry. The study, done exclusively for Maharashtra, has covered the districts of Nashik, Aurangabad, Nagpur, Kolhapur, Ahmednagar and Pune.

The study, the first of its kind for a particular state, highlights the lack of congruence between job opportunities available in Maharashtra and the employability of those with basic skills. The rate of labour absorption thus has been substantially lower than the rate of growth of output in key organised manufacturing industries.

The reasons for this paradox are many. Despite improvements in the pace of economic growth, nearly 77 per cent of the rural labour force still depend on the primary sector for livelihood, with the secondary and the tertiary sectors yet to penetrate into the rural economy. For instance, the secondary sector has grown steadily since the 1990s, but the share of workers has stagnated at 35 per cent.

The small-scale sector also hasn't done too well on this front. In spite of a positive growth in total income from unregistered small units in the state, the ratio of total employment to total small-scale enterprises has declined from 8.45 in 1981 to 7.81 in 1991 and 6.51 in 2000.

The share of state income devoted to education has been a measly 3-4 per cent. What's disturbing is that among graduates, the rate of unemployment is 24 per cent among male, 32 per cent among female, and 27.4 per cent in the SC/ST group. The percentage is almost same for the 25-30 years age group. Only about 4 per cent of the workers in the state hold some kind of technical degrees.

There also exists a huge regional variation in the educational levels of workers in the state: while only about 20 per cent of the workers in the Konkan region are illiterate, the percentage is above 45 per cent in the inland central region, and 40 per cent in inland northern and eastern regions.

The study says employers typically are apprehensive about taking initiatives to invest in their potential workforce and prefer to keep complaining about the state not providing skilled manpower.

A case in point is the rapidly growing construction industry where the employers continue to hire illiterate and low-skilled manpower in spite of ITIs having trained youths in masonry. Also for industries in foundry and casting, the tendency is to hire unskilled workers.

Though the ITI in Kolhapur offers training in foundry, there are very few takers as industry takes shortcuts and want ready-made workers.

Industry, however, feels lack of technical skills was a major handicap. This was especially so in districts such as Aurangabad, Nagpur, Kolhapur and Ahmednagar. Most ITIs were focused on a single trade, which was not what industry required any more. A mere fitter or a turner was, for example, a misfit in the changing industrial set-up where multi-skills are the order of the day.

To address this gap between perception and reality, the TISS study has made some innovative recommendations, such as setting up of a full-fledged labour market information cell and service training institutes. The suggestion makes sense as a considerable information gap exists with regard to the knowledge available about what industry wants and what's available.

People entering the job market also need information to help them make informed decisions about the options available to them. The cell can provide information about the nature of skill sets in demand and the training available and ensure synergy among the state government, local industry, educational institutes and entrants into the job market.

It's obvious that the only way such an experiment can succeed is to have a fruitful public-private partnership.
Shyamal Majumdar
Source: source