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Strategies for Full Employment in India

Uncommon Opportunities: Roadmap for Employment, Food & Global Security

November 21, 2004

International Center for Peace & Development, USAThe Mother’s Service Society, Pondicherry

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Unemployment

1993-94 20M 1999-00 27M Twice as high for lower consumption classes On daily basis 35M Youth Unemployment 13%

Kerala 35%

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Natural Employment Generation

New entrants to labour force ` 7-8M/yr Urban migration 1M/yr Agriculture employment is flat Less growth in unemployment -1M/yr Natural job generation 7-8M/yr

The absence of social unrest and the fact that urban migration continues and urban unemployment does not rise enormously indicate the surpluses are being absorbed.

This is unorganized, unconscious process akin to education without schools

Make the unconscious process CONSCIOUS

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How society stimulates employment

New products New services Growth in demand Technological innovation Higher quality &/or productivity Organizational innovation Higher skills Better access to information Increased speed Legislation & law enforcement Administrative responsiveness Environment/health consciousness Change of attitudes

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Three Approaches to Employment Generation

Expand existing activities Nursery schools, tutorial institutes, English teaching

Borrow from other countries Credit rating & collection agencies Trade shows & network marketing Health clinics

Promote culturally compatible activities STD & chit funds Marriage halls Mini-power plants Rural information centres Contract farming agencies

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Available Modes of Action

Increase access to credit Provide incentives for new initiatives Strengthen or enforce legislation Impart training Use insurance as a stimulus Publicize opportunities in the media

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Where are the untapped potentials

Raise farm productivity Renewable energy Agro-industrial linkages Service sector Employable skills Application of IT

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Prosperity 2000 Strategy

Agriculture as engine for industrialization & employment growth

Shift focus from meeting minimum production needs to maximumizing profit

per unit land & water

Projecting market growth based on nutritional requirements

Raise productivity of soil & water

Shift to commercial crops which absorb more labour

Develop industry linkages with industries

Create 4.5 million direct & 5.5 million indirect employment opportunities per

annum

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India’s Crop Productivity Gap (kg/ha)

Crop USA China India

Maize 8900 4900 2100

Paddy 7500 6000 3000

Soy beans 2250 1740 1050

Seed Cotton 2060 3500 750

Tomato 6250 2400 1430

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Low farm productivity results in

High unit cost of production

High priced food

Low farm incomes & purchasing power

Low labour absorption

High water consumption/unit of produce

Limited export potential & threat from imports

(e.g. cotton)

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Technology Strategies

Raise crop yields

Raise water productivity

Improve post-harvest storage & transport

Expand & upgrade processing industries

Raising productivity can create millions of on-farm and

off-farm employment opportunities.

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Horticulture

Labour content 6 times cereals

Generates 10-30 times earning / unit area

Filling India’s nutritional gap requires 40% growth

Add 4M ha horticulture to raise production 40%

Generate 8 million jobs

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Food Processing

Improve storage & processing to reduce Rs 70,000 crores in

crop losses

Global share of processed food exports is rising

India processes only 2% fruits & vegetables vs. Thailand 30%,

Brazil 70%, Philippines & Malaysia 78-80%)

India projected to process 10% fruit & veg by 2010

Industry directly employs 1.6M

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Power Demand to Triple by 2020

0

200

400

600

800

1000

1200

1400

Industry Transport Agriculture Commercial Residential Total

1997 BAU 2020 BCS 2020

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Oil Demand to Triple by 2020

0 50 100 150 200 250

Power

Industry

Transport

Agriculture

Commercial

Domestic

Total

Projected demand for oil in million tonnes

1997 BAU 2020 BCS 2020

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Cotton & Textile Industry

India is 3rd largest producer of cotton

Domestic demand projected to grow 70% by 2010

Export demand projected to triple by 2010

Double productivity of cotton

Double area under irrigated cotton

12 million additional jobs in textile industry

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Forestry, Herbs, Medicinal Plants

100 M rely on forests for main source of

livelihood, including half of India’s 70M tribals

Objective to raise forest cover 50% in 10 ys

Introduce corporate contract farming with bonded

performance guarantees & assured employment

for local population

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Fisheries World seafood market doubled in the 1990s

India’s marine & inland fisheries employ 6M

1/3rd of India’s marine fishery potential untapped

China full-time employment in rural aquaculture

1989 – 1.5M

1997 – 3.3M

Shrimp farming -- 4 direct & 4 indirect jobs per ha

1999 – 161,000 ha generates employment for 1.3M

Additional 120,000 ha would create 1M jobs

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Dairy Rs 100,000 crores by 2005

India is largest and lowest cost producer

70M dairy farmers

Cooperatives provide employment for 11M

families

Potential for 42M jobs

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Employment Potential -- summary

Crop productivity growth 5,000,000

Horticulure 8,000,000

Biomass power & bio-fuels 21,000,000

Agro-forestry 6,000,000

Cotton & Textiles 12,000,000

Dairy, animal husbandry, fisheries 8,000,000

Total 60,000,000

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Organization for Rural Prosperity

Self Help Groups

Contract Farming

Rural Information Centers

Farm Schools

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Self Help Groups

1 million created in 3 years

15 million members benefit

90%+ repayment of loans

Mostly for non-farm activities

Commodity-wise SHGs for agriculture

Appachi Foundation & ICICI – 60 SHGs for cotton

growers in Tamil Nadu

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Contract Farming

Successful Indian model -- sugar mills

Organize SHGs of farmers

Role of the Contractor Provide quality inputs Arrange credit with banks Arrange crop insurance Deliver extension services Tie-up market with industry Operate farm schools

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Farm Schools cum Extension

Objective: double farm yields in 3 years Lead farmers act as paid field training &

extension staff for the contractor Lead farmers run Farm Schools on village lands Demonstrate methods on farmers’ lands Train farmers & disseminates information Operate or link to Village Information Centre Link to soil test labs Link to agro-service centres

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Rural IT Knowledge Centres

Mission 2007 – 500,000 village centres Can create 5 jobs per centre Can charge for services

Soil analysis -- expert system for advice Multi-media farm training Input supply information Market information Educational information Health information E-government services Other vocational training

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Ag Enterprises -- Policy Issues

On-farm training system

Enforce sanctity of contracts

Expand access to credit through SHGs with group guarantees & post-

dated checks, including present defaulters.

Extend powers of Revenue Recovery Act to ensure repayment by SHGs.

Tax credits for contractors who raise farm productivity

Strengthen crop insurance program

Penalties for false documentation by officials

Penalties for adulteration of ag inputs

Railways to provide refrigerated storage & transport

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Service Sector

USA: provides 80% of jobs

India:

Grew by 60M jobs in 18 yrs

Rose from 25% to 32% of total employment

High potential fields Tourism Transport, storage, communication Education Health care Financial services Internet-based activities

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Internet-based Self-Employment

Desktop publishing Web design Web research E-books Translation Technical writing Engineering & technical services

Opportunities from Rs 5000 to 1 lakh per month

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Vocational Skills

50% of firms in developing and industrialized

countries report severe shortage of skilled workers.

India’s problem is not lack of employment

opportunities but lack of employable skills.

Skills create employment and self-employment

opportunities.

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Vocational Skills Gap

Only 5% of India’s workforce (20-24 years) have

vocational training compared with 28% in Mexico

and 96% in Korea.

By 2010 major labour shortages will emerge in the

industrialized nations forcing movement of both

manufacturing & service jobs to wherever the skills

are best.

Upgrading skills essential to tap global markets

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Vocational Training in India

4200 ITIs 1,654 government run 2,620 private

Courses offered 43 engineering & 24 non-engineering trades

Capacity – 6.3 lakhs

State enterprise programmes – 1.7 lakh

Including agriculture & other – 20 lakh

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Vocational Training Deficit

Students completing 8th-9th standard 300 lakhs

Students entering 10th-11th 150 lakhs

New entrants to workforce (per year) 70 lakhs

Vocational training in engineering, agriculture & other fields

20 lakhs

New entrants to workforce w/o training 50 lakhs

Existing unemployed youth (15-29) of which 80% are educated up to 10th

150 lakhs

Existing workers to be trained to raise non-ag skilled portion to 25%

350 lakhs

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Three Models

Farm Schools in every revenue village

Vocational Schools

Computerized & Televised Vocational Training

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Vocational Schools

Promote vocational institutes at block and district level 5000 govt 50,000 private

Conduct exams for every skill as for drivers licenses

Certify approved training centres, e.g. BPO

Provide scholarships & incentives for trainees

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Computer-based learning is twice as fast @ half the cost

Multimedia Interactive Immediate Feedback Self-paced learning Eliminates need for trained teachers Responds rapidly to changing skill needs Uniform testing

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Computerized Vocational Training

Establish 1 lakh CVT Institutes like internet cafes 50,000 in private sector 50,000 training centres at engineering and arts colleges,

ITIs, polytechs, high schools, NGOs, etc. Partnership with industry to develop multimedia training

software Provide training to a minumum of 4 million students per

annum Government certification of courses Generate self-employment opportunities for 50,000

entrepreneurs

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Multimedia vocational courses

RWH Child care Nutritionist

Selling skills Real estate Law clerk

Telemarketing Insurance agent Quality manager

Catering Video editing Furniture design

Farm mgmt Pharma rep Textile design

Reporter Dry cleaning Electrical repair

Travel agent Internet research Graphic design

Bookkeeper Organic farming Interior design

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CVT Job Shops

Privately owned, self-employment

Each centre with 1 to 10 computers

Stocked with a library of training software

Training material on CD-Rom format

Fees based on an hourly rate

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CVT Job Shop: Assumptions

Three computers per Job Shop 20 training programmes per Job Shop Each computer utilized 300 hours per mo Operating expenses for rent, two paid

employees, phone, electricity may range from Rs 15,000 to 20,000 per month

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CVT Job Shop: Economics

Capital investment Rs 1.5 lakh.

Cost of operations per computer hour = Rs 20 / hour.

Cost of amortising of computers and software over two

years = Rs 14 per hour

Average cost of training = Rs 35 per hour

Average retail price of training = Rs 50 per hour

Net profit = Rs 15 per hour or Rs 1.5 lakhs / yr

50 hours of computerized vocational training, equivalent to

about 250 hours of classroom training, would cost the

student only Rs 2500.

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Training Software: Economics

Cost Rs 50 lakhs per course

Retail price Rs 1000 per set

Sale of 10,000 sets generates Rs 50 lakhs profit

Offer 50% government subsidy for development

of approved courses

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CVT Action Plan

1. Delivery CVT through all state-owned engineering colleges, ITIs, Polytechnics, liberal arts colleges, high schools, other institutions.

2. Provide financial assistance/ incentives under Central Government self-employment schemes to promote private training institutes.

3. Encourage financial institutions to provide loans to entrepreneurs.

4. Negotiate with computer software companies to develop a wide range of vocational training courses.

5. Recognized institutional authorities to certify course contents.

6. Finance bulk purchase of approved training software with 50% subsidy to minimize the cost of training.

7. Train entrepreneurs to set up/manage private institutes.

8. Provide scholarships to low income youth to cover training fees.

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IT Incubator Business Parks Computerised vocation training Computerised tuitions institutes Computerised language training Software training Video-conferencing services High speed data transfer services Web, graphic and animation design services Computer repair and maintenance services International Internet telephony Computer hardware parts manufacturing and assembly Customer and technical support call centres Back office processing Medical transcription Digital photography, scanning and image processing Internet research services Accounting services Computerized testing laboratories

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Who creates enterprises?

Skilled experienced workers leaving existing jobs create enterprises Machinists taxi drivers hotel servers bus cleaners Printers tailors

Do entrepreneurial training programmes work?

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Promoting Entrepreneurship

Extend bank credit & seed capital to employees

with 5 years experience

Require training & certification for new enterprises

to reduce failure rate

Existing entrepreneur to sign as guarantor

Insurance companies can ensure loans based on

qualifications

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Issues for Study

Natural job creation How many jobs are being created? In which sectors & fields? By what process? How can the natural process be magnified and accelerated? How are rural migrants absorbed in the cities?

Occupational demand Identify high growth occupational categories at all levels Measure growth in pay/income levels by category

Emerging Activities Identify emerging occupations in all sectors,

Farm managers & Soil technicians Servicing for cell phones, ACs, computers, VCDs, etc. Home delivery, floor cleaner, masseuse

Skills for national development Compile a complete list of skills needed for India’s development to next higher level

Job creation in other countries Study which job categories grew rapidly in US during a comparable period?

Efficacy of Entrepreneurial Development Programmes