Federal think tank NITI Aayog has proposed that the government set up a labour utilisation fund that will make the country’s workforce more skilled and cost-competitive, encouraging businesses to hire more at a time when automation and the use of artificial intelligence are making low-skill labour redundant.
NITI Aayog vice-chairman Rajiv Kumar said in an interview that the government should consider setting up the fund, which will foot the bill for skilling workers and providing them social security, making workforce more cost-competitive for the industry to employ.
The government has been encouraging automation in the textile industry under a technology upgradation fund (TUF) to make it capable of competing with large production houses in countries such as China. Kumar suggested that instead of capital subsidy for businesses, there was a need for labour subsidy now. TUF, which was announced in 1999, was further modified for continuation in the 2012-17 period, giving capital subsidy to the sector for adopting technology.
“Just like that, we should have a labour utilization fund. It doesn’t have to pay salaries but can be used for better training, for paying provident fund contribution and for covering the health costs. In advanced economies, all these things are provided by the public sector,” said Kumar.
Since social security benefits in India do not match those in developed economies, there is a need for a dedicated policy and schemes to lower labour costs, said Kumar, adding that it will also help bridge income inequality in the country.
From the time Kumar took over from Arvind Panagariya, the think tank has been working on a blueprint for the government to create jobs.
“The objective of our policy should be maximizing employment generation. If you do that, everything will fall in place,” said Kumar, adding that labour-intensive sectors such as housing, construction, exports, garments, tourism, education and health should be in focus.
The economist also suggested that the impediments to growth in these sectors should be studied in detail to figure out where the shoe pinches.
According to Kumar, economic growth will accelerate further from the 6.3% recorded in the September quarter in the three months to December on account of the reforms undertaken so far.
Economic growth in the September quarter was an improvement over a three-year low of 5.7% in the June quarter, indicating businesses have shaken off the effects of demonetization and GST rollout.