Editorials/Opinions Analysis For UPSC 07 February 2024

Contents:

1. Slower pace of Job creation
2. Need to push investment in research and development (R&D)

Slower Pace of Job Creation

Context:

Recently, the Ministry of Statistics and Programme Implementation released the results for the Annual Survey of Industries (ASI) for 2020-21 and 2021-22.

Relevance:

GS Paper 2: Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources.

Dimensions of the Article:

1. Key Terms related to Employment
2. Analysis of the Annual Survey of Industries (ASI) for 2020-21 and 2021-22
3. Estimate of employment
4. Steps taken by Indian Government to address unemployment

Key Terms related to Employment:

• Labor Force: The labour force is the part of the population that provides or offers to provide labour for economic activities to make goods and services. This includes both people who are working and people who are looking for work.
• Unemployment Rate: The unemployment rate is the number of unemployed people out of the total number of people who want to work.
• Labour Force Participation Rate (LFPR): The LFPR is the percentage of people in the working age group, which is usually 15 years and older, who are working or actively looking for work. It is based on their age.
• Worker Population Ratio (WPR): This is the number of people who are working out of the total population.
• Datasets about creating jobs
• Periodic Labour Force Survey (PLFS): This is a survey put out by the Ministry of Statistics and Programme Implementation’s National Statistical Office (NSO) (MOSPI).
  • The quarterly bulletin is for cities, while the annual PLFS report is for both rural and urban areas.
  • It figures out the most important employment and unemployment rates, such as the Worker Population Ratio, the Labour Force Participation Rate, and the Unemployment Rate.
• Consumer Pyramids Household Survey: This survey is done by the Centre for Monitoring Indian Economy (CMIE) to find out how households’ financial situations have changed in the past few months.

Analysis of the Annual Survey of Industries (ASI) for 2020-21 and 2021-22:

• Significance of the Survey:
  • The survey is a critical source of information on the registered organised manufacturing sector in the economy.
  • The analysis during the year 2020-21 and 2021-22 gains significance as it was marked by disruptions in economic activities on account of the pandemic. The survey helps in understanding how industry fared during those years.
  • It cover factories employing 10 or more workers using power and those employing 20 or more workers without power.
•  Data:
  •  In 2020-21:
    • The gross value added grew by 8.8 per cent in 2020-21 (in current prices), after registering a fall the year before.
    • Growth in value added was driven by a sharper fall in input than output.
  • In 2021-22:
    • The economy rebounded in this year.
    • The value added grew by 26.6 per cent, with output growing at 35.4 per cent.
    • The industries that drove growth during 2021-22 were manufacture of basic metal, coke and refined petroleum products, pharmaceuticals, motor vehicles, and chemicals — value added by these industries grew by 34.4 per cent. Profits, also bounced back during this period.
  • The registered organised manufacturing sector grew at a faster pace than the unorganised sector in both the years.

Estimate of employment:

• During the first year of the pandemic (2020-21), total persons engaged fell marginally by 3.2 per cent compared to the figures in 2019-20.
• However, there was gradual rise in the employment thereafter.
• The main cause of concern is the pace at which quality jobs are being generated across all sectors at the aggregate all-India level.
• As per the data from the periodic labour force surveys, between 2017-18 and 2022-23, while the labour force participation rate saw a steady increase, a greater percentage of workers were self-employed, not engaged in regular salaried or casual wage employment.
• The share of workers that were self-employed rose from 52.2 per cent in 2017-18 to 57.3 per cent in 2022-23. However, this period witnessed a fall in the share of workers in manufacturing.
• Hence, this job dilemma will remain as a principle policy challenge.

Steps taken by Indian Government to address unemployment:

• Atma Nirbhar Bharat Rojgar Yojana (ABRY): It was started in 2020 as part of Atma Nirbhar Bharat package 3.0 to encourage employers to create new jobs, along with social security benefits to make up for jobs lost during the Covid-19 pandemic.
• National Career Service (NCS) Project: Its goal was to offer a variety of services related to careers, such as job matching, career counselling, vocational guidance, information on skill development courses, apprenticeships, internships, etc.
• PM SVANidhi: Its goal is to help street vendors get back to work after the Covid-19 lockdown by giving them affordable working capital.
• Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA): This law was meant to give every rural household whose adults volunteered to do unskilled manual work at least 100 days of guaranteed wage work in a financial year.
• Production Linked Incentives scheme: This is the main programme of the Ministry of Skill Development, and it plans to create 8 lakh jobs by 2025.
  • However, 50 million new people will be looking for work during this time. This means that PLI can’t solve unemployment all by itself.

Need to Push Investment in Research and Development (R&D)

Context:

Recently, the Government of India presented the Interim Budget in the Parliament for the year 2024-25.

Relevance:

GS Paper-3: Indian Economy and issues relating to Planning, Mobilization of Resources; Government Budgeting; Science and Technology- Developments and their Applications and Effects in Everyday Life

Dimensions of the Article:

1. Budget: Allocation of funds for R&D
2. Present state of India’s R&D expenditure
3. Concerns with the Research & Development in India
4. Private investment in R&D
5. Way forward
6. Conclusion

 Budget: Allocation of funds for R&D:

• In 2024 Interim Budget, the government underscored its focus on fostering entrepreneurship and innovation.
• The Finance Minister announced the establishment of a ~1 trillion corpus to incentivise innovation and research in sunrise sectors.
  • It aims to provide financing and refinancing for long tenures with low or zero interest rates.
  • This will in turn enable the private sector to scale up research and innovation, especially the startups.

Present state of India’s R&D expenditure:

• India’s per capita R&D expenditure is one of the lowest in the world.
• Gross expenditure on R&D as a percentage of gross domestic product (GDP) is far lower than the world average.
  • It is at a meagre 0.64 per cent for India in 2020-21, which if much lower than world average of 2.71 per cent.
• As per the recent data, the top two software firms in the country invested only 1.4 per cent and 0.5 per cent of sales in R&D, respectively.
• The figures are in sharp contrast with the investments made by the IT Software firms in in countries like the US, China, Japan, and Germany.
  • It ranged between 6.5 per cent and 21 per cent.
• According to the World Intellectual Property Organization’s global innovation index, India retains its 40th rank in 2023.
  • The data shows India’s inability to scale up its efforts in research and innovation.

  Reasons for low R&D allocation by the government:

• Low R&D by India has dragged down the overall share of expenditure on research in India’s GDP.
• Lack of Private Investment:
  • Low investment by the private sector leaves most of the pressure on the government, which has other pressing concerns to address.
  • However, fear of imitation by smaller firms discourages large private-sector firms from increasing their R&D spending.
  • It is no surprise that the country cannot boast too many global firms in contemporary times

Concerns with the Research & Development in India

• There were several references in the Budget Speech to funding for dedicated centres for excellence in “Artificial intelligence” research, initiatives to scale up technology to produce laboratory-made diamonds, and a centre for research on sickle cell anaemia. However, there was less focus on basic research.
• Despite the fact that all of these initiatives could be distributed among several government departments, none of the budgetary allocations indicate a significant expansion of basic research.
• Technology cannot advance if basic science is not supported.
  • Low Research and Development Allocation
• In general, developed and technologically advanced nations invest more than 2% of their GDP in R&D.
• The World Bank claims that the allocation is insignificant in comparison to Korea’s allocation of 4.8% of GDP to science and technology.
• Spending in the US is 3.45% and in China is 2.4%, respectively.
• Despite being one of the top producers of scientific literature worldwide, India’s share of global innovation continues to be around 0.7% (according to the Global Innovation Index 2022).
• As a result, just like previous administrations, this one has failed to push the proportion of GDP spent on research and development above 1%.
  • Limited Absorptive Capacity of Scientific Institutions o While lack of funding is not the only obstacle to research and development in India, the absence of significant departmental raises demonstrates that the country’s scientific institutions have a low capacity for absorption.
  • Unnecessary delay o Research scholars’ continued inability to receive promised funds on time and their ongoing struggle to obtain the high-quality equipment they need to conduct their work are two major challenges.
  • Lack of Interest in Research and Development o According to the All India Survey of Higher Education (AISHE) report, less than 0.5% of Indian students pursue a PhD or a degree of a comparable level.
• In terms of researchers per lakh of the population, the country currently lags far behind China, the US, and other much smaller countries like Israel.

Private investment in R&D:

• For India to move up in the global supply chain, it is important for the private sector to step up its efforts in R&D and improving innovation output.
• A few global companies are developing R&D capacity in India. For instance, GE Healthcare opened its first 5G innovation lab in Bengaluru in 2022. The same year, another health care firm opened its first surgical robotics centre in the Asia-Pacific region in Gurugram.
  • These global capability centres will increase overall R&D activity.
  • Though this is a significant development, the research and innovation breakthroughs in most cases belong to overseas firms.

Way forward:

• The new funds allocated must focus to help small new-age firms as large corporations in India are not short of cash.
• The government must work with the private sector to address their needs and concerns to boost higher research activities.
  • It should improve its focus on Developing intellectual property rights regime and Resolving uncertainty around data protection
• The establishment of the National Research Foundation will be a significant step towards achieving the goal. The Government must ensure its smooth functioning without Bureaucratic interference, as it can affect its operations and outcomes.
• The establishment of scientific infrastructure and the allocation of a sizeable portion of the funds are necessary.

Conclusion

• Today’s world is mainly driven by technology. Hence, both the Government and the firms must improve its focus on innovation to prosper.