Model Answer

Introduction

India’s manufacturing sector has struggled to achieve the goal of labor-intensive exports, particularly in areas such as textiles and footwear. Instead, the focus has shifted toward capital-intensive industries like auto parts and pharmaceuticals, which do not employ a significant number of low-skilled workers. This imbalance has hindered job creation and economic growth.

Reasons for Failure of Labor-Intensive Manufacturing Sector

1. Lack of Skilled Labor
   • Many workers transitioning from agriculture to manufacturing lack the necessary skills for labor-intensive industries.
   • Fact: Only 4.69% of India’s workforce is formally skilled, compared to 24% in China and 52% in the U.S. (source: Ministry of Skill Development and Entrepreneurship).
2. Ease of Doing Business Challenges
   • Rigid labor markets, tax uncertainties, and obstacles to entrepreneurship impede the growth of labor-intensive manufacturing.
   • Fact: India ranks 63rd out of 190 nations in the Ease of Doing Business report (source: World Bank).
3. Complex Labor Laws
   • The multitude of labor-related laws complicates compliance for employers, discouraging investment in labor-intensive sectors.
   • Lack of public social security provisions increases the burden on employers.

Measures to Promote Labor-Intensive Exports

1. Ease Labor Law Regulations
   • Simplifying complex labor laws and codifying them into fewer, clearer codes can encourage growth in labor-intensive sectors. The codification of 38 labor acts into 4 labor codes is a positive step.
2. Promote Labor-Intensive Sectors
   • Focus on sectors with high export potential, such as apparel and leather, which do not require highly skilled labor and can scale effectively.
3. Support for MSMEs
   • Micro, Small, and Medium Enterprises (MSMEs) are crucial for labor intensity. Promoting schemes like MUDRA loans can enhance their growth.
4. Skill Development Initiatives
   • Address the skill gap through programs like PM Kaushal Vikas Yojana, targeting semi-skilled and skilled worker training.
5. Access to Capital
   • Initiatives such as Start-Up India and Stand-Up India can create a favorable environment for entrepreneurs in the labor-intensive export sector.

Conclusion

India’s manufacturing sector may not have followed the traditional growth path, but with ongoing government initiatives aimed at promoting labor-intensive manufacturing, the country is on the right track. By focusing on skill development and simplifying regulations, India can reverse the trend of jobless growth and enhance its labor-intensive export capabilities.