'Must provide jobs to those not well-educated to go beyond freebies'

Harvard Business School professor Christian Ketels says it isn't useful to think of manufacturing versus services jobs; a range of sectors need to be mobilised for job creation

The Institute for Competitiveness recently came out with a report titled Competitiveness Roadmap for India@100. The report, authored by Harvard Business School professors Michael E Porter and Christian Ketels, and Institute chair Amit Kapoor suggested ways to enhance competitiveness by breaking silos to enable India to become at least an upper-middle-income economy by 2047. Christian Ketels tells Indivjal Dhasmana about the need for a 25-year timeframe, the uselessness of creating a manufacturing-services sector dichotomy for job generation, and looking beyond freebies in the long run. Edited excerpts:

Q. John Maynard Keynes had said before the great depression, “in the long run we are dead”. At a time when the International Monetary Fund (IMF) has warned of the possibility of a global recession you have come out with a recipe for the next 25 years. Is the prescription not at odds with the ground reality?

A. Obviously, it is a very ambitious timeframe of 25 years. That being said, it is quite useful to take that perspective because you want to make sure that India does both — what is immediately necessary to deal with the difficult situation that we have in the world, but there should also be a clear sense how will it build up to create the type of India that we want to see in future. So, I think we need both short-term actions and a strategic perspective. We tried to provide a road map, not an exact action list for 25 years... that would be totally unrealistic... but a kind of a direction and way of thinking so that what we do builds up every year and not run around without a clear long-term plan.

Q. Bibek Debroy, chairman of the Economic Advisory Council to the Prime Minister (EAC-PM), said India would be an upper-middle-income country in 25 years even if it grows at a relatively conservative rate of 7-7.5 per cent a year. So that tag targeted by the report is not that difficult to achieve. Is it not?

A. I agree with him. India is on an almost automatic track to see quite a lot of growth. But that being said, it is not enough. We have seen some of the challenges faced by India at the moment such as falling labour force participation rate (LFPR), between 6 million and 10 million people entering the labour force every year and India is not creating any jobs. Yes, the gross domestic product (GDP) is growing, but we need to create opportunities for these people. That will require a change in policies that we argued for in the report. We just can’t hope that automatic forces are going to help India get rid of those problems. Yes, even if India does not do anything different, there will not be any disaster, but I think it can do much better.

Q. Recently, former Reserve Bank of India governor Raghuram Rajan said India focuses on services-led export growth to generate employment for millions of people. Your take on this:

A. I don’t think it is useful any more to think in this stark dichotomy — manufacturing versus services jobs. We need to mobilise a range of sectors for job creation. We are trying to suggest this in the report; those are all manufacturing sectors that would provide opportunities such as renewable energy, telecommunication and other sectors. But technology is now such that job creation potential from these sectors alone is not going to be enough. So, we also talked about services as well. We talked about logistics in agriculture, healthcare, and education.

Q. The report talked about shared benefits from economic growth. In that sense there is a lot of debate on freebies in India. What is your view on the issue?

A. I think it is a very difficult balance. On the one hand, we need to help the vulnerable sections that are going through hard times; they need help today as they can’t wait for anything else. On the other hand, in the longer run you need not provide only social services, you need to enable the poor to sustain themselves. That is why we focussed on a model where we have entry-level jobs. We start with education not because they all are going to be data scientists tomorrow but because they can do some jobs tomorrow. For some reasons, India’s labour market is structured that way. We have become more and more skill intensive, we have made it harder for those not well educated to even enter the labour market. Then we are forced to give them freebies. That is not a sustainable model. We need to give them opportunities, which means the jobs that they can do that can give them the first step on the ladder to become more successful.

Q. The report talks of tapping opportunities in farm exports. However, there are knee-jerk reactions in India on banning wheat exports or restricting sugar exports, etc. How will we overcome these abrupt policy changes?

A. This is quite understandable, at least psychologically, to talk about banning exports when there are food shortages. But India has an agriculture sector that can produce more than its needs. It is competitive in the global markets in certain segments. So we need to use those opportunities more. But this requires a change in thinking to understand that exports don’t take away things from us but those actually create opportunities for more prosperity to come in for local communities and help farmers and their families.

Q. Two different points of view emerged in a discussion on the report. The former CEO of Procter and Gamble Gurcharan Das said India needs a deputy prime minister to coordinate between central ministries and departments as well as the Centre and the states to transform policies, but EAC-PM member Sanjeev Sanyal did not agree with this. What is your take on the issue?

A. We all agreed that silos are a critical problem. We need to get much better coordination. The focus now is on helping the government do things better. I do think that India needs to find an institutional solution that works in this context. Those working in the government have a much better sense of what will work. But I would suggest trying different things.