Can The Service Sector Drive The Indian Economy For Long

Countries, be it developed or developing, are confronting the problem of economic dualism where the technology-oriented sector, which is highly advanced and globally integrated owing to the use of capital intensive resources, employs lesser manpower for production and the social sector absorbs more labour force in spite of having lesser productivity and fails to compete at the international level. It gives rise to a catch-22 situation for policymakers regarding the sector to be promoted, i.e., technology or social.

- Rajiv Khosla

Economists offer three strategies to sail through this predicament. In the first approach, complete focus is on making investment in skills and training of the labourers as has been done by China. The Chinese made substantial investment in modernising the education sector in general and technical education in particular. A pool of economically efficient engineers (vis-à-vis the US and Europe) churned out the latest technology enabled commodities, which management graduates sold in the big Chinese market. By perfecting their supplies in domestic market, the Chinese companies gained confidence to beat the competition at the international levels. For a country like India, this needs to be done from the school level itself as it is not expected to yield the desired results after the school level.

The second strategy offered is to allow the magnificently operating firms to absorb more manpower. It is projected that many such areas in the supply chain, which do not require high level of skills should be opened up for ordinary labourers.

Even the government can help the absorption of labourers by extending subsidies for the use of labour oriented devices. But there is a fear that absorption of more labour or unnecessarily doing something unnatural can take a toll on the operations of the firm in terms of competitiveness.