Economic Survey (2020) Chapter – 05 (Creating Jobs And Growth) – Economics

Table of Contents

INTRODUCTION

Growth in exports provides a much needed pathway for job creation in India.
For instance, in just the five year period 2001-2006, labour- intensive exports enabled China to create 70 million jobs for workers with primary education.
The US–China trade war is causing major adjustments in Global Value Chains (GVCs).

Firms are now looking for alternative locations for their operations.
China’s image as a low-cost location for final assembly of industrial products is rapidly changing due to labour shortages and increases in
These developments present India an unprecedented opportunity to chart a similar export trajectory as that pursued by China.
Through it, we can create unparalleled job opportunities for its

India’s share in world exports has increased from 0.6% in 1991 to 1.7% in 2018.
Yet, even by 2018, India’s world market share remains paltry compared to 12.8% for China.

What type of policy interventions would help achieve faster export growth?
Should policies target export growth through specialization or diversification?
Is it in our interest to promote strong local linkages for domestic industries or to participate in GVCs wherein linkages are globally dispersed?
Which are the industries that hold the greatest potential for export growth and employment generation?
Are free trade agreements beneficial to India?

By addressing these questions,
This chapter lays out the policy map to achieve sustained and faster export growth and thereby well-paid jobs.

China-India gap in world market share is almost fully driven by the effect of specialization.

China-India gap with respect to specialization has been fully driven by the quantity effect.

The bottom line is that-
If India wants to become a major exporter,
It should specialize more in the areas of its comparative advantage and achieve significant quantity expansion.
The fast growing commodities in India’s export basket are capital and skill intensive.
In contrast, China’s export composition shows a strong bias towards traditional labourintensive industries.

While capital-intensive products account for a higher share in
China’s export basket than that of India’s,
It is important to emphasize that,
Exports of capital-intensive products from China expanded since 2000 after the country recorded a major export expansion, for nearly two decades (1980-2000).
India’s market penetration in high-income countries is perceptibly low.

India has gained a competitive advantage in relatively low and middle income country markets but at the cost of losing the much bigger markets in richer countries.
India can benefit significantly from utilising the potential opportunities from greater trade with high income markets.
But this requires a reorientation of our trade specialization towards labour intensive product lines.
This can be achieved both via selective focus on

Traditional labour-intensive sectors such as textiles, especially man-made fibres.
Increased participation in G

There are two groups of industries that hold the greatest potential for export growth and job creation:-
First, in India’s traditional unskilled labour-intensive industries such as textiles, clothing, footwear and toys.
Developed countries concentrate in higher value added activities such as design, branding and marketing.
Physical production is carried out by firms in developing countries
Second, India has huge potential to emerge as a major hub for final assembly in a range of products, referred to as “network products”.
The GVCs in these industries are controlled by leading MNEs such as Apple, Samsung, Sony
The lead firms retain skill & knowledge-intensive stages of production in high-income headquarters (e.g., the U.S.A, E.U and Japan)
But locate assembly related activities in low wage countries (e.g., China and Vietnam)