Draft Concept Note – Workshop Promoting the Manufacturing Sector as a Driver of Inclusive Growth and Job Creation in India 25 November 2013 The Lalit Hotel, New Delhi 1. Background Until recently, India had been able to record growth rates of over 10 per cent, which created considerable expectations of continued rapid economic development. Apart from the current downturn, the main disappointment has been the failure for economic growth to translate into stronger employment generation, especially in the formal segment of the economy. In India, around 92 per cent of workers are in informal employment; more disconcerting is the fact that, although the share of workers in the unorganized sector is falling, the proportion of informal workers in the organized sector is rising (for example, due to contract labour). Thus, despite decades of higher growth, only a small proportion of Indian workers have regular, full-time formal jobs with social protection. This has further exacerbated the dualism and inequality that exists in the Indian labour market. The Indian growth story is in contrast with most of East and South-East Asia, which have shown that high rates of economic growth and increasing openness were associated with an expansion in employment in the formal sector (i.e. large-scale factories). Improved labour outcomes in these countries were linked to the growth of labour-intensive and relatively low-tech production segments of the manufacturing sector, such as garments, leather products, and electronics. At the same time, there was an increase in agricultural productivity in these countries, which led to a rise in both the well-being of the self-employed in agriculture, and the minimum wage at which labour would migrate to the urban manufacturing or services sectors. Arguably, many of these economies passed through the Lewis turning point—in other words, they passed the point where they could rely on an elastic labour supply from agriculture for industrial development, thereby increasing the pressure for a rise in wages.1 The success of several East and South-East Asian countries in creating better quality, formal sector jobs is usually attributed to a number of factors and policies: high levels of education and skills, good infrastructure, market-led strategies, and encouragement to foreign capital and investment. In comparison, almost half of workers still earn a living in the agricultural sector in India. At the same time, around just 11 per cent of Indian workers are located in the manufacturing sector (a similar 1 Fang, Cai, 2008, “Approaching a Triumphal Span: How Far Is China Towards its Lewisian Turning Point?”, Research Paper No. 2008/09, Helsinki, UNU-WIDER. Also see Islam, Rizwanul, 2009, “Has Development and Employment through Labour-intensive Industrialization Become History?” in Kaushik Basu and Ravi Kanbur (eds.), Arguments for A Better World: Essays in Honour of Amartya Sen, Vol. 2, Society, Institutions and Development, Oxford University Press, Oxford. 1 share is found in the construction sector). Overall, India has yet to witness a significant transition of (low-skilled) workers from agriculture/urban informal service sectors to a labour-intensive manufacturing sector. Though it is generally believed that the manufacturing sector must play an integral role in promoting a more inclusive growth path in India, the future trajectory for this sector remains uncertain. In particular, questions remain surrounding the ability for large-scale, labour-intensive manufacturing to take off and assume the position as the driver of growth and job creation in the formal sector. Many commentators focus on the role labour laws play in hampering the growth of Indian enterprises (notably in the context of the Industrial Disputes Act, Chapter Vb). However, manufacturing in India is impacted by a range of factors and constraints, including land acquisition, infrastructure, supply of skilled workers, and the myriad of laws that exist, including labour laws. Former Chief Economist of the World Bank, Justin Lim estimated that 85 million manufacturing jobs will be shed in China in the coming years as its economy moves up the value chain.2 The challenge for India is whether it is in a position to take advantage of this once-in-a-generation structural change. Through research and project activities, the ILO in India has addressed in recent years a number of crucial dimensions relevant to the situation facing the Indian manufacturing sector. These include the SCORE Project, which aims to improve productivity and competitiveness of SMEs, and the Way of Informality Project. Furthermore, ILO has also been active in supporting skills development and employment policies in the country. 2. Objectives Through the presentation of recent ILO studies on the manufacturing sector and bringing together leading experts, the main objective of the workshop is to broaden the debate and discourse on the challenges facing manufacturing enterprises in India. This will involve highlighting the importance of a range of factors, not only limited to the narrow purview of labour laws and informality, but also the broader issues of productivity and competitiveness, employment and skills development. As a result, the meeting will also identify policy and research recommendations. 3. Participants The workshop will consist of participants (expected 100) from the Government of India (Ministry of Labour and Employment, Ministry of Commerce, Ministry of MSME, Ministry of Finance, Planning Commission), industry representatives, employer organizations and trade unions, academics and other international organizations. 2 http://blogs.worldbank.org/developmenttalk/how-to-seize-the-85-million-jobs-bonanza 2 4. Draft programme (some speakers to be confirmed) 9:00 – 9:30 9:30 – 10:00 Registration Opening 10:00 – 11:00 Welcome by Ms. Tine Staermose, Director, ILO Country Office for India and Decent Work Team for South Asia Opening remarks by Ms. Gauri Kumar, Secretary, Ministry of Labour and Employment, Government of India (requested) Remarks by Mr. N.M. Adyanthaya, Worker Member ILO Governing Body and Mr. Y.K. Modi, Employer Member ILO Governing Body Chief guest: Mr. Arun Maira, Member, Planning Commission, Government of India Vote of thanks Session 1: The state of the Indian manufacturing sector: setting the scene Chairperson: Mr. Arun Maira, Member, Planning Commission, Government of India Dr. Duncan Campell, Director, ILO, Geneva Prof. T.S. Papola, Institute for Studies on Industrial Development (ISID) Prof. K.P. Kannan, Former Director, Centre for Development Studies (CDS), Trivandrum Open discussion 11:00 – 11:15 11:15 – 1:00 Coffee/tea Session 2: Challenges facing the Indian manufacturing sector Chairperson: Mr. Rajeev Dubey, President, Employers Federation of India (requested) Prof. Dev Nathan, Institute for Human Development (IHD) and Prof. Sandip Sarkar, Institute for Human Development (IHD) Dr. Rana Hasan, Principal Economist, Asian Development Bank (ADB) Dr. Rajen Mehrotra, President, Industrial Relations Institute of India and former ILO official Mr. Thampan Thomas, Vice President, Hind Mazdoor Sabha Mr. Sunder Rajan, President, Sona Koyo Steering Systems Ltd and Member, CII National Industrial Relations Committee Open discussion 1:00 – 1:45 1:45 – 3:30 Lunch Session 3: Productivity constraints & solutions for MSMEs: growing bigger and more competitive Chairperson: Mr. Madhav Lal, Secretary, Ministry of MSME Mr. Sunil Chaturvedi, CEO, Automotive Skills Development Council (requested) Ms. Reshmi Dey Mr. Shashank Kulkarni, Director, Ahmednagar Auto and Engineering Association Mr. V. Krishnamurthy, Chairman, National Manufacturing Competitiveness Council (requested) Ms. Sudipta Bhadra, ILO Open discussion 3:30 – 4:00 4:00 – 5:30 Coffee/tea Session 4: Closing and way forward Chairperson: Dr. Duncan Campbell, Director, ILO, Geneva Mr. J.P. Rai, Director-General, National Skills Development Agency Mr. Saurabh Chandra, Secretary, Department of Industrial Policy Promotion (requested) 3 Dr. Santosh Mehrotra, Director-General, Institute of Applied Manpower Research (requested) 4