Digital economy can create 60-65 million jobs by 2025: McKinsey report

With the general election around the corner, the debate over unemployment and the need to create more jobs has taken centre stage. Now, a new report by the McKinsey Global Institute says there is a huge potential in India to create jobs in the burgeoning digital economy.

The report – ‘Digital India: Technology to transform a connected nation’ says, “the productivity unlocked by the digital economy could create 60 million to 65 million jobs by 2025, many of them requiring functional digital skills, according to our estimates.” The report adds that the retraining and redeployment will be essential to help some 40 million to 45 million workers whose jobs could be displaced or transformed by the digital revolution.

Meanwhile, core digital sectors such as IT, business process management, digital communication services and electronics manufacturing could see their GDP levels double to between $355 billion-$435 billion by 2025. Moreover, sectors where digitisation is newer, like agriculture, education, energy, financial services, healthcare, logistics and retail are poised to leapfrog as digitisation picks up pace.

These sectors could each “create $10 billion to $150 billion of incremental economic value in 2025 as digital applications in these sectors help raise output, save costs and time, reduce fraud, and improve matching of demand and supply,” the report said.

The findings seem to be in line with a NASSCOM report published earlier this year. The report -- ‘India’s Trillion Dollar Digital Opportunity’, suggested that India is poised to become one of the largest data ecosystems in the world with the number of smartphones projected to more than double, digital retail transactions to jump tenfold and mobile data consumption to leap as much as 60 times by 2025. It projected that India can become a $1 trillion digital economy by 2025.

Speaking exclusively with Fortune India on the Digital India report, Alok Eknath Kshirsagar, senior partner, and Anu Madgavkar, partner at McKinsey & Company highlighted the aspects that require maximum attention going forward.

“Unemployment on account of technological innovation is not new, it has happened several times before,” said Anu Madgavkar, commenting on the threat of automation and digitisation threat to jobs.

“Whenever that has happened it has been frictional in nature and that is because the labour force did not adjust enough and in time,” she added. She also said that the digital revolution may not necessarily wipe out jobs, but make certain tasks related to a job redundant.

Madgavkar further explained that a lot of the new jobs created in the digital economy will be digitally-enabled or digitally-facilitated jobs, not necessarily high-tech jobs – those will be smaller in number. “For example, delivery for e-commerce requires some digital skills, but it is not a high-tech job. (It is) physical fulfilment of a digital service,” she said.

Nurturing digital literacy and skilling people for some of these new jobs are crucial to the digital economy and its growth, according to the McKinsey partners. “One of the learnings is that skilled workers need some handholding and mentorship even after the skilling is done,” Madgavkar said.

According to Kshirsagar the focus is more on livelihoods rather than jobs and that solving the jobs problem should be done by solving the income problem. He says that there are more people now looking at a combination of jobs to reach the ₹15,000-₹20,000 per month income figure and that the digital economy could aid these efforts and enable more people to access a higher monthly income. He also highlighted the need to reduce time wasted in the recruitment process. “Data and digitisation can help with much better targeting and reach. Many companies are also administering behavioural tests online.”

When asked about the biggest challenges that India is likely to face in its path towards its digital economy vision, both Madgavkar and Kshirsagar agreed on two major concerns. First – the need to accelerate the speed of mass adoption when it come to new technologies and innovations, and second – ensuring that the infrastructure supporting the digital economy is robust. They also said there was a need for policy and regulation to move more in step with the pace of innovation.