Jayant Sinha presents new development model for India

For a country like India, achieving high GDP growth is not enough. It needs jobs which cater to the rising aspirations of the people. At the annual Fortune India Next 500 summit, union minister of state for civil aviation Jayant Sinha, presented his vision to achieve this.

According to Sinha, providing jobs in high-productivity industries such as banking, aviation, steel, and most importantly, jobs embedded in market ecosystems and supply chains can improve the quality of life of the people. And midsized companies have a huge role to play in this. “Our economy is poised for a dramatic and fast growth due to sustained major policy reforms followed by synchronised global growth. Secondly, India’s development model and what we need to do achieve prosperity depends on midsized companies.”

During the presentation titled ‘Farm-to-Frontier: A unique development model for India’, Sinha took the example of Bhola Kushwaha, a youth from his constituency Hazaribagh who is aspiring for a job in the formal sector. However, with nearly 400 million people surviving on a monthly family income of less than Rs 5,000 and nearly 500 million more with a family income of anywhere between Rs 5,000 to Rs 25,000 a month, Sinha admitted that there aren’t enough high-quality jobs in the system.

“There are only about 50 million people that are in an environment where they have a high quality job and leading good global middle class lives,” said Sinha.

Sinha highlighted the scale of the challenge by putting into perspective where India stands today as compared to counties like China and the U.S. in terms of GDP per capita. With a GDP per capita of $ 1,710, he said even if India were to grow at 7% per annum for 20 years, India would still be behind China’s GDP per capita today at $8,123. In fact, while India is the sixth largest country in terms of absolute GDP numbers, in terms of GDP per capita, India’s peers are the likes of Djibouti, Nicaragua, Solomon Islands and others (Fortune India has done a detailed story in its upcoming issue on how India compares with other countries in terms of GDP per capita).

According to Sinha, rapidly increasing regional disparities within India pose a big challenge to the efforts to provide high quality jobs. “We have a group of states [southern and western states] which are doing quite well on a GDP per capita basis…states like Jharkhand and Bihar are not catching up, in fact we are falling behind. That is a very serious challenge that we face in our country that the regional disparities are getting sharper,” he said, adding that the gap between the better performing states and the laggards will be as much as $18,000 in times to come.

Sinha’s thesis for correcting the situation, and giving people like Bhola Kushwaha the high-quality jobs that they demand, is to take them from the farming sector to frontier sectors with high-productivity jobs. “Look at places like Gurugram, Whitefield, Hinjewadi. We have people here who have gone straight to the productivity frontier by working jobs and working in industries that are absolutely world class today. So we have to get people from agriculture and bring them to the productivity frontier and make sure that they are as productive as possible because only then we will get them to highly prosperous high quality jobs,” he said.

Sinha added that GDP per capita measures productivity; therefore, workers can get high earnings if they are producing a lot. Giving examples of high-productivity industries, Sinha pointed to private banks, aviation, IT services and steel. “We have about 200,000 people directly employed in aviation today. Their output is about $67,164 per capita. No wonder they enjoy a good standard of life. Therefore we need to bring people towards high-productivity jobs,” said Sinha.

That is easier said than done given the lack of skills that many of India’s youth suffer from. However, Sinha recognised the challenge and provided a solution to overcome the challenge. “The answer to that challenge is through market platforms. Nobody produces just by themselves. They are embedded in a market ecosystem. They are embedded in a supply chain. So the way we can get people to produce more is to enable them to produce more through a market ecosystem so that they can produce much more…the perfect example is an Ola or an Uber driver. To become an Ola or Uber driver all you need to be able to do is drive. But once you start using all the equipment around them, even someone with fairly rudimentary skills can produce very high output and they can improve their skills gradually,” he said.

The other advantage of frontier jobs is the multiplier effect. Sinha highlighted that a frontier job in industries like IT services, creates three indirect jobs. He estimates that out of 50 million formal jobs today, there are about 10 million jobs in the frontier industries. “My proposition is to create 2 million such jobs [jobs in the frontier industries] a year over the next 20 years in these frontier industries. If we do that, then 20 years later we will have 200 million jobs, 150 million indirect and 50 million direct jobs, connected to high-productivity frontier industries,” he said.

According to Sinha, achieving this would require the government to push forward with the Institutions of Eminence, provide adequate financing for frontier industries and invest enough in social security.

“If we do all of this, we can provide Bhola Kushwaha a future. We can give him an opportunity to get plugged into the market ecosystem. He can become a part of the supply chain through either a dairy farm or be a skilled worker in a daily processing farm,” he concluded.