The ‘Make in India’ vision is grand: Prime Minister Narendra Modi hopes to create 100 million jobs by 2021 and spur the development of middle class that will power the Indian economy in the near future. This ambitious program is designed to turn the subcontinent into a “global manufacturing hub” and increase jobs by providing a fresh impetus to the economy. Running high on this momentum, the government geared the union budget to aid several policies such as ‘Skill India’ and ‘Digital India’ that complement ‘Make in India’.

Attempting to tap this aggressive fiscal push, key manufacturing industries are in the process of incorporating artificial intelligence (AI) to reap productivity gains from automation in areas such as labor flexibility, better finish, more reliable demand forecasting, agile supply chain and inventory optimization. Make in India is a laudable initiative; however, pro-rata quantum increase of 100 million manufacturing and service jobs, a goal of the initiative is yet to be seen.

And it is unlikely to be seen unless drastic steps are taken.

The Make in India initiative may have come a little too late, and then too without proper support critical for its success. India is required to generate 12 million jobs each year to employ new entrants to the labour market. This figure does not include about 20% of the jobs today that face existential crisis. With the increased sophistication of AI and automation, there are concerns that will lead to further significant unemployment as capital is substituted for labour and reduce the size of the middle class. So, even if India becomes a global production hub, the declining labour-intensity of manufacturing suggests the fruits of this accomplishment will be highly concentrated among very few. In short - the economic tide may rise, but it will not lift everyone’s boat.

Manufacturing was indeed the main driver for employment creation and economic growth over the last two decades for the Asian tigers and China. However, this is yesterday’s playing field. Now, even Apple is relocating iPhone manufacturing away from China to completely automated factories in the US. Similarly, as AI evolves, many BPO and outsourcing jobs will be replaced by AI. After all, anything that can be described as a series of logical steps and sent down a wire to a BPO can equally be done by AI. Tomorrow’s playing field would involve technology creation, IP (Intellectual Property) creation, licensing and brand ownership. The jobs of the future will be “what computers & AI cannot do better than humans”.

How can the government meet the new challenges? This change of focus needs incentives, investments and skill creation. Witness the investments in this area by China, and even Singapore, which invests 3% of GDP behind R&D, and is trying to attract global talent to its shores. India announced initiatives by devoting only 0.6 percent of GDP to R&D, well below the United States (2.74) and China (2.07). Today, India is lagging behind the West and the frontrunners of technology creation and adoption in Asia, such as China and Korea, in the innovation culture, and in eco-system and infrastructure needed to develop a base for the adoption and creation of cutting edge technology.

Besides the issues mentioned so far, education is a key area that needs significant improvements if the country is to meet the challenges of tomorrow. Poor outcome of school graduates in math and reading, (foundational subjects required to move to a tech related job domain); lack of employment readiness of STEM (Science, Technology, Engineering, Math) graduates; low availability of specialized faculty and researchers; lack of flexibility in curriculum revisions in medical, engineering and computer science courses to keep up with rapid advancements in technology; and low levels of interdisciplinary research in AI related and other new technology fields are just some of the factors that have led to this scenario.

Even assuming the long-overdue reforms advance expeditiously, augmented manufacturing could result in job slowdown for the next decade. This deceleration comes as companies struggle to restructure their business models and before skill development programmes are applied to the modern-day manufacturing processes. Companies such as Infosys are already cutting their work force in the wake of automation.

The situation needs to be addressed urgently at two levels by the government.

First, providing right incentives for the desired objectives.

India is playing catch up with the forerunners of AI whilst the real-world applications of cutting edge technology and AI are taking time to emerge at home. Limited investment in building technology and AI infrastructure, in addition to the existing poor eco-system, puts India at an economic disadvantage. Policymakers need to make Technology and AI a critical component of the programmes in the form of incentives for technology enabled manufacturing investments, tax credits for venture capitalists investing in technology enabled startups, creating regional innovation clusters for augmented manufacturing and robotics in partnership with universities and start-ups, incorporating market-based mechanisms for identifying the skills that employers will value in the future.

Contrary to popular notion, technological advancement need not impact job creation — India can instead move towards a knowledge-based economy by focusing on the benefits of cutting edge technology creation, as well as AI augmented manufacturing and enrolment in quality higher education. During this transition, the entire ecosystem—government, companies, employees—need to brace for this period of limbo as the domains where cutting edge technology can be used to shape up our business and economic models. The time is right to evolve “Make in India” to “Create and make in India”.

In this context as the U.S. turns protectionist and tries to keep out the very global talent that has given it an edge in technology and job creation, countries are vying with each other to attract this talent and offer conditions to live, work, interact and create. Singapore and Dubai are two hubs who have made this very easy. India is actually very well placed to attract global talent into designated “start-up cities” to create IP, jobs, and enterprises. An easy win could be to attract NRI and OCI (Overseas Citizens of India) to return, invest and create in India. Similarly, opportunities could be provided to other nationalities provided they can create IP and jobs. In this case, India does not have the inbuilt disadvantage of language like China.

Second, urgently and radically reforming the education sector.

The education sector needs to be re-aligned in order to effectively harness the potential of technology and AI in a sustainable manner. We in India have great cause to worry in this regard. In a world where Google has all information within easy access, and collaboration is the way of the future, our education system’s focus on rote learning, testing memory, and an individual-focused competitive education system that discourages teamwork is outdated and out of sync with the marketplace.

With innovation, experimentation and market forces influencing the labour demand-supply, education models need to evolve to enable human capital to adapt. “Create and Make in India” must include initiatives that focus on building human capital to take on highly skilled jobs that are less susceptible to automation. We must make reskilling existing workforce and developing technology skills in students a national priority.

In primary and secondary schools, there is a need for transition to skill and application-based education in subjects relevant to tech development. The rote learning crisis of the Indian education system is harming the future employability of the next generation and is in urgent need of transition particularly in subjects relevant to STEM.

Introducing think labs, applied math and technology clubs, leadership mentoring and career counselling in STEM fields are some steps to promote early adoption of technology organically. In higher educational institutions, there is a need for collaboration between academia and the public and private sectors. Re-designing curriculum with industrial expertise, field visits, better engagement and case resolution & team project oriented teaching, visiting professors, research centers are some channels to open communication between faculty and industry.

While the above reforms and incentives take effect, during transition, the entire Indian ecosystem need to brace for a period of limbo. Whether India can persevere through this is another matter altogether.

Siddharth Shekhar Singh is an associate dean and associate professor of marketing at the Indian School of Business. He can be reached at siddharth_singh@isb.edu . Nandu Nandkishore is executive fellow at the London Business School, and retired executive vice president Nestlé S.A. He can be reached at Doreswamy.nandkishore@gmail.com

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