He said that industry should lobby with the government to have a plan for employment generation.
The renowned economist said that even in states like Gujarat and Tamil Nadu where manufacturing has grown well, the labour intensive industries have not seen the desired level of expansion.
“Gujarat certainly has good roads, good connectivity, even some private ports, certainly Gujarat is much more industrialised and has the highest manufacturing share in the state GDP. But in terms of the growth of labour intensive industry, labour intensive industries seem to do rather poorly in India,” said Dr Panagariya.
He gave examples of labour intensive industries like readymade garments where India has been left behind by smaller countries. “If you look only at India’s clothing exports, we are about 1/10th of China even today. China is now becoming high-wage economy, in absolute terms we are less than Bangladesh and even little bit behind Vietnam.”
Dr Panagariya agreed with well-known economist Dr Omkar Goswami who shared his analysis of the listed companies showing a secular trend of less of labour intensity in the net production value.
The NITI Aayog vice-chairman who delivered the JRD Memorial Lecture on the experience of South Korea in pursuing free trade and reaping benefits in terms of growth told the Indian industry leaders how employment generation was important, given the fact that the country has about 500 million workforce. On top of it, 12 million workforce is getting added year after year.
However, somehow the Indian entrepreneurs, he said had looked the other way when comes to creating jobs. They rather invested in capital-intensive machinery which resulted in employing less people.
Dr Panagariya established a link between quality employment generation and the growth of the manufacturing sector. In the Indian context he said, the manufacturing has not grown and still suffers from several regulatory issues.
When it comes to manufactured exports as many as 50 permissions are required.
Talking about the quality of governance and its impact on the economic growth, he said that India never had a scenario of consistent negative growth, though it had witnessed slow growth before the liberalisation of 1991-92. “Governance is everything,” he said adding that even with minimal governance India could see considerable growth.
He expressed confidence that with improvement in policies the growth in manufacturing would look up.
Earlier in his lecture, Dr Panagariya said that unlike India, South Korea’s growth was led by manufacturing.
In his welcome address, senior vice-president, ASSOCHAM, Mr Sunil Kanoria said that there was a need for quality improvement when it comes to the functioning of the regulators in India. He said that the Indian industry should be trusted to deliver without too much of regulation which should not take another form of inspector raj.