AI and jobs in India – Opinion News

By Nirvikar Singh

India’s economic growth has been notoriously stingy in generating jobs that pay better than traditional jobs like agriculture or low-level services. Among the reasons for this undesirable feature of India’s growth are policies that either discourage using labour versus capital, or discourage the creation of productive, dynamic firms, irrespective of how they manage their labour-capital mix. Another reason has been the education system’s failure to give people the right skills for productive employment. This is a policy failure, but also partly a consequence of the aforementioned biases against labour and entrepreneurship. Many Indians leave low-productivity agriculture for urban jobs, but those jobs are often also low-productivity.

High-skilled Indians, a labour elite, have always thrived, and have particularly benefitted from India’s opening up of its economy since 1991, as well as the impacts of information technology (IT). Those changes gave skilled Indians greater access to productive, high-paid jobs. But skill acquisition has been rationed by the education system, as well as failures in health and early child welfare policies which add their own constraints on what people can accomplish as they enter the workforce.

The source of some of the benefits that have accrued to skilled Indian workers is captured in an aphorism of Brad DeLong, an American economist: “IT and the Internet amplify brain power in the same way that the technologies of the industrial revolution amplified muscle power.” DeLong wrote that a quarter century ago, when the Y2K problem was giving Indian IT firms and workers a jump-start in applying that amplified brain power. Since then, India has become a global provider of a range of knowledge services. That was also the time of the dotcom bubble, and some were questioning the potential of the Internet, or IT more generally, but clearly the optimists were right — IT and the internet have been transformative in many respects.

The technologies of the industrial revolution amplified muscle power, but also led to some skills becoming less valuable, as industrial machines substituted for skilled craft work. Some professions disappeared almost completely, like blacksmiths. Later advances created new jobs, like telephone switchboard operators, then further technological progress wiped out those as well. Generative artificial intelligence (GenAI) is about to have a major impact on jobs everywhere. GenAI amplifies brain power, but also replaces it in some circumstances.

Presumably, people at the highest end of the skill spectrum will adjust, using GenAI tools to do their jobs better. But some jobs will disappear, just as they did during the original industrial revolution. This means that India’s road in pursuing sustained growth, which requires job creation, will get bumpier. Some economists have argued that India lost its chance to participate in the post-World War 2 global expansion of labour-intensive manufacturing. But climate change and demographics (ageing populations in many countries) will increase demands for many products and services that were not important in earlier growth. Workers with the right kinds of skills will still be needed in increasing numbers.

Arvind Virmani, who has served as a policy advisor over many decades, is one economist who has repeatedly emphasised the importance of “medium-level” skills in supporting India’s future growth. He pointed out that much modern construction requires plumbers and electricians with more advanced skills than traditional residential construction. Electricians will be needed everywhere, as energy production and transportation electrify. And whereas factory production for some manufactures can be automated, repairs and maintenance in field settings require human presence and engagement. More generally, as our products become more sophisticated, servicing them demands greater training and skills. At a different level, caring for ageing populations will not only increase the demand for all kinds of monitoring and assistive devices, but also for direct care — nurses and other quasi-medical professionals will be increasingly needed.

The fact that millions of Indians spend years preparing for competitive examinations that might get them government jobs is an indication of a massive policy failure in the Indian system of education and training. Unfortunately, those jobs do not provide the kind of training and on-the-job skill acquisition that might lead to careers outside that sphere, except perhaps for the elite few. It might seem that training more nurses and electricians will run into a problem of insufficient demand, but we have seen how software engineers became part of a global labour market. Nurses and other skilled workers already emigrate. Increasing their domestic supply will fill growing global demands, and raise standards at home.

One problem, of course, is that India lacks the institutional expertise and human capital to ramp up these kinds of training. Drawing on global expertise to scale up domestic skilling seems to be a natural solution. India has long seemed to devalue practical, hands-on knowledge versus “pure” brain power. The first decades of the IT revolution covered up the limitations of that bias. The acceleration of advances in AI, substituting for some kinds of brain power, can be a reminder that the range of productive jobs and the skills needed for them is much broader than what has fuelled India’s growth so far. India’s demographic dividend might still be generated and cashed in, if its policies change strategically.

(The author is a Professor of Economics at the University of California, Santa Cruz.)

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