Sent: Thursday, February 09, 2006 1:44
AM
Subject: [Assam] Bangalore Squeezes
India's Low-Skill Hinterland - What canAssam Do?
Does this means that there are thousands, well hundreds of jobs for our
educated but not gainfully employed??
----------------------------------------------------------------------------------------------------------------
Bangalore Squeezes India's Low-Skill Hinterland
By Andy Mukherjee
Feb. 7 (Bloomberg) -- Windfall gains are seldom
an unalloyed
blessing for an economy, and very often a curse.
Economists call it the ``Dutch Disease,'' a reference to the
deindustrialization that took place in the Netherlands after
natural
gas was discovered in the North Sea in the 1960s.
A variant of the disease
-- the ``Bangalore Bug'' -- now
threatens India, Kalpana Kochchar and
other researchers at the
International Monetary Fund warn in a new study.
The bug may spread as the current surge in India's software
and
call-center industries pushes up the price of skilled workers
to a point
where textile, furniture or footwear makers, which
have small profit
margins, can't find supervisors and managers.
If that prevents
labor-intensive manufacturing from
expanding, employment may suffer
because growth in India's
services has created few jobs and too many of
the country's
workers are still eking out a living from farmland.
``The advanced skill-intensive part of the Indian economy
may be
bidding up scarce skills in such a way as to slow the
growth of
labor-intensive manufacture and the exit of surplus
labor from
agriculture,'' the study says.
The fast-growing western and southern
Indian states of
Karnataka (of which Bangalore is the capital),
Maharashtra, Tamil
Nadu and Andhra Pradesh are narrowing the skills -- and
wage --
gap with rich nations. These states, whose population growth has
already slowed because of rising literacy and falling fertility,
are
luring away skilled workers from their poorer northern rivals.
This may be
most detrimental to Bihar, Madhya Pradesh,
Rajasthan and Uttar Pradesh,
which are often referred to as the
four ``sick'' states of the country.
Laggards
As much as 60 percent of India's population increase
by 2051
is expected to take place in these northern and central Indian
states, which are laggards in economic growth and on most social
indicators. For instance in Bihar, a state more populous than
Germany,
two out of three women can't read or write.
In Uttar Pradesh, whose
population exceeds the U.K., France
and Spain put together, seven out of
10 children don't receive
full immunization.
In these states, there's
little scope for skills-based
industries to take root because the
infrastructure needed to
support them -- assured industrial power, good
roads and law and
order -- are largely absent.
These landlocked
states, already at a disadvantage because
of their distance from ports,
are most at risk from the Bangalore
Bug because the current pace of 15
percent to 20 percent annual
inflation in skilled workers' pay makes it
difficult for them to
hire and retain technicians and managers.
Containing the Bug
That, in turn, undermines their only chance
to escape
poverty by replicating Chinese-style, large-scale, labor-
intensive manufacturing.
India's service industries employ about 30
percent of the
nation's workers, a figure that has barely moved in 10
years.
That stagnation has occurred even as the share of banking,
telecommunications, software, tourism, transportation, health,
education, entertainment and trade has grown to more than half of
the
$693 billion economy, compensating for the full decline in
agriculture,
which shrank to 20 percent of gross domestic product
in 2005, from 31
percent in 1991. The share of manufacturing has
been little changed at 16
percent of GDP.
Stifling Bangalore's growth is not the solution to
containing the bug. A much better way would be to ease the
emerging
skilled-worker shortage by freeing higher education from
the clutches of
state controls.
World-Class Engineers
If the supply of
technical and managerial manpower keeps
pace with the burgeoning demand,
the price for skilled labor will
remain within reach of what laggard
states can afford to pay to
create globally competitive labor-intensive
factories.
``From a policy perspective, the irony is that in order to
promote unskilled labor-intensive activities in the future, a
great
deal of attention may need to be paid to fostering the
supply of skilled
labor,'' Kochchar and her colleagues conclude.
India's success in
skill-based industries has been an
unintended outcome of state policy.
The windfall accrued because, soon after independence in
1947,
Soviet-inspired economic planners decided to make in state-
owned
factories all the heavy equipment that most other poor
countries with
surplus labor might have preferred to import.
The emphasis, therefore, was
on producing world-class
engineers even at the cost of scrimping on
blackboards in village
schools. In 2000, India spent 86 percent of per
capita gross
domestic product on university training of each student. It
allocated 14 percent to primary schooling. By contrast, China
only
spent 11 percent of its per capita GDP in university
education.
Hinterland
When the Indian economy started opening to the
world in 1991,
the country had a ready pool of engineers. These engineers
could,
thanks to the plunge in telecommunications costs, design computer
chips for Intel Corp. and aircraft engines for General Electric
Co.
without having to leave Bangalore.
Now is the time to take economic growth
to the Indian
hinterland by improving the business climate in slow-growing
states so that it starts making business sense to employ
thousands of
low-skilled workers.
That would be the surest defense against the
Bangalore bonus
degenerating into a resource curse.
--Editors:
Greiff (jdu)
Story illustration: To graph the year-on-year change in
India's quarterly gross domestic product, click
{INQGGDPY
<Index> GP <GO>}. Click on {TNI INDIA ECO BN <GO>} to
see more stories on the Indian economy. Click on {RBIN <GO>} for
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please
see {TOP IN <GO>}.
To see more Mukherjee columns, click on {NI
MUKHERJEE <GO>}.
To comment on this column, click on {LETT
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letter to the editor.
To contact the writer
of this column:
Andy Mukherjee in Singapore (65) 6212-1591 or
[EMAIL PROTECTED]
To contact the editor responsible for
this column:
James Greiff at (1) (212) 617-5801 or [EMAIL PROTECTED]
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#<254164.45857.2005-11-10T14:40:00.96>#
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-0- Feb/06/2006
20:06 GMT
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