IT, BPO sector ‘not enough’ for India’s $5Tn economy target
Despite gaining global prominence and playing a pivotal role in the country’s export performance, India’s services industry —particularly IT and BPO — will not be enough to hit its $5 trillion economy target.
A report from Money Control stated that critics are starting to question the sector’s ability to generate large-scale employment. According to the Quarterly Employment Survey (QES), the IT/BPO sector accounted for only 10% of employment in Q2, compared to the manufacturing industry’s 39%.
Moreover, jobs generated via the services industries are relatively skill-intensive in nature in a country that has unskilled labor in abundance. The mismatch of skills implies a possibility of an unabsorbed labor force.
To solve this problem, experts said that the country should rely more on ‘servicification.”
‘Servicification’ is a term used for manufacturing firms that are increasingly engaging in service activities to add value to their core competency.
A paper published in The World Economy stated that ‘servicification’ enabled Indian manufacturing firms to increase their presence in global value chains (GVCs).
Moreover, ‘servicification’ is also found to be a crucial channel through which small and medium firms (SMEs) and firms operating in low-technology-intensive industries can increase their presence in GVCs.
Money Control added that by creating a complementarity between the manufacturing and industries, India could not only absorb more workers in the manufacturing process but also reap its global advantage in the services sector.
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