April , 2019
The human link to the production chain
15:38 pm

Kishore Kumar Biswas

It is known that increased mechanisation, use of artificial intelligence, the fourth industrial revolution, etc. are some of the buzz words in business media, business meetings and corporate boardrooms. But the necessity of the human element in production units is the key to any successful business. It is not that more employment means a bigger market, thereby higher demand in an economy, which ultimately helps the economy. The biggest and most successful industrialists consider that the key to success is proper utilisation of human inputs in production. Human beings are the masters of technology. But before coming to the main analysis, let us look for a similar view about the Indian economy by political leaders.

In a recent question and answer session in Bangalore between Congress President Rahul Gandhi and start-up entrepreneurs, he stressed on employment generation. The problem of unemployment reached its peak in the last fifty years and is being considered as one of the most serious failures of the present government.

Rahul Gandhi talked about the urgency of banking reforms. He said that the banking industry had been monopolised by a section of investors and that banking finance needs to be used to generate employment in the country. According to him, this was possible by connecting the existing skills of the country to the financial system. India had a large number of skilled persons. The task would be to bring them under a value chain by connecting them with the financial system. He also said that China had been successful in its own way but India had to choose a different path. At the same time, India needed to develop the required infrastructure. Formalisation of skills already present in the country was necessary but that should be done gradually. No hasty policy would give results. Rahul Gandhi’s opinion is important because the Congress is the biggest opposition party. If it is voted to power, then one can expect a policy change. At the same time, many other political parties are also showing their concern regarding economic issues like employment generation, growth and development.

Indian economy in a state of slow capital formation

Indian economy is now passing through a phase of very weak capital formation. The situation is grave, particularly, in case of private investment. This is the area where the next government must give emphasis. Whether it is employment generation or infrastructure development, nothing is possible without high investment in an economy. According to CSO data, it is found that there has been a consistent decline in investment levels. The gross capital formation was 34.3% of GDP in 2011-12 which has come down to 26.8% in 2017-18. It is known that the CMIE data on new investment proposals in 2018-19 indicate that the investment in the economy was around Rs. 9.5 lakh crore which is the lowest in 14 years. In an earlier period, in between 2006-07 and 2010-11, it was Rs. 25 lakh crore per year, Out of which around 62% was private investment. This was down to 47% in 2014-16.

One of the reasons behind high investment growth before 2012 was the vibrant global economy at that time. At present, the global economy has been slowing down. This is because of slowing down of the Chinese economy and the impact of trade war between the US and China. There are more factors like Eurozone destabilization, central bank liquidity traps, volatility of energy prices, rise of inflation, etc. All these factors can stand in the way of global economic growth. Quite a number of important sectors in India have been facing crisis. Energy sector, telecom, banking, coal and some other mining sectors are not doing too well. Recent reports of the aviation sector depict a gloomy picture. In the power sector, the State Electricity Boards (SEBs) have crippled many power producing companies by not paying their dues to them. Therefore, demand for power is not rising as the SEBs is not able to purchase power in adequate amounts. The demand for power in industrial sector is not rising and is even negative in states like West Bengal. Excess capacity has been huge in many sectors like power.

Importance of human factor in increasing productivity and efficiency

The point that has been raised at the beginning is that even in the present situation, the real strength of a production unit has been its human resources and not sophisticated technologies. This has recently been discussed by Arum Moira, former member, Planning Commission. He pointed out towards the opinions of three major industrialists of the world.

These opinions are important at a time when the use of sophisticated technology is replacing labour in production units throughout the world. The remarks of the three CEOs are discussed below.

Vikram Kirloskar, the CEO of Toyota-Kirloskar pointed out that ‘people to people’ collaboration and trust enables a win-win environment within factories and across boundaries in the supply chain. The second was the CEO of Bosch, a global leader in designing and in production of high-tech equipment. The third was the CEO of Bharat Forge which is known as one of the most successful component producing companies of the world. This company has been famous for its ability in rapid prototyping. Computer aided equipment enables the combination of flexibility with accuracy. All these three CEOs were asked questions at CII’s AGM in April, 2019. All these big industrial personalities said that the key to improving productivity with technology was people. Baba Kalyani, CEO, Bharat Forge, a path-finder in the automobile industry, highlighted the necessity of human intelligence in improving a system’s performance.

During the end of the 20th century, supporters of globalisation propagated the importance of the comparative advantage theory of international trade. In that situation, India would have the advantage of exporting goods which are labour intensive. This was because India had and has still today, a big pool of cheap labour. But that has not been true in reality. Even Indians have not been able to reduce their labour force from its primary sector to utilise that labour in more productive sectors like industry and service. At present, the world is moving towards labour displacing methods of production for better efficiency and higher productivity. But according to these CEOs, if this goes on unabated, it will be a self-defeating exercise.


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