Per-capita income in India is $1,700 per year, which is around 16% of the world average. India’s labour productivity – economic output per hour of work – is just 15% of the US levels. During the last century, technology was complementing India’s workforce by making it more productive. Electricity, combustible engines and refrigeration aided economic growth through a more productive labour force. Unfortunately, things are now different. In this age of big data analytics, machine and deep learning, machines are increasingly taking over jobs performed by humans. With technology changing at a rapid pace, no one knows where jobs of the future are coming from and what do they look like. Daily, less than 2% of Indians who apply for jobs get them.

There is no silver bullet that may provide immediate respite, but nurturing growth of our core manufacturing sectors such as cement and steel may help. Read this.

At 8 am every day, 2,000 odd labourers begin their work at a cement plant located in Beawar, Rajasthan. Beawar, is a non-descript town to the south-west of Ajmer, with a population of just around 0.3 million (in comparison to Delhi’s 18.6 million). Although, cement factories have become mechanised, the plant in Beawar has been a source of employment for thousands of people, both skilled and unskilled. Labourers, technical people, engineers and other professional people work for this industry. Besides, as cement factories offer employment opportunities in smaller towns (factories are located close to limestone mines), it is most often seen as a harbinger of uniform growth process across India.

At a time when fewer jobs are getting created and India’s urban centres are unable to accommodate any further expansion, growth of core industrial sectors such as cement is important. The cement industry’s performance tracks industrial growth. India, with an installed capacity to produce 500 million tonnes per annum, is the world’s second largest producer of cement after China, ahead of USA and Japan.

During 2018-19, the government is expected to spend Rs 330 billion on account of Pradhan Mantri Awaas Yojana (with the stated objective: housing for all) and Rs 6,000 billion in spending on infrastructure, which is expected to sustain demand for cement. In terms of revenue, cement industry has been the fourth-largest contributor to the national exchequer, contributing nearly Rs 500 billion per annum in the form of taxes and levies. Cement industry attract a GST of 28%, which means a ton of cement which costs around Rs 5,600, contributes Rs 1,560 to national exchequer.

Additionally, this sector is seen as a torchbearer of green environment. On the World Environment Day (5 June, 2018), Cement Manufacturers Association offered to use plastic waste (up to 12 million tonnes) that is generated in this country for its cement kilns by 2025. Cement industry is also using fly ash as an input, a by-product from burning thermal coal in power plants. One can also get hiatus from stubble burning in neighbouring Punjab and Haryana as the crop residue can very well find its use in cement factories in the northern region.

One concern that is plaguing cement is excess capacity. Cement industry is presently using 70% of installed capacity. In fact, during the lean rainy season capacity utilisation falls further. Over the last 5 years, growth in cement prices has been less than 4% annually (less than the inflation rate). The opportunity to export and thus use the excess capacity does not work either. Cement as a commodity falls under bulk (heavy) export category. The cost of transport comes to around 25%, making export unviable. Cement is second largest revenue contributor to Indian railways. Besides, only a few ports, such as Kandla in Gujarat, have the capability to handle bulk export items such as cement. The cost inclusive of transport cost makes domestic cement uncompetitive in foreign markets. Only a few countries in the Middle East buy cement from India. Less than 5% of cement produced in the country gets exported.

Luckily, India still needs many more ports, airports, roads, hospitals, school and houses. It is time for the government to take a leaf out of Keynesian ideology: build infrastructure and create jobs. Hopefully, this will make our income distribution function – depicting how an entire population is distributed on an income scale, starting with very low incomes to the billionaires – looks more like a normal distribution (read, reduce income inequality). Nurturing growth of our core sector and creating infrastructure is a much better policy option than giving doles. All such populist measures such as farm loan waivers and direct cash transfer will not sustain economic growth. We will be stuck in the middle income trap and make a hole in our already fragile fiscal deficit scenario. (IPA Service)