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Towards automation? Being labour intensive post-pandemic is a 'recipe for disaster'

By Rit Nanda*
The coronavirus pandemic has changed the way we live in the short term and most certainly it will change the way we live in the long term. Already the nations that are coming out of quarantine are doing things differently, especially with regards to social distancing. Maintaining distance in a country as populated as ours is a challenge not only in our homes, but also in our industries.
One of the reasons India has become a large global exporter is due to our excess labour supply. We have therefore managed to work them on meagre wages and wring out the maximum output from them. Thus, cost of production for us compared to other developed nations is lesser which has meant an inherent advantage for us in terms of selling our goods abroad.
From metalworking to garments, we have seen lines of workers at work manually to make these goods. This is in stark contrast to China, which has not only decreased its cost of production due to lower labour cost as compared to developed countries but constantly produces many goods at a lower cost than the Indian market due to the scale of production.
The more units are produced with the raw materials available, the unit cost decreases. Indian companies, except large corporations, have not been able to scale up their supply and are still dependent on keeping the costs low by being labour intensive.
However, being labour intensive post the pandemic period will be a recipe for disaster where labourers toil in cooped conditions. Any industry serious about not becoming a hotspot for the virus in the short term would have to cut down on the amount of labour it employs.
In the long term, too, it cannot compete and simultaneously give its labour a good standard of living because the moment their standard of living increases, it increases the cost of production which adversely affects saleability. That is neither good for the industry nor the labourers. So eventually the industries anyhow would have had to move towards a model of cost reduction by increasing production scale.
This pandemic is the right time to achieve an Automation Revolution because India needs to keep competing at the global level. To help the industries achieve that the government needs to provide mechanisation support to small industries to upscale their production.
Constant subsidy to help them upscale would be a market interference that will distort the market, but one-time help in capital purchases, much like the government helped farmers with tractors during the Green Revolution, will go a long way in helping them turn around their business models.
Once mechanisation is introduced in any field, it is hard to go back on it. Technology, employed at an appropriate scale, always is cheaper than labour and therefore replaces them. Some labourers can be trained as operators but economics dictate that most of the labourers will be let go, with the cost saving on that covering the cost of technology and some more. So, to protect them an entirely separate ecosystem needs to be created.
A good example of this is the IT revolution. When information technology and computers were brought to India, many were worried that it will replace clerical jobs. It did that, but it simultaneously ensured many more were employed in the IT sector.
Thus, an entire new ecosystem was created by the introduction of computers where industries dependent on them became more efficient, and they themselves spawned an entire industry. Going back a century, the Electricity Revolution was also of a similar nature.
Once electricity became commonplace, old jobs like gas bulb lighters, where people had to individually go light the bulbs, became obsolete. But in the process it made existing services more efficient and birthed the entire electrical industry.
Our approach at this time should be similar. Automation as a whole would not only improve our industries, but to ensure that it does not displace our labour, it must create a separate ecosystem of its own.
That means moving all the production of machines that will be used in such industries to India, borrowing the technology wherever we do not have it, and ring-fencing both domestic and foreign entrants into this field from competition for around a decade.
But, economic and financial fillips alone will not ensure the creation of these new industries to offset the labour reduction in other industries. The labour from the old industries that will be laid off due to mechanisation need to be trained in our existing Industrial Technical Institutes (ITI) prior to this shift. This chance can also be taken to introduce new software concepts into the curriculum of these institutes.
Automation as a whole would not only improve our industries, but to ensure that it does not displace our labour
Furthermore, we also need to be smart and create new industries to deal with the challenges thrown up by this pandemic. For example, if we look at the US city of Pittsburgh, it once used to be a hub for steel and heavy industries. But once steel began declining in the USA, they transitioned into an economy based on medicine, computers and education.
This gradual change ensured that it did not fall into the same state of disrepair like the automobile city of Detroit fell into when it could not transition quickly enough amidst the decline of the automotive industry in the USA.
After the pandemic, public transport and public health would need to be dramatically improved. This pandemic has clearly shown that in the short term, crowded spaces on public transport systems need to be avoided. In the long term too, Indians would benefit by a public transport system that can carry the travel load more evenly.
It would encourage people to switch from private transport, which would reduce the traffic and therefore air pollution too. So, an expansion of the number of buses, flyovers, metro coaches, metro rails, trains, railways etc. seem to be of pressing concern. Labourers need to be trained in these sectors so that our public transport system becomes more robust and public tracks are utilised to the maximum to avoid overcrowding on any service.
Public health should be another area of focus. Nurses should be trained, labour should be employed to build hospitals and townships in rural areas where doctors can live in comfort and do not move away after graduation to other urban centres or countries.
The machines required in any state-of-the-art hospital should be made indigenously with import of technology and prohibition of competition for a certain period, if required.
A scale-up of all these industries and creation of new and parallel industrial ecosystems would allow us to achieve a long term aim of becoming less labour intensive and it will also serve to protect us from the pandemic in the short term. So, this opportunity must not be wasted.
Significant public funding will be required for all the proposals given above, but the less we make industry labour intensive, more we become competitive and more labourers themselves become a scarce resource, due to distribution across industries, which increases their standard of living.
This increases the country’s gross product as well as its tax base. Hence, an increased tax burden now actually reduces over perpetuity and we should therefore make this public investment.
---
*M.Sc. energy, trade and finance, City University, London; procurement, logistics and human resource supervisor and consultant

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