Digital India

Not for nothing Apple CEO Tim Cook is hopeful of turning India into "next China" for his company. "Our iPhones sales in India were up over 50% in 2015-16... and we believe we're just beginning to scratch the surface of this growing market opportunity". This enthusiasm indicates that India is fast moving to embrace the digital economy. True, even unemployed youth have found a source of entertainment in the mobile phones. The deep impact of digital economy is just beginning to unfold and it will take decades for it to work out completely.

Three centuries ago the industrial revolution took place. James Watt invented a steam engine that could pump out water from deep mines and pull out the coal in trolleys. That led to a steep increase in the production of coal and a corresponding reduction in its price. Business persons began to run the looms with steam engines. The amount of cloth produced in a day by one worker increased many fold. The cost of cloth declined. British traders imported this cheap cloth into India. Indian weavers who were still weaving with their hands could not compete with the cheap cloth made in Manchester. They began to lose their jobs. In due course of time, Indian business persons also set up textile factories run by steam engines. Few workers were employed in these factories in comparison with the large numbers of handloom weavers. The numbers of workers employed in the weaving of cloth in India declined drastically. These workers did not die though. Invention of electricity and the internal combustion engine followed the steam engine. Electricity made it possible to draw out water from deep for irrigation. Tractors using internal combustion engines made it possible to cultivate larger areas. The crop production increased drastically. Farmers reemployed the workers who lost their jobs in handloom weaving as agricultural labour to undertake operations like weeding and harvesting that depended on human labour. The wages of the agricultural labour, however, did not increase much because a huge army of unemployed was waiting for jobs. The result was that large farmers became immensely rich. They started large-scale cultivation of sugarcane with tube wells and tractors. The standard of living on the agricultural labour also improved even though wages remained low.

A similar transformation is underway in the ongoing 'lnformation Technology Revolution'. Large numbers of jobs have been lost in accounting, photocopying, call centres, and the like. The wages of the common person have remained stagnant though.

This loss of income of the poor is a global phenomenon. A report by the US Agency for International Development published in 2014 says that the "impact of the innovation-driven economy has led to a surprising economic paradox... the median income of the American worker has stagnated and unemployment has risen". The World Bank in its World Development Report 2016 says, "Digital expansion helps rich more than poor... the anticipated dividends of higher growth, job creation and better public services are well short of expectation... And, rather than the poor, the more affluent sections have garnered a disproportionate share of the benefits of rapid digital expansion." A Policy Brief from the Organisation for Economic Co-operation and Development, an intergovernmental economic organization of the developed countries says that the digital economy is leading to polarization of jobs between high-paying and low- paying jobs. A report by a Delhi-based NGO states that 900,000 jobs were created in the Indian economy in 2011. This job creation has since slowed down. Only 135,000 jobs were created in 2015. It is clear that the digital economy is eating up jobs just as the steam engine had eaten up jobs centuries ago.

Some believe that improving the e-skills of the workers will help them log on to the digital economy and raise their incomes. Education was similarly though to be the path to raising incomes of the poor few decades ago. There is a huge army of educated unemployed today. Education has increased the supply of educated workers. However, the demand for educated workers has not increased proportionally. The supply of educated workers is more than the demand hence their wages are falling. An accountant or a doctor with MBBS degree willing to work for about Rs 10,000 per month which is nearly equal to the income of an unskilled worker. The more skilled get the few highly skilled jobs while the less skilled ply cycle rickshaws. Imparting of e-skills will not help raise incomes of the common man just as imparting of education has not done.

Root of this problem is that labour is becoming redundant. Computers and robots are taking over the jobs. This is happening both for the unskilled and less-skilled workers. The way forward is to provide a basic income to every citizen from the taxes paid by the fewer numbers of rich people. In absence of such basic income, the same redundancy will lead to the unemployed taking to crime in revenge for inequality, and joining terror organisations as a path for self-affirmation. Making India digital as quickly as possible as the media is talking about it day in and day out, is not realy going to solve the mounting unemployment problem.

Frontier
Vol. 49, No.19, Nov 13 - 19, 2016