There is no doubt that there is a positive correlation between rising GDP and higher disposable incomes. However, my original point was that people, and the media in particular, are making the 5 trillion dollar economic benchmark as a significant milestone, and overtaking Germany and Japan as a major achievement.
But with a labor force of nearly 600 million, mostly in their mid-20s, a GDP of $5 trillion seems strikingly low. For context, Europe has a labor force of 480 million but boasts a collective GDP of $25 trillion. Notably, Germany, currently the 3rd largest economy, ranks only 18th in population and has a workforce of just 45 million people.
Our focus should mostly be on addressing the issue of skills gap, which could help tackle unemployability and low productivity.
firstly let's understand that the 5 trillion $ target is largely a branding exercise for investors, especially foreign investors. if GoI says 250 lakh crore instead of 5 trillion $, their brains may not even register it, perhaps even brains of our english educated desi industrialists may not even register it.
examples of germany and europe comparisions do not work for us. low end manufacturing goods which pay low end manufacturing jobs, they don't have them, they simply import from asia. and India doesn't make high end products like lamborginis and passenger aircrafts. there is very little in common between europe and India, industries are different, currency is different, wages are different, living costs are different , hence shouldn't matter how their markets and skilling operates.
on skills gap, let's take a recent example of mobile phone manufacturing, 5 years ago there were hardly any workers who were skilled in that domain, now apparently there are 5 lakh and 2.5 lakh incoming in next few years, that's 7.5 lakh workforce getting added to manufacturing vertical. this is to say, it is the market that decides the skill sets, and there will be a lag between market demand and skilling depending on the type of industry. when ever mobile manufacturing industry feel that they see value in manufacturing mobile components domestically, it might add another 5 lakh jobs. India mobile phone manufacturing is around 3.5 lakh crore domestic industry, a major chunk of this money is going to chin.
as you said there are approx 60 crore eligible work force, of which manufacturing sector will probably handle only 10 crores, there is an upper limit to which domestic manufacturing industry all combined can absorb. which goes back to my original point, it's the disposable income that decides the demand.
if we had FTA with eu and U.S, Indian manufacturing would have been geared to handle their demand as well. but we don't, so for now it's not 60 crores that we need to worry about, just about skilling for 6-10 crores in manufacturing and another 7-14 crores in service industry, organised and unorganised combined.
if your final thought on this discussion, is that India should move up the value chain to drive revenues and skills up, then we agree.
