Answer:

The capital-to-labour ratio refers to the proportion of capital (machinery, tools, technology) relative to the amount of labour used in production. A rising ratio often signifies greater use of automation and technology. In India, where the labour force is abundant, an increasing capital-to-labour ratio could boost productivity but may reduce employment opportunities in the unskilled sector. This trend impacts economic growth, requiring a balance between technological progress and job creation.

Implications of an Increasing Capital-to-Labour Ratio in India’s Economic Growth:

• Productivity Boost: Increasing capital in production leads to higher productivity and output per worker, contributing to economic growth.
  For example: Use of AI in the IT sector has enhanced productivity by automating repetitive tasks, allowing skilled workers to focus on complex solutions, thus boosting IT services exports.
• Impact on Employment: A higher capital-to-labour ratio can reduce labour demand in low-skill sectors, leading to job displacement.
  For example: The textile sector in India saw automation reduce labour requirements in spinning and weaving, resulting in job losses despite productivity gains.
• Shift in Skill Requirements: Automation and advanced technologies require a more skilled workforce, shifting employment towards high-skill jobs.
  For instance: The National Skill Development Corporation (NSDC) launched programs to upskill workers for emerging sectors like AI, robotics, and data analytics, aligning with industry needs.
• Income Inequality: A higher capital-to-labour ratio can widen the income gap, as capital owners may gain more than workers, especially in capital-intensive industries.
  For instance: Automation in manufacturing increased profits for capital owners while limiting wage growth for labourers, deepening economic inequality.
• Economic Diversification: India’s shift towards capital-intensive sectors may slow the growth of labour-intensive industries, limiting rural employment.
  For instance: The IT and finance sectors thrive, but lack of focus on labour-intensive industries in rural India has slowed rural employment growth.
• Challenges for MSMEs: Small and medium enterprises struggle to adopt capital-intensive technologies, limiting their competitiveness and job creation potential.
  For instance: Many MSMEs in India lack access to affordable technology, stalling productivity and preventing them from scaling operations.
• Agriculture Sector Displacement: Automation in agriculture reduces labour demand, but manufacturing may not absorb displaced agricultural workers, causing unemployment.
  For instance: Mechanisation in agriculture reduced the need for manual labour, yet the manufacturing sector has not fully absorbed these displaced workers.
• Capital Investment in Manufacturing: Higher capital investment in manufacturing can improve competitiveness, but ensuring sufficient job creation remains critical.
  For instance: The Make in India initiative has attracted foreign capital in manufacturing, but there is a need to focus on job-intensive industries like textiles and electronics.

How Policymakers Balance Technological Advancements with Job Creation:

• Promoting Labour-Intensive Industries: Policymakers must incentivise sectors that require human labour alongside automation to sustain employment.
  For example: The Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) promotes employment generation in labour-intensive sectors by providing financial support to employers.
• Public-Private Partnerships for Skilling: Collaborations between government and private sectors are essential to align skilling efforts with industry needs.
  For example: The Skill India Mission develops curricula that match industry requirements, ensuring employability in advanced sectors like AI and robotics.
• Technology Support for MSMEs: Providing support for technology adoption in MSMEs can create a balance between automation and job creation.
• Adaptive Education Policies: Continuous updates to education policies can help prepare the workforce for future technological advancements.
  For instance: The National Education Policy (NEP) 2020 emphasises digital literacy and vocational training, ensuring the workforce adapts to emerging technologies.
• Labour Market Flexibility: Labour reforms should ensure both labour rights and flexibility to attract investments in labour-intensive sectors.
  For instance: India’s new labour codes simplify compliance, encouraging businesses to hire more labour while remaining competitive.
• Boosting Employment in High-Potential Sectors: Policymakers can focus on sectors with high growth and employment potential, such as tourism and logistics.
  For example: The Tourism sector, under initiatives like Dekho Apna Desh, is expected to create millions of jobs, helping absorb displaced workers from automation.
• Encouraging Green Jobs: Investment in green technology offers a sustainable path for economic growth while generating new employment.
  For example: The National Solar Mission is expected to create thousands of jobs in solar power installation and maintenance, helping to meet environmental and employment goals.
• Labour-Inclusive Technological Solutions: Policymakers should adopt technological solutions that complement rather than replace human labour, ensuring job creation.
  For example: E-commerce platforms use technology alongside human labour for last-mile deliveries, balancing automation with job creation in logistics.

India must ensure inclusive growth in its journey toward a technology-driven economy. By fostering labour-intensive industries, enhancing skilling initiatives, and maintaining policy flexibility, India can leverage its capital-to-labour ratio for sustained economic growth. A balanced approach will ensure job creation, preserve India’s demographic dividend, and secure long-term competitiveness in a globalised market.

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