In a candid conversation with Venture Capitalist Asha Jadeja at the TiE Global Summit, Nobel Prize-winning economist Abhijit Banerjee explained what he sees as major potholes in India’s growth and policy issues that continue to keep its economy poor.
Abhijit Banerjee shared the 2019 Nobel Prize in Economics with his wife, Esther Duflo, and Michael Kremer for their exceptional approach to alleviating global poverty. An international professor at the Massachusetts Institute of technology, his mantra for alleviating poverty is through creating high-end jobs where money will trickle down to the people at the lowest rung.
As one of the brightest minds among the elite list of speakers at the TIE Global Summit, Abhijit Banerjee emphasised on rethinking India’s job creation trajectory and doing away with scepticism around foreign venture capital investment. In a session moderated by Asha Jadeja, a Silicon Valley-based venture capitalist, Banerjee said that India is going through a poor phase of the economy since 2012, and job creation at high and middle-level should be its priority.
Rethinking Job Creation
The author of ‘Poor Economics’ said that India has not performed well in most of the global indices, and even startups have failed to create many mid- and high-end jobs. “India has produced jobs in the last decade, but those jobs are low level. Like labourers in the construction business, food delivery boys, and other menial jobs, where the scope to develop skills is limited or negligible,” said Banerjee, “Such jobs are low paid, so they are irregular. The people involved in such jobs live a very low-standard life. They get fed up of living conditions, leave such jobs and migrate back to their villages.”
Banerjee said that irregularity at jobs hurt the economy, and India should spend on social support and residential infrastructure to help people involved in low-level jobs. He said that startups have created high-end jobs, but those are only a few. “There is no doubt startups are playing their role. But India needs more high-end job creation through startups.”
The Need to shed scepticism about Foreign Capital
When Ms. Jadeja asked about the capacity of startups to hire people in an atmosphere where the venture capital for entrepreneurs is at its lowest end, Banerjee advocated that the Indian government should give up being sceptical of venture capital coming from abroad. He said, “Venture capital into Indian startups is still limited. If giant Indian companies don’t want to spend much on venture capital in the COVID-19 world, let’s give more chances to international companies who want to have their footprints in India,” elaborating more on the subject, he said, “Seeing international venture capitalists through a sight of suspicion is a colonial mindset.”
Today, a lot of international organisations, mainly the big tech firms, are headed by Indians. Indian unicorns which have substantial international venture capital still have an Indian hold in their boards. Banerjee said sectors like exports can also play a key role in reviving the Indian economy. “Indian export industry needs to replicate the model of China. China’s exports are high and they have taken a substantial number of high and middle-level jobs to the low-rung cities. Unlike in India, where people from low-rung cities and towns are occupied in manufacturing only.”
The Impact of Technology on Job Creation
When asked which income group is the most affected after the introduction of artificial intelligence, Banerjee said it has directly impacted mid-level jobs. “I am speaking from America’s point of view. After AI was introduced to different sectors, there was hardly any difference at the top level. In some sectors, more jobs were created at a low level. But the middle-level jobs are most severely hit.”
Banerjee opines that in a country like India, sectors like BPOs can see the most jobs get axed because of AI. “AI is taking over BPO jobs in India. The automated call and mailing process is moving a lot of middle-level jobs out of the way.”
Speaking about his own projects, Banerjee said that he was working on computer-based education for the masses. “In India, there are shreds of evidence that technology has failed in imparting education to the lowest level. Like there are computers, but not skilled teachers in villages. Or, if there are teachers, they are expensive and unaffordable. I am working on a project where we can take advantages of computer-based education to the masses.”
The session concluded with Banerjee suggesting the gradual end of India’s decades-old protectionist policies and building a more open investment culture in a bid to create an entrepreneurial ecosystem that creates more mid and high-level jobs.