Fourth industrial revolution and India's “employment problem”

Abstract

PurposeThis paper aims at assessing the impact of innovation on productivity as sustainable development can be attained primarily through non-resource-driven growth. Secondly, it also proposes to reflect on the rising capital intensity in the Indian industries as technology advancement, particularly in the light of the fourth industrial revolution, is expected to reduce the labour absorbing capacity of the industrial sector.Design/methodology/approachBased on panel data for different Indian firms in various groups of industries, this paper estimates TFPG and TE (following Cornwell et al. methodology) and assesses the impact of R&D expenditure on the performance indices. Secondly, it measures the capital intensity across various groups of industries to reflect on the “employment problem”.FindingsInnovation does not seem to enhance the performance index in a very significant manner across industry groups considered in the study. The lack of extensive evidence on impact of innovation on total factor productivity growth suggests that innovation does not necessarily result in technological progress while the need of the hour is to experience non-resource-driven growth on the one hand and employment growth on the other. The positive impact of innovation on efficiency as seen in the paper can be interpreted as the expenditure incurred to realize the potentiality of the technology which is possibly imported. However, capital accumulation is resulting in rapid productivity growth at the cost of employment.Research limitations/implicationsCapturing technological progress in terms of TFPG can be subjected to criticism.Practical implicationsPolicy implications for employment generation and inclusive growth are derived.Social implicationsThe study cautions us about the adverse implications in terms of employment growth.Originality/valueAssessing the impact of innovation on performance such as TFPG and TE is rather rare in the literature, and this paper tries to reflect on this aspect using the Indian firm-level data. Secondly, the trade-offs between productivity growth and employment growth are brought out distinctly in order to highlight the declining labour absorbing capacity of the industrial sector. This enables us to reflect on the adverse consequences of the fourth industrial revolution.