ABSTRACT
Modern civilisation is highly driven by technological progression. This realisation has compelled most economies in the world to undertake and to pursue appropriate strategies and policies to gear up technological change and productivity growth so that the economy can derive the resultant benefits on the acceleration of growth and employment. Technological change, sought by a host of factors such as educational development, skill formation, RampentityD investment and competitiveness, has therefore appeared to be the detrimental factor in accelerating the long-term growth of an economy. While technological progress accelerates growth, its impact on development, particularly on employment, has been ambiguous, because of its substitution effect on the employment level in the short term. Although the gradual creation of new jobs, as an indirect effect of technological change, is supposed to compensate for the substitution effect in the medium to long term, this ambiguity has still been predominant in the existing literature. The developing world largely pursued a strategy of import-substitution for industrialisation in the past by protecting economic activities within the economy and employment therein. Since the Second World War it was gradually realised that such a strategy neither accelerated the growth rate nor solved the employment problem of those economies which had mainly been suffering from higher poverty and unemployment for a long period of time. The strategy of liberalising industrial and trade policies has been considered to be an alternative approach by replacing the protectionary import-substitution policy pursued since the early 1970s in many countries in the world. Latin American countries from the developing world initiated this earlier than those of the south and southeastern economies. The experiences of such a reform have, so far, been mixed on employment in Latin American economies. However, this strategy played a successful role in accelerating growth in many Asian economies during the last two to three decades. India did delay in liberalising its economy and adopted a few reformatory measures during the late 1980s and started to pursue the strategy of liberalisation vigorously from the early 1990s. These measures include a gradual reduction of tariff and non-tariff barriers from trade flows, privatisation, disinvestment in the public sector, delicensing of industrial policies, de-reservation for small-scale industries, financial sector autonomy, full convertibility of currency, reduction of barriers on capital mobility, etc. All these reforms essentially were attempts to raise competitiveness, and thereby improve the level of technological progress, leading to a rise in the economic growth of the country. A higher growth further leads to an increase in demand for workers and therefore raises the employment level. In recent years, the Indian economy increased economic growth substantially, but did not experience any change in employment growth particularly in the formal sector. Many scholars have defined this phenomenon as ‘jobless growth’. Scholars tend to argue that the success of economic reform has been limited mainly by the labour market rigidity in the Indian economy. Labour legislations of the economy have been highly protective and provide sufficient fuel to the trade union activities functioning in the industrial sector soon after independence. Therefore, the rigidity of the labour market restricts the flexibility of employment and thereby leads to a drop in the rate of capital formation and technological change. This low rate has not been able to accelerate the decent and formal employment in the economy. As a result, a substantial reform in the labour market has appeared to be the immediate recommendation in order to reap the benefits from such a liberal economic environment. However, the traditional school, influenced by leftist ideology, still has been critical of the policies for economic liberalisation and identified the strategy as the principal reason behind poor performance in the labour market over the last two decades. This debate has prompted us to look at the effect of economic reform particularly on the technological progress and its transmission mechanism on the labour market in a typical developing economy with special reference to India. This work has identified many upcoming issues relating to the implication of economic reform and labour market functioning in the Indian economy, and some of those may contradict the conventional understandings.
