India should set up a labour utilization fund to make workforce better skilled and cost-competitive and encourage businesses to hire more when low-skill labour is losing relevance due to artificial intelligence and automation, Indian Government think tank NITI Aayog has proposed. It sees a need for labour subsidy instead of capital subsidy for businesses. As social security benefits in India do not match those of developed nations, a dedicated policy and schemes to lower labour costs are needed to help bridge income inequality, NITI Aayog vice chairman Rajiv Kumar told a top Indian business daily.
The government’s technology upgradation fund (TUF) has been encouraging automation in the textile industry to enable it to compete with large production houses in countries like China. TUF, announced in 1999 and modified for continuation in the 2012-17 period, offers capital subsidy to the sector for adopting technology.
Similarly, the labour utilization fund doesn’t have to pay salaries but can be used for better training, for paying provident fund contribution and for covering the health costs, said Kumar. A policy objective of maximizing employment generation with focus on labour-intensive sectors like housing, construction, exports, garments, tourism, education and health should work, he added.