The Jobs Precipice

Ways out of a grave cri­sis *per an­num

India Today - - INSIDE - BY M.G. ARUN, SH­WETA PUNJ & AJIT KU­MAR JHA

In­dia needs 16 mil­lion new jobs a year for the next 15 years. What can the gov­ern­ment do to fix the cri­sis? Ex­perts weigh in

The year was 2013. Naren­dra Modi, the prime min­is­te­rial can­di­date of the BJP, was on a cam­paign­ing spree, at­tack­ing the UPA gov­ern­ment on cor­rup­tion and non-per­for­mance and promis­ing rad­i­cal trans­for­ma­tion in all spheres if voted to power. At a rally in Agra, he made a prom­ise that is re­turn­ing to haunt him. “If the BJP comes to power,” he thun­dered, “it will pro­vide one crore jobs which the UPA gov­ern­ment could not de­spite an­nounc­ing it be­fore the last Lok Sabha polls.”

Cut to 2017. In May, a Labour Bu­reau quar­terly re­port on em­ploy­ment noted that a mere 230,000 jobs were cre­ated in eight key sec­tors from April-De­cem­ber 2016, a far cry from Modi’s 2013 prom­ise. This, when over a mil­lion as­pi­rants en­ter the In­dian job mar­ket ev­ery month. Fur­ther, the Cen­tral Sta­tis­tics Of­fice said GDP growth slipped to 5.7 per cent in the April-June quar­ter, the low­est in three years, with man­u­fac­tur­ing grow­ing at a five-year low of 1.2 per cent, from 10.7 per cent a year ago. Core sec­tor growth, on the other hand, re­bounded to a five­month high in Au­gust to 4.9 per cent and man­u­fac­tur­ing ac­tiv­i­ties grew for the sec­ond con­sec­u­tive month in Septem­ber. Small con­so­la­tion, though, for job seek­ers: the Cen­tre for Mon­i­tor­ing In­dian Econ­omy es­ti­mates that about 1.5 mil­lion jobs were lost dur­ing Jan­uary-April 2017, the first quar­ter af­ter the Novem­ber 2016 de­mon­eti­sa­tion ex­er­cise. Worse, In­dia is set to see a fur­ther 30-40 per cent re­duc­tion of jobs in man­u­fac­tur­ing com­pared with last year, ac­cord­ing to re­cruit­ment firm TeamLease Ser­vices.

With a gen­eral elec­tion in less than two years, the dearth of jobs could prove the Achilles’ heel of the Modi gov­ern­ment even as it is strug­gling to pump prime a stag­ger­ing econ­omy, rein in the high prices of es­sen­tial goods and rec­tify ano­ma­lies in the Goods and Ser­vices Tax (GST). As the clam­our for a stim­u­lus and lower in­ter­est rates grows louder, the Re­serve Bank of In­dia, in its fourth bi­monthly mon­e­tary pol­icy state­ment on Oc­to­ber 4, chose to main­tain sta­tus quo on the repo rate, and re­it­er­ated the need for re­cap­i­tal­is­ing banks. The gov­ern­ment, mean­while, is hope­ful of fill­ing va­can­cies in the cen­tral and state gov­ern­ment, in­clud­ing, sig­nif­i­cantly, in 244 PSUs. There is also talk of ex­pand­ing the Ap­pren­tice­ship Act, which reg­u­lates the train­ing of ap­pren­tices in in­dus­try and sets the min­i­mum age of their in­duc­tion at 14 years. The gov­ern­ment had ear­marked Rs 10,000 crore to train five mil­lion ap­pren­tices by 2020, but is hope­lessly be­hind tar­gets. There’s talk of sharp­en­ing the gov­ern­ment’s fo­cus on the scheme, as also a ramp-up in pub­lic ex­pen­di­ture on in­fra­struc­ture.

A MOUNT­ING CHAL­LENGE

The Op­po­si­tion is los­ing no time haul­ing up the gov­ern­ment over its fail­ure to cre­ate jobs. “Cur­rently, we are not creat­ing enough jobs,” Congress vice-pres­i­dent Rahul Gandhi said at the Uni­ver­sity of Cal­i­for­nia in Berke­ley re­cently. “Thirty thou­sand new young­sters are join­ing the job mar­ket ev­ery sin­gle day, yet the gov­ern­ment is creat­ing only 500 jobs a day,” he said, even as he ad­mit­ted that the UPA gov­ern­ment too faced the same chal­lenge.

Some­what cor­nered, Modi, ad­dress­ing com­pany sec­re­taries in New Delhi on Oc­to­ber 4, said that the gov­ern­ment was com­mit­ted to re­vers­ing the set­back to growth in the April-June quar­ter.

“In­dia could have been sail­ing smoothly at 10 per cent plus growth, but for the spate of dis­rup­tions, in­clud­ing de­mon­eti­sa­tion, GST, RERA and the new bank­ruptcy norms,” says Niranjan Hi­ranan­dani, man­ag­ing di­rec­tor of the epony­mous Mum­bai-based real es­tate group. While in­di­vid­u­ally they may carry a broad range of ben­e­fits, to­gether they have in­flicted col­lat­eral dam­age much more than was an­tic­i­pated. The real es­tate sec­tor, which cre­ates 1.5 mil­lion jobs, has been among the worst hit. Home sales fell 26 per cent in the Delhi-Na­tional Cap­i­tal Re­gion in the first half of 2017 as de­mand nose­dived post-de­mon­eti­sa­tion, ac­cord­ing to real es­tate con­sul­tants Knight Frank. This, they add, de­spite a 20 per cent cor­rec­tion in prices in the 18 months to June. Un­sold in­ven­tory in the Delhi-NCR mar­ket stood at a stag­ger­ing 180,000 units—the high­est in the coun­try—and it will take de­vel­op­ers four-and-a-half years to sell it.

Other sec­tors have suf­fered too. In the past three years, as many as 67 tex­tile units are re­ported to have shut down across the coun­try, ren­der­ing 17,600 peo­ple job­less. In Novem­ber 2016, In­dia’s largest en­gi­neer­ing firm, Larsen & Toubro, sacked 14,000 em­ploy­ees, or 11.2 per cent of its work­force, as busi­ness slowed down and digi­ti­sa­tion left many em­ploy­ees re­dun­dant. In­dia’s sto­ried IT com­pa­nies, in­clud­ing Tech Mahin­dra, Wipro and Cog­nizant, laid off tens of thou­sands of staff as global busi­ness grew tougher. The bank­ing sec­tor wasn’t spared ei­ther. HDFC Bank laid off 11,000 work­ers over three quar­ters to March 2017 cit­ing digi­ti­sa­tion. Yes Bank elim­i­nated more than ten per cent of its work­force—2,500 jobs— cit­ing in­creased re­dun­dancy, poor per­for­mance and the im­pact of digi­ti­sa­tion. Ac­cord­ing to the em­ploy­ment out­look re­leased by the Man­power Group for the sec­ond quar­ter of 2017, hir­ing in­ten­tions in cor­po­rates are five per­cent­age points weaker com­pared with the pre­vi­ous quar­ter and 20 per­cent­age points lower yearover-year, re­sult­ing in the weak­est fore­cast since the sur­vey be­gan in 2005. In the in­for­mal sec­tor, on which there is in­suf­fi­cient data, the scene could be worse, as lakhs of work­ers go job­less as con­struc­tion pro­jects dry up given the un­prece­dented in­vest­ment slow­down.

The re­cent pol­icy dis­rup­tions apart, the econ­omy was go­ing through a rough patch al­ready. Man­u­fac­tur­ing was stut­ter­ing de­spite the gov­ern­ment’s high-deci­bel ‘Make in In­dia’ cam­paign. Ac­quir­ing

The mood in the gov­ern­ment has shifted fi­nally from blam­ing paucity of data to ac­knowl­edg­ing that lack of jobs is a real prob­lem

land for set­ting up man­u­fac­tur­ing units con­tin­ued to be tough, even as the Cen­tre passed on the onus of fram­ing land ac­qui­si­tion laws to in­di­vid­ual states. Pri­vate in­vest­ment growth has been fall­ing since 2012, and was in the neg­a­tive ter­ri­tory for much of 2016. The coun­try still ranked a low 130th in the World Bank’s ease of do­ing busi­ness rank­ings in Oc­to­ber 2016.

EM­PLOY­MENT PRECIPICE

In­dia’s job chal­lenge is stag­ger­ing, to put it mildly. The coun­try needs to cre­ate 16 mil­lion jobs a year for the next 15 years to take ad­van­tage of its “de­mo­graphic div­i­dend”, ac­cord­ing to the In­dia Em­ploy­ment Re­port 2016 au­thored by Ajit K. Ghose, an hon­orary pro­fes­sor with the In­sti­tute of Hu­man De­vel­op­ment in New Delhi. A work­ing group led by Ghose is help­ing the NITI Aayog chart out a strat­egy and vi­sion for the gov­ern­ment to tackle the jobs chal­lenge by 2022.

Ex­perts warn that cat­e­goris­ing jobs ac­cord­ing to sec­tors may be mis­lead­ing, es­pe­cially when tech­nol­ogy has seeped into all spheres of ac­tiv­ity in a big way. “Job growth in ev­ery sec­tor is de­pen­dent on the other,” says R.C. Bhar­gava, chair­man of Maruti Suzuki, In­dia’s largest car maker. Ser­vices, for in­stance, in­clud­ing bank­ing and in­sur­ance, can­not grow with­out growth in man­u­fac­tur­ing. IT and IT-re­lated ser­vices too have ma­jor clients from the man­u­fac­tur­ing sec­tor. How­ever, the sec­tor has seen ne­glect for decades, so much so that in some key ar­eas like tex­tiles, In­dia has ceded its lead­er­ship to coun­tries such as Bangladesh and Viet­nam. TeamLease, in an in­ter­nal as­sess­ment of its over 2,500 cor­po­rate clients, found that en­try-level jobs are at the high­est risk as com­pa­nies con­tinue with their cost-cut­ting mea­sures amid con­cerns over low growth. Adding to the man­u­fac­tur­ing woes is the im­ple­men­ta­tion of new dig­i­tal tech­nolo­gies like the in­ter­net of things, cloud com­put­ing and ar­ti­fi­cial in­tel­li­gence in the man­u­fac­tur­ing process, mak­ing tra­di­tional jobs ob­so­lete. Th­ese tech­nolo­gies, along with a squeeze in ser­vices, are af­fect­ing IT jobs too.

How­ever, changes in the IT sec­tor have been grad­ual, not abrupt, be­lieves R. Chan­drasekhar, pres­i­dent of in­dus­try body Nasscom. “If at the turn of the mil­len­nium, a 100 per cent in­crease in rev­enue led to a 100 per cent in­crease in head count, to­day, such an in­crease in rev­enue would re­quire only half an in­crease in head­count,” he says. Re­ports of mas­sive lay­offs in the IT sec­tor, he feels, is a ‘mis­rep­re­sen­ta­tion’. “Even if one per cent of em­ploy­ees are let go on ac­count of per­for­mance, the in­dus­try as a whole would be shed­ding 40,000 peo­ple a year. But five per cent are be­ing hired.”

Yo­gesh Misra, vice-pres­i­dent, Thomas As­sess­ments, a tal­ent as­sess­ment firm, says hir­ing fore­casts of com­pa­nies could have hit a low. “In­creas­ingly, we are see­ing de­mand for more skilled jobs. Fif­teen years ago, Gen­pact was hir­ing large num­bers for its voice-call­ing jobs; they have since been re­placed by chat-bots,” he says. Sales jobs are dry­ing up, and peo­ple are mov­ing to on­line sell­ing, dig­i­tal mar­ket­ing. En­trylevel jobs have moved to Tier II and III cities, where real es­tate is cheaper, he adds.

Hitesh Oberoi, co-founder of naukri. com, ex­plains that while ev­ery­body is lament­ing the IT slow­down, the sec­tor is creat­ing 2.3 times the jobs it was do­ing 10 years ago. Com­pa­nies have tripled in size, and they are hir­ing since there is at­tri­tion.

“How­ever, sec­tors like con­struc­tion, real es­tate, power, en­ergy, in­fra­struc­ture are de­stroy­ing jobs, not creat­ing them. There has been a 30 per cent de­cline in job cre­ation since 2007-08 (in th­ese sec­tors),” he says. Real es­tate and tele­com are markedly down in hir­ing, while jobs are be­ing cre­ated in health­care, ed­u­ca­tion, hos­pi­tal­ity and travel (see graphic on hir­ing trends). “There are growth sec­tors, sec­tors with tem­po­rary slow­down and sick sec­tors such as man­u­fac­tur­ing” Oberoi adds.

SHORT­CUT IS NO SO­LU­TION

Given the pain in the econ­omy, how do we re­vive growth? Ex­perts rec­om­mend a three-pronged so­lu­tion: short, medium and long term. Steps at the macroe­co­nomic level—mea­sures to boost con­sump­tion, re­vive ex­ports, im­prove pri­vate in­vest­ment—should be com­ple­mented with stim­uli for spe­cific sec­tors. Some say that in the short run, only re­lief pro­grammes (spe­cial em­ploy­ment schemes such as the Ma­hatma Gandhi Na­tional Rural Em­ploy­ment Guar­an­tee Act or MGNREGA), rural in­fra­struc­ture-build­ing pro­grammes in roads, hous­ing and toi­let con­struc­tion can be im­ple­mented. Other mea­sures rec­om­mended in­clude low­er­ing of tax rates across the board, in­clud­ing cor­po­rate tax rates, re­viv­ing the PPP (pub­lic-pri­vate part­ner­ship) model in in­fra­struc­ture, and long-term mea­sures such as eas­ing the land ac­qui­si­tion process.

Short-term job cre­ation looks near-im­pos­si­ble, Bhar­gava feels. “We have been fo­cus­ing on the wrong kind of man­u­fac­tur­ing for 60 years, and will have to pay the price,” he says. In the medium to long term, the growth strat­egy it­self needs to be re­jigged. Many be­lieve In­dia should fol­low China’s model in de­vel­op­ing in­fra­struc­ture—rail­way sta­tions, met­ros, ports, na­tional high­ways. “In China, a growth of 2.5 per cent in GDP came from hous­ing, 2 per cent from man­u­fac­tur­ing and an­other 2 per cent from in­fra­struc­ture,” says Hi­ranan­dani. But that needs pos­i­tive in­vestor sen­ti­ment, cur­rently miss­ing in In­dia. Bank credit has fallen by 50 per cent, adds Hi­ranan­dani. In many cases, credit is sanc­tioned but not availed of. New pro­jects are not com­ing up as pri­vate in­vest­ment is dry­ing up. The role of the pri­vate sec­tor in hous­ing needs to be en­cour­aged, as the gov­ern­ment can­not do it all. “Fo­cus on con­struc­tion will also boost the steel and ce­ment in­dus­try. We need to fol­low the rest of the world in de­vel­op­ment, not the US,” Hi­ranan­dani adds. He also rec­om­mends greater clar­ity on com­pa­nies go­ing through in­sol­vency, since the pub­lic has its money stuck in th­ese pro­jects.

Con­struc­tion and in­fra­struc­ture can boost eco­nomic ac­tiv­ity and jobs sub­stan­tially, but they have been marred by time and cost over­runs. “We need well­con­ceived pro­jects,” says Arund­hati Bhat­tacharya, chair­man of the State Bank of In­dia, the coun­try’s largest lender. Banks are still ready to fi­nance vi­able pro­jects, she adds. How­ever, as crit­i­cal as sup­port­ing gi­ant pro­jects is ex­tend­ing help to small en­trepreneurs. SBI, on its part, is hold­ing camps for its Mu­dra loans for the small en­tre­pre­neur, and is work­ing with fi­nan­cial ex­perts who can hand­hold promis­ing en­trepreneurs through their pro­jects. In bank­ing it­self, there is ris­ing de­mand for busi­ness cor­re­spon­dents, and SBI has

trained 250,000 job as­pi­rants in the last fis­cal, with a place­ment rate of 49 per cent. It is also plan­ning to tie up with the Con­fed­er­a­tion of In­dian In­dus­try to aug­ment its rural train­ing cen­tres. Ex­perts say re­cap­i­tal­i­sa­tion of banks can also help them lend to busi­nesses, given that bad loans to the ex­tent of Rs 7.7 lakh crore (till March 2017) have weak­ened their ca­pac­ity to lend.

SHARP­EN­ING SKILLS

In­for­ma­tion tech­nol­ogy is an­other sec­tor that is los­ing its sheen as a sig­nif­i­cant job provider, with mar­kets such as the US be­com­ing more pro­tec­tion­ist. Tech­no­log­i­cal ad­vances are also ren­der­ing the work force ob­so­lete at a faster clip, as clients de­mand staff with ex­per­tise in cut­ting-edge tech­nol­ogy. Nasscom’s Chan­drasekhar says the time has come to look at tech­nol­ogy jobs in non-tech­nol­ogy sec­tors. More­over, skilling ini­tia­tives have to be ramped up at the level of pri­vate firms as the gov­ern­ment’s na­tional skills de­vel­op­ment pro­gramme is not for­ward-look­ing enough. “The right kind of per­son for the job will come only when we use tech­nol­ogy for skilling it­self, such as on­line pro­grammes sup­ple­mented with phys­i­cal in­fra­struc­ture,” he says.

Go­drej group chair­man Adi Go­drej goes on to add that “skilling and train­ing work in tan­dem with de­mand,” ex­plain­ing how the econ­omy must pick up for more jobs to be cre­ated. To give the econ­omy that push, he re­minds the gov­ern­ment of “its prom­ise to re­duce cor­po­rate tax rates”.

Maruti’s Bhar­gava has a dif­fer­ent take. “In the case of car com­pa­nies, tech­nol­ogy has not re­duced em­ploy­ment. When a prod­uct be­comes bet­ter in terms of cost and qual­ity, sale in­crease, creat­ing more jobs.” Sim­i­larly, naukri’s Oberoi is bet­ting on digi­ti­sa­tion, cit­ing the role of e-com­merce in re­viv­ing re­tail. The for­mal­is­ing of the econ­omy is help­ing re­tail play­ers and creat­ing jobs in new cat­e­gories, says Kishore Biyani, chair­man of the Fu­ture Group. This could be the right time to boost con­sump­tion through low­er­ing in­ter­est rates or giv­ing gov­ern­ment sub­si­dies to cer­tain

busi­nesses. “The next round of growth will come from con­sump­tion,” he says.

IN­FOR­MAL JOBS IN PERIL

How­ever, re­viv­ing the in­for­mal sec­tor re­mains the big­gest chal­lenge. For one, it’s im­pos­si­ble to gauge the ex­tent of job­less­ness given paucity of data which also im­pedes the gov­ern­ment’s ef­fort at tar­geted in­ter­ven­tion. Within the gov­ern­ment, how­ever, there is a clear shift from dis­miss­ing job­less growth con­cerns and blam­ing patchy data col­lec­tion to ac­knowl­edg­ing that un­em­ploy­ment and job cre­ation are real is­sues. “There is sim­mer­ing dis­con­tent wait­ing to ex­plode that we must pre­vent. We must act now,” says Ra­jiv Ku­mar, vicechair­man of NITI Aayog.

Economists and pol­icy ob­servers say job losses as well as the slow­down in job cre­ation has been the most se­vere at the grass­roots level post de­mon­eti­sa­tion and GST com­pli­ance chal­lenges, and spurring ac­tiv­ity there would have a ‘trickle-up’ ef­fect. Pub­lic em­ploy­ment gen­er­a­tion pro­grammes have been a ma­jor tool for creat­ing ad­di­tional jobs. The gov­ern­ment has also in­creased bud­getary al­lo­ca­tions for anti-poverty pro­grammes and em­ploy­ment gen­er­a­tion schemes to sup­ple­ment job cre­ation. The high­est ever al­lo­ca­tion un­der the MGNREGA was made dur­ing 2017-18. As per data, about 51.2 mil­lion house­holds were pro­vided em­ploy­ment dur­ing 2016-17.

The larger de­bate con­tin­ues to be over what In­dia should fo­cus on: man­u­fac­tur­ing or ser­vices. Growth in the re­cent pe­riod has been driven by ser­vices, which in it­self was ow­ing to sub­stan­tial in­flows of for­eign fi­nance. Many be­lieve In­dia needs rapid man­u­fac­tur­ing growth (and, cor­re­spond­ingly, man­u­fac­tur­ing-led growth) fu­elled by both ex­port growth and ex­pan­sion of the do­mes­tic mar­ket. Ex­port growth (and thus growth of ex­port in­dus­tries) will re­quire ex­change rate man­age­ment and some re­form of tax and tar­iff struc­tures, they say.

Jobs will re­main a thorn in this gov­ern­ment’s side, one it needs to deal with be­fore 2019.

AFTAB ALAM SID­DIQUI

SAY Q FOR EM­PLOY­MENT The rush at a job fair in Patna

VI­VAN MEHRA

TECH II Tech­nol­ogy isn’t af­fect­ing jobs in the auto sec­tor

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