Industry News Skills Development

How to Create Jobs: Different strokes for different folks, say experts

Job creation
The debate over what India should focus on when it comes to jobs continues: 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.
Information Technology

CHALLENGES

Technological developments in this sector have led to a much higher level of automation. In that sense, the IT sector is bringing change to other sectors while also being impacted by those same changes. The big issue is the level of skill of the workforce rather than the number of people in it.

At the turn of the millennium, if a 100 per cent increase in revenues led to a certain increase in head count, the same increase in revenue today would require only half the corresponding increase in headcount-and this is going to reduce further. Less skilled workers may not be required in high numbers.

A lot of re-skilling is required for employees to remain relevant. However, some employees may not be capable of learning new skills. This could lead to a situation in which companies are hiring new employees while simultaneously letting existing employees go because of their weaker skills. That is another consequence of the continuously growing technology landscape.

Within the industry, there is a little bit of miscommunication or misrepresentation-that there are mass layoffs. That situation has not yet arrived. Even if companies let go of one per cent of employees on account of performance, the industry as a whole would shed 40,000 people a year. But five per cent are being hired. There are newer skills and newer talent requirements.

WHAT NEEDS TO BE DONE

We need to look at increasing technology jobs in non-technology sectors. Technology is being heavily deployed in areas like healthcare and manufacturing.

The government’s national skills programme is not adequately forward-looking. We need [to develop] skill sets that will be required five years hence.

People should be trained at sufficient scale, quality and speed. That will happen only when technology is used for skilling itself, like online programmes supplemented with classrooms, but essentially relying on online content.

There is a need to create jobs, but existing jobs also have to evolve so that we can retain our competitive edge. Technology has seeped into almost every sector-people need to be trained.

Training will acquire momentum if those who are hiring are willing to pay a premium for those who are trained.
Manufacturing

CHALLENGES

India is going through a transition from a predominantly cash-based economy to a formal economy. This will cause some pain, but there are no quick-fix solutions.

Jobs are becoming interconnected, so the fortunes of one sector are dependent on other sectors. For example, banking and financial services-be it industrial or consumer finance or general insurance-are related to manufacturing. There are also a lot of after-sales service and repair jobs related to manufacturing. The services industry cannot grow without growth taking place in manufacturing.

With demand for growth in the IT services sector having tapered off, we need to look at new avenues of growth. The IT sector is not going to be a big job creator any more.

WHAT NEEDS TO BE DONE

A focus on infrastructure and construction will create manufacturing opportunities. However, it is impossible to create a large number of jobs in the short term.

If the government wants to create jobs in the long term, it should take on a massive infrastructure building programme. The recent railway footbridge tragedy in Mumbai points to the kind of infrastructure development that needs to be undertaken on a war footing.

You can’t resist technology-it is better to increase its adoption. In the case of car companies, technology has not reduced employment.

When a product becomes better in terms of cost and quality, sales increase, creating more jobs. At Maruti Suzuki, we have introduced a lot of technology but have not reduced manpower.
Energy

CHALLENGES

Financial viability of state distribution companies which suffer large losses across the distribution system for technical and commercial reasons.

Fuel supply is another major concern.

Power sector exposure is seen at Rs 2.3 lakh crore, or 35 per cent of banks’ stress level

Demand for power is estimated to remain tepid at for the next three years

Debt service obligation of power sector will suffer

WHAT NEEDS TO BE DONE

The government needs to work on revival of demand, relief to stressed assets and ensure that sanctity of contracts are honoured. This will result in increased demand for power , and ensure investments into the sector.

India requires over $1.5 trillion in investments in the next 10 years. If the country has to grow at 7 per cent per annum, the government needs to push policy measures for creating an enabling environment for increased capital flows and better the performance of the infrastructure sector. Innovative approaches to increase private funding, and government initiatives such as project-acceleration programmes will act as the necessary stimulus.

CHALLENGES

Back to back disruptions-GST, the Real Estate (Regulation & Development) Act and the new bankruptcy norms-have shaken things up a great deal. Individually, these policies bring a broad range of benefits, but [the government] can’t create disruption after disruption and expect businesses to still put in a great performance.

In real estate, there has been a 75 per cent drop in demand for homes in certain pockets, such as Gurugram. There are hardly any new projects coming up in some areas. Considering that real estate employs 1.5 million workers, this is a grave situation.

In certain areas, as much as 30 per cent of real estate businesses used to run on cash. Here, the impact of demonetisation was especially severe. The secondary market has been eliminated.

In some cases, the issue is unavailability of labour. Many are getting into social schemes such as MGNREGA, which leads to a dearth of labour.

WHAT NEEDS TO BE DONE

India has to follow China’s lead in development of infrastructure-railway stations, metros, ports and national highways. In China, growth worth 2.5 per cent of GDP came from housing, 2 per cent from manufacturing and another 2 per cent from infrastructure. A focus on construction will also boost the steel and cement sectors.

Clarity is needed regarding companies that are going through insolvency.

The tax rate on affordable houses is 32 per cent, which is a disincentive for buyers. This needs to change.

A big issue is that bank credit has fallen by 50 per cent. Credit is available, but is not being availed of. Companies’ boards are not giving approvals for new projects.
Retail

CHALLENGES

Contrary to certain other sectors, we have seen job growth in organised retail. The formalisation of the economy is helping this sector and is creating more avenues for job creation.

The sector is going through a transition. Companies such as ours belong to the new ecosystem. Retail is a major job creator, since you do not need to be a graduate to get a job. Even a person who has [only completed school] can take up a job in retail and get on-the-job training.

WHAT NEEDS TO BE DONE

Companies need to improve efficiency and reach out to customers. Indian companies have the ability to build brands and products and to understand Indian consumers on their terms.

If India reaches consumption levels of $1.5 trillion, that will create jobs across the spectrum of retail, distribution, warehousing and logistics. We can turn our vast population into an advantage.

The next round of growth will come from consumption, so the government should encourage consumption growth.

We need to train people on the job so that they pick up skills fast.

Banking

CHALLENGES

The jobs situation in public sector banking is positive. State-owned banks are still recruiting, as the sector is creating new avenues. In our case, even after the merger of some associate banks with SBI, there have been no layoffs.

Organised industry is not creating as many jobs as it was earlier, so it has become imperative to look at new avenues of job creation.

In the past, the results of the infrastructure and construction sectors have been marred by time and cost overruns.

WHAT NEEDS TO BE DONE

One segment that can boost economic activity and job creation in a major way is construction. For this, we need to have well-conceived projects, where approvals for land and linkages are already in place. We need to ensure that such projects are viable. Banks are still ready to finance viable projects.

Extending help to small entrepreneurs is also critical. SBI is holding camps for its Mudra loans, which are targeted at small entrepreneurs. It is also working with financial experts who can handhold promising entrepreneurs through their projects. This will create new jobs in the entrepreneurial space.

In the banking sector itself, there is a rising demand for business correspondents. SBI has trained 250,000 people in the last fiscal year, with a placement rate of 49 per cent. SBI is also planning to tie up with the CII to augment its rural training centres in backward districts across the country.

Agriculture

CHALLENGES

Agriculture remains an almost wholly unorganised sector. Employment conditions remain so pathetic that workers moving from this sector to unorganised non-agricultural sectors always find an improvement in employment conditions-wages are always higher.

The excess supply of agricultural labour shows up not as high unemployment but as underemployment of a large section of the employed.

Casual wage employees, for example, cannot find work 10-20 per cent of the time.

There are altogether 104 million surplus workers in this sector that are seriously underemployed. If they were employed in different sectors, agricultural productivity would rise and increase wage rates of non-surplus workers.

The wages for casual labour in construction have been and remain much higher than in agriculture, in both the organised and unorganised segments. Casual labourers, therefore, have much to gain by moving from agriculture to construction.

WHAT NEEDS TO BE DONE

Eight million jobs need to be created per year for the next 15 years to tackle unemployment and underemployment in agriculture. This is aside from an additional 8 million jobs required annually for fresh entrants to the work force. Workers in this sector also need to be educated so that they can find better employment.

MGNREGA made it obligatory for the government to provide 100 days of employment every year at a fixed minimum wage to members of rural households. About 5.1 crore households were provided employment during 2016-17. Even though implementation has been far from perfect, it is widely agreed that schemes under MGNREGA helped the poor by providing employment and by increasing the wage rate for casual labour.

The objectives of MGNREGA included the creation of a social safety net via a fallback employment option and by the development of infrastructure (irrigation and water management systems and road networks in particular), which could stimulate growth of agriculture and thus strengthen the rural economy. The continuation of such policies would go a long way in mitigating underemployment and unemployment among agricultural workers.

Infrastructure & Construction

CHALLENGES

There is a distinct slowdown in some sections of the infrastructure sector. While areas like power, bridges, dams, roads and urban infrastructure development have shown an increase in the order books, the severest slowdown has been observed in the thermal energy sector.

There are several process-related delays contributing to the slowdown in this sector-for instance, land acquisition delays, slow pre-tendering process.

On average, construction and infrastructural projects have suffered from time and cost overruns in the 20-25 per cent range. In some cases, that goes up to 50 per cent. Other problems relate to weak dispute resolution processes and inefficient performance management.

Slow progress on the Public-Private partnership model.

OPPORTUNITIES

There has been a substantial increase in the order books of companies that are working in certain sectors, including railways, roads, electricity transmission and distribution, urban infrastructure and irrigation.

Over the last couple of years, mid-cap construction companies have seen their order books grow 2.5 times their turnover.

WHAT NEEDS TO BE DONE

The government chose the right strategy-pushing public expenditure in 2015-16. But that alone cannot fill the shortfall of private investment. Public-private partnerships should be encouraged.

The finance minister had announced an institution-3P India-with an allocation of Rs 500 crore to help in mainstreaming public-private partnerships. The Kelkar committee has also made its recommendations on revisiting and revitalising the PPP model.

There is no fear of automation displacing jobs, but recovery could take three to five quarters-capacity utilisation has to go up from the current 60-65 per cent.

Textiles

CHALLENGES

We have a lot of catching up to do with China, which is the leader in textiles. Exports of textile products from China are to the tune of $280 billion, compared to $40 billion from India-yarn, cotton and fabric included. China’s competitive framework has been developed by its foreign exchange rate, productivity, cost of labour, utility costs and costs of raw materials, among others.

While the rupee has appreciated from 68 per dollar to 63 per dollar, China has been depreciating the yuan. China has also incentivised production and has a huge productive workforce.

There have been issues with GST paid up front before exports, but the government is addressing that issue.

Some units would have been affected by GST-it involves migration from a non-compliant to a compliant model. When you have to become part of an honest system, some churn is inevitable.

WHAT NEEDS TO BE DONE

Maintain a healthy exchange rate beneficial for exporters.

Sign a free trade agreement with the European Union (EU), as Bangladesh has done, thus getting preferential treatment and tax benefits for textile exports to the EU.

Fixed term contracts have been allowed, which provides flexibility to increase or decrease the workforce depending on work.

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