India, Asia’s third biggest economy has all indicators pointing to strong economic growth. But the fact is that the fastest growing Indian economy is struggling in vain to convert the speedy economic growth into employment gain, writes Dr Lakshmi Mohan, Director, ITM Business School.
India is a country where nearly close to 1.6 crore people enter the workforce every year. The World Bank has said that to maintain a stable employment rate, India needs to create about 8 million jobs each year. Opening up the economy, encouraging foreign capital to flow, generation of wealth and creating business opportunities are opinions offered by several analysts to improve the current apathy. Demonetisation and GST have compelled corporates to formalise which can open up restructuring of organizations. Crucial sectors like IT, BFSI and Telecom can be seen undergoing major shifts. Telecom sector has rendered 75,000 jobless, owing to the onslaught of Reliance Jio and another 40,000 people are estimated to be out of jobs. Banks are on digital transformation, cutting jobs that technology has taken over. This year there have been convergences of many disruptions that have shaken up the job scenario.
The expectation of a proportionate increase in job opportunities to GDP has turned out to be a disappointment. ILO has predicted that in the year 2018, unemployment rate will remain at 3.5 percent and further 77 percent of them would come under vulnerable category (self-employed or family run establishments).
If comparisons have to be made, employment had increased by 2% in the 80’s when GDP growth was 4%, while today GDP growth to employment growth ratio is as low as 0.1%. It is not surprising that unemployment among graduates is approximately 16 percent. New investment projects fell by 38.4% and expected foreign direct investments dropped by 15% according to CMIE data. With low buying demands and falling capacity utilisation, the economy has not been an encouraging scenario thus resulting in stunted job creation. Factors such as erratic monsoon, rising crude oil prices, sliding rupee value, exiting foreign investors have added to the agony. Other glitches pointed out which are hampering progress are glacial economic reforms, weak banking sector, stringent labour laws and faulty education system that ignores skill development.
GDP versus Job Opportunities
Gross Domestic Production or GDP is total value of goods and services produced in a fiscal year. Rise in demand or inflation can increase value of goods. At the same time production increases either because of mechanization or job growth. So in simple terms we may consider GDP growth to increase job growth. In fact Okun’s law clearly states that one percent increase in unemployment makes GDP fall by 2%. But GDP growth may not wholly guarantee job creation. For instance, a company that had requirement for 10 customer service representatives is appointing none as the services will be rendered by chat bots. Mechanization has snatched jobs or replaced humans. The production has increased but not led to job increase. The GDP too has increased but job opportunity is not visible.
Unfortunately, huge wealth in the hands of a few, and hundred millions of middle class is what describes our economy today. Privileged few reap benefits of rising abundance. Inequality has risen from 81.3% in 2013 to 85.4% this year according to Credit Suisse. Economic growth has to be inclusive and would not make sense if it leaves people out. It is said that growth in employment opportunities have not grown to the extent of educated Indians who are age eligible to be part of the work force, thus resulting in unemployment on the rise, despite India sparkling in the slowing global economy. Economists are of the opinion that more work is being carried out by fewer employees, thus creating a crunch in jobs per unit of GDP. Chief economist at Crisil, Mr Joshi has indicated that economy has become less labour-absorbent. This contradicts the growth that India has been experiencing, so the pertinent question is whether growth itself is overstated or it is in less labour-intensive sectors or the correct data is unavailable. Job creation has to also be supported by banks and other investing institutions which is lacking. Ease of doing business in India is a big question which has deterred several organisations to move to friendlier countries with their business proposals thus leaving little scope for job opportunities. Labour reforms have not been progressive adding to the problem of unemployment. Make in India gave Indians great promise of 15 Lakh crore of investment from both Indian and foreign investors, but these projects have not moved beyond paper. Make in India is an excellent venture but yet to create job opportunities.
Campus hiring has become selective as companies are vying quality candidates from Management Schools. At ITM Business School there seems to be a rise in companies visiting campus to select students. The same holds true for institutions that have reputation and quality like the IIMs, ISB etc. While we are witnessing conglomerates laying off employees who have been working with them for long, they seem to be having an appetite to pick up from reputed B Schools. The pre-placement offers after internships too have seen a drastic rise in comparison to previous years. Companies are shifting their focus from mass hiring to handpicked candidates with special acumen in emerging technologies.
AI, Digital, Sales and Analytics would rein the job scenario for 2018. Upskilling and continuous learning and professional development are the mantra to remain ahead in today’s corporate curve. As we see technology is playing truant in stealing jobs but keeping pace with ever changing business requirements is a way to keep oneself in demand. Workplace flexibility is increasing, and greater importance is laid on performance rather than experience, which is leading to layoffs of senior employees. Job search mechanisms have improved and at the same time there is a need to key in words in the Resume aligning to job descriptions, which can catch short attention span of employers. Volume to value is what companies are looking at while hiring and the best way to beat the blues is relentless efforts towards employability keeping industry trends in view. (Views expressed by author are a personal opinion)