There Are No Jobs
Neither PM’s ‘Make In India’, nor growing FDI inflow has been able to overturn the dwindling hiring intent in the country. In addition, automation and lack of employable skills are making matters worse
Imagine, you see a baby crying. What would be your immediate effort to pacify the baby?” S. Unnikrishnan, chief executive officer of Thermax, asked a gathering of 200 odd people. To which the audience replied in unison, ‘smartphone’. “True. You are most likely to offer your smartphone.”
“Unfortunately, the Indian education system will take another 17 years to officially introduce the working of smartphone technology to that child,” said Unnikrishnan, who was present there to not talk about smartphones, but to throw light on the country’s obsolete education system and how it is impacting the job market and producing ‘useless’ workers.
His opinion amazed everybody as he bluntly said, “Why should we give jobs to your degree holders when robots perform the same task at lesser price and with better efficiency?”
Srinivas Kandula, CEO of the domestic arm of French IT major Capgemini that employs nearly one lakh engineers in the country, echoed a similar concern very recently. He said, “I believe that 60-65 per cent of employees (in the information technology industry) are just not trainable.”
While Unnikrishnan and Kandula may come across as pessimistic, their concern is not entirely unfounded. Despite being a bright spot among the global economies, India has failed to witness a growth that is full of jobs.
The recent reports of dwindling intention of companies to hire people are in fact alarming. According to the India Hiring Intent survey by HR outsourcing and technology firm PeopleStrong, the latest growth in the ‘intention to hire people’ is the lowest in the last three years. This year the hiring intention has grown by 7-10 per cent, which is half of last year. In 2016, it grew by 14 per cent, and by 23 per cent in 2015. “At present, the job market outlook doesn’t look very encouraging. It would probably take six to nine months to improve if we follow some hard-task measures. Technology and socio-economic trends are constantly changing business models and how work is organised,” says Pankaj Bansal, CEO of PeopleStrong.
Extravagant Promise Vs. The Reality
In his mandate, Prime Minister Narendra Modi promised to provide employment to 1 crore people annually — it lured the youth to vote for him.
But jobs remain far and few between today. The only latest data available on job creation between January and December 2015 shows that just 1.35 lakh jobs were created. It was the slowest rate of job creation since 2009.
Job addition in 2015 — the first full year of Modi government — fell by about 70 per cent. It was 90 per cent less than the job growth seen in 2009, when the UPA was in power (see Employment Outlook).
And while the jobs are declining, an estimated 12 million people are entering the workforce every year, says government data.
Job creation remains a challenging task, agrees Gopal Krishna Agarwal, national spokesperson of the BJP on economic affairs, who says the government is focusing on infrastructure investment. “Digital India also aims at improved connectivity. We expect to see good results by 2019. Once this cycle starts, private sector will start growing. We hope private investment to pick up in 2017-18,” he adds.
D.K. Srivastava, an economist at consulting firm EY, too feels that lately, the conditions for the job market have not been favourable. “We were already suffering a slowdown in investments, when demonetisation accentuated consumption slowdown as well,” he says adding that while India’s growth potential has been slowed by 1 percentage point, the job opening potential has dropped by 2 to 2.5 percentage points.
Booming FDI Inflows Didn’t Help
Foreign direct investment (FDI) inflows touched an eight-year high at $46.4 billion in 2016, registering an annual average growth of 28.2 per cent for the past three years. The rising numbers is a consequence of relaxed FDI norms and more stress on ‘ease of doing business’ in India.
Going by the theoretical perspective, swelling FDI inflow should have direct as well as indirect (positive) impact on job creation. But the reality is different. “We are growing but not so well or so much to create enough jobs,” says T V Mohandas Pai, former director of Infosys and present chairman of Manipal Global Education.
Sample this: Last year’s inflows included cash infusion by Vodafone Plc into its Indian subsidiary for spectrum payments and debt repayment. The infusion was substantial, but not related to job creation.
“A large part of FDI is coming in the form of acquisitions, again, not leading to job creations,” points out Dilip Chenoy, former CEO of National Skill Development Corporation. “FDI’s come with the primary aim of generating returns and not necessarily to create jobs,” he adds.
Dissecting ‘Make in India’
FDI equity inflow has undoubtedly swelled since PM Modi came to power. However, data shows that so far ‘Make in India’ hasn’t made much impact in boosting the share of manufacturing in the country’s GDP, which is the principle aim of the initiative.
Data from the Department of Industrial Policy and Promotion shows that majority of the $40 billion that India attracted by way of FDI during FY15-16, did not go into manufacturing. Three non-manufacturing sectors — services, computer software and hardware, and trading — attracted more than 41.5 per cent of the FDI inflow, whereas core manufacturing sectors such as automobiles, chemicals, power, pharma and construction secured only 14 per cent of the FDI. Some non-manufacturing sectors such as hotels and tourism and telecommunications were the others areas that saw foreign investors pumping in money.
Surprisingly, the core manufacturing sectors accounted for 21 per cent of the investment during the financial year 2014-15, when India received only $31 billion in FDI. And services including computer software and hardware and trading together received 30 per cent of the total inflow.
Several economists including the former Reserve Bank of India governor Raghuram Rajan have been critical of the ‘Make in India’ initiative. In December 2014, Rajan said that an import substitution strategy or an incentive-driven, export-led growth mechanism will not work for India.
Recently, C. Rangarajan who served as the chairman of the Prime Minister’s Economic Advisory Council in the UPA regime, said, “If ‘Make In India’ is to succeed, the critical point is how good is our infrastructure, how cost effective as a country are we, and that is where our focus will be. The slogan has to be translated with effective infrastructure support.” Speaking at an event in Ahmedabad University, he said “Make In India is one way to do that.”
Modi government has set an ambitious target of increasing the contribution of manufacturing output to 25 per cent of GDP by 2025, from 16 per cent currently. While the sector has the potential to account for 25-30 per cent of GDP and create up to 90 million jobs by 2025, it is currently far from it. “Foreign manufacturers need automated machines and robotics. Our Asian peer countries such as Thailand and Sri Lanka have better manufacturing technology. I think, our manufacturing sector is now obsolete and needs immediate attention,” says Abheek Barua, chief economist at HDFC India.
While the index of industrial production (IIP) is improving, it rose by 2.7 per cent in January after contracting 0.4 per cent in December. So economists and recruiters aren’t very hopeful of job market revival anytime soon.
According to a report on the future of jobs by industry lobby, Confederation of Indian Industry, India is now witnessing a shift in the traditional model of globalisation where large scale manufacturing and global merchandise exports are losing their primacy as drivers of growth and jobs. Countries are moving away from large-scale, export-oriented plants to smaller, multi-country plants network. “The plan to leverage manufacturing and exports by promoting low-cost labour is unlikely to work anymore for us,” the report says in conclusion.
Small firms, according to McKinsey, account for 84 per cent of manufacturing jobs in India, compared to 25 per cent in China. “The availability of finance to small and medium enterprises is also under stress due to the issue of non-performing assets in the banking system,” says Chenoy. Manufacturing sector is unlikely to create many jobs, immediately.
A Hopeful Services Sector
In the last one year, several pink slips have been issued. Engineering major Larsen & Toubro reportedly laid off some 14,000 employees, while companies such as Microsoft, IBM and Nokia too cut back on their workforce in 2016, albeit on a smaller scale, owning to sluggish demand. E-commerce major Snapdeal has also downsized its staff by almost a 1,000 employees.
Issues of lack of funding, cost optimisation and skill gap have largely affected the services sector. “In services sector, especially e-commerce, there are no major hiring plans until new capital comes in. Similarly in IT, there is a contraction in labour demand due to automation,” Barua from HDFC points out.
The corporate banking sector, however, remains relatively stable. The government’s demonetisation drive has led to new possibilities with the banking system. “Considering the digitisation drive, the country would now require a combination of biometrics, regional language programming and graphical UI design. Banks are adding staff who can design, develop and implement different regional languages programmes,” says A.G Rao, group managing director of US-based staffing firm ManpowerGroup India, trying to cheer up the otherwise dull sentiments.
Moreover, jobs in payment wallet companies as well as digital finance will keep coming in. “Job openings in the services sector will not boom, but they will remain steady,” says Rituparna Chakraborty, co-founder of staffing firm TeamLease Services.
Tarun Katyal, Chief Human Resource Officer, MTS India, said,"Like 2016, where the job market was quite flat and saw some major layoffs, the year 2017 also has been moving on the same trend. Except for new entrants like Reliance Jio, all the major telecom players have been on the back foot in terms of hiring. Hiring is done only for front end sales positions and extremely critical business positions which become vacant due to attrition.
Strong and Weak Sectors
Telecom and allied services and energy are the two sectors that intend to hire the most, followed by hospitality, banking, insurance, travel, BPOs and automobiles. “The opportunities and risks (in the above-mentioned sectors) could shift over time. Businesses that foresee and act on those shifts first will drive the competitive advantage in the coming months,” says Rao of ManpowerGroup.
While automation is being accused of making some jobs redundant, it can also create new kinds of jobs. “As it is now more about finding creative ways to exploit and deploy promising new technologies,” adds Rao.
The gloomy sectors are manufacturing, pharmaceuticals and healthcare. The fast-moving consumer goods (FMCG) sector is expected to adopt a more cautious approach in the coming year as its area of growth is weaker than anticipated.
Amid these, retail sounds promising. Kishore Biyani, CEO of Future Brands, is upbeat about hiring in the coming year. He says, “Retail provides employment opportunities in large numbers to youth — both directly and indirectly — and more often to socially and economically-backward segments of the society.”
However, some segments are still positive with their hiring plans. "Last year, we hired about 200 people and this year, we plan hire about 250 more. Since the market share of retail sector is increasing day by day, the job market also foresees a lot of opportunities," said Rahul Agarwal, CEO, Organic Harvest.
Of late, hiring activity in the real estate sector has declined due to reduced consumer demand. The saturation and lower profit margins in the telecommunications sector has also resulted in a recruitment slowdown. “However, post the Idea and Vodafone merger in the face of tough competition from Jio, the sector could create exciting job opportunities,” says Chakraborty.
Banking On Startups
Startups could be the answer to the job-less streak of growth in India, opines Barua. “We need to create asset-light models such as Uber that require minimal capital but still create an ecosystem for thousands of job seekers.”
The latest round of funding by e-commerce company Flipkart, where it raised $1.4 billion in funding and is now aiming to raise the same amount in the next few months, has made the industry realise that investors are always ready to back attractive, stable ventures.
“With Flipkart strengthening its hiring plans and Snapdeal downsizing, the overall effect remains the same,” says Anil Joshi, managing partner at Unicorn India Ventures. “While mature startups will not hire much, new startups would have better hiring plans.”
And with more startups and more jobs in this age of digitisation, the requirement of digital security officers will go up. “People who bring in design-thinking skills and who can build apps and websites will be best-suited,” says Saumyajit Guha, co-principal at Jaarvis Accelerator, a business startup accelerator.
Making A Switch: Is The Grass Really Greener On The Other Side?
According to KPMG’s annual compensation trend survey, the average projected increment for the year 2017-18 is 9.7 per cent, a decrease of 0.6 per cent from 2016-17. If you are unhappy with the salary hike, and job change is on your mind, staying put may be better for you at the time. Before you plan to switch, think twice.
As the current state of economy and job market doesn’t offer many opportunities, headhunters suggest against looking for a new job when one has had an unfavourable appraisal in one’s present organisation. “It is always prudent to adopt a “wait and watch” approach and defer career transition decisions during periods of business uncertainty,” advises Kamal Karanth, former managing director at US-based staffing firm Kelly Services. “In a career span of 20 years, there would be at least 6 years where you would get bad appraisal. You cannot afford to switch six jobs for the sake of your resume credibility.”
Majority of the sectors are increasingly using flexible workforce as they see it clearly as a competitive edge to thrive in this time of uncertainty. “The increase in demand for flexi jobs is about 18-20 per cent year-on-year,” says TeamLease’s Chakraborty, who is also the president of Indian Staffing Federation.
You Better Skill Yourself
After an average appraisal, it will do you better to identify the gaps and improve your skill set in the present organisation as the poor skill set may end up creating problems in the new place of work.
“We don’t recommend people to hunt for jobs as a reactive step to appraisal hikes,” says Karanth of Kelly Services.
Changing jobs on an impulse can land a candidate into a wrong profile and industry all together.
A “Skill India” mission was launched with much fanfare in 2015, promising to make 400 million Indians employable in seven years. It managed to reach about 1.76 million only in its first year.
However, where the programme really failed was it couldn’t create enough supply of people armed with niche or high quality skills. Sadly, National Skill Development Corporation (NSDC) is able to place only 50 per cent of the total people it trains — which shows the clear difference between inculcating skills and inculcating employable skills. “Rate of job creation has definitely come down,” says Jayant Krishna, chief operating officer of NDSC. “We were creating about 10 lakh jobs per month, and 1.2 crore jobs per annum, but that is not happening now. About eight to nine people out of every 10 jobs are in the informal sector, but these jobs are not well paying, not much aspirational and very uncertain,” he says.
Data on NSDC, sourced from a Right to Information appeal, published by media reports, reveals that of the 800,145 candidates trained through non-scheme skilling programmes in 2016-17, just 48.4 per cent or 3,87,762 candidates got jobs. Similarly in 2015-16, of the 13.55 lakh students skilled, just 46.9 per cent or 6.35 lakh got jobs. “Certainly, while imparting skills, the bigger challenge of getting a decent job still remains,” says Krishna of NSDC.
(Inputs from BW Bureau)