A worrisome job scenario

BRP Bhaskar
Gulf Today

With the working population rising rapidly and job opportunities lagging behind, India, which has replaced China as the world’s fastest growing economy, is in the most challenging phase of its developmental effort.

According to the latest UN projections, India’s population will outstrip China’s by 2022, six years earlier than previously calculated. While China has to contend with an ageing population, India, theoretically, has an advantage over it by virtue of its larger working population. But to take advantage of the demographic situation, it has to improve its ability to create jobs.

Currently an estimated one million people enter the workforce each month. The rate of job creation, which has always been short of the requirement, is now declining. A recent official survey revealed that eight labour-intensive industries, including textiles, garments, BPO, metals and automobiles, created only 135,000 jobs last year. They had created 490,000 jobs the previous year.

A study of the performance of more than 1,000 companies by a private rating agency also showed that the job creation rate was falling. Together these companies created only 12,760 jobs last year as against 188,371 in the previous year. The manufacturing sector companies recorded a 5.2 per cent decline in job growth. In the previous year there was a 3.2 per cent growth.

Three industries account for the bulk of employment in the organised sector. They are manufacturing (40 per cent), banking (23 per cent) and information technology (18 per cent). Prime Minister Narendra Modi’s ambitious goal of creating 250 million jobs over a 10-year period cannot be reached unless they generate more jobs.

Some analysts have suggested that studies based on the performance of companies may not reflect the true position as industries are increasingly outsourcing certain types of jobs. But, according to the official survey, there was a decline in contractual jobs also last year.

The dismal situation revealed by the studies has prompted critics to taunt the Prime Minister with questions like “Where are the promised jobs, Mr. Modi?” The fact is that low job creation has been a feature of India’s economic development even before Modi’s time. Between 1991 and 2013, India recorded an average annual growth of 6.5 per cent but did not create enough jobs to attract even half of those entering the labour market.

Modi’s expectation that increased flow of foreign direct investment and his Make in India programme will boost job creation has not materialised. About 60 per cent of the FDI is in the form of private equity investment, which may fetch the investor a decent return but does not necessarily result in job creation. The Make in India programme requires skilled labour for manufacturing and high-end services. Skilled workers form only two per cent of India’s labour force.

Medium, small and micro enterprises are the backbone of the industrial sector. There are about 40 million such units and they employ about 100 million people, making them the largest provider of jobs. Falling exports and difficulties in obtaining timely credit hamper their ability to play a bigger role.

Official and unofficial studies limited to the organised sector do not give a full picture of the job situation. More than 90 per cent of the country’s working people are in the unorganised sector where wages are low and underemployment is widespread.

Although China has fallen behind India in the rate of growth of the economy, it is still ahead in job creation. According to Human Resources Minister Yin Weimin, China created more than 13 million new jobs for urban residents last year. However, the pace of job creation is slowing. The target for this year is only 10 million new urban jobs.

China’s major problem on the job front now is the rehabilitation of 1.8 million workers who are expected to be laid off by state-owned coal and steel plants as the economy switches from the investment-led model to one that relies on domestic consumption, services and innovation.

Interestingly, Arvind Panagariya, Vice-Chairman of the Niti Ayog, which has taken over the functions of the erstwhile Planning Commission, senses an opportunity for India in the Chinese downturn. He believes the high wage levels in that country will tempt manufacturers of certain items like textile and footwear to view India as an attractive alternative location.

Amartya Sen, the economist, has pointed out that India is trying to become a global economic power with an uneducated and unhealthy labour force, which has never been done before and never will be done in the future either. Clearly the government has to do more to realise its goal. -- Gulf Today, Sharjah, September 6, 2016.

Start-up plan raises hopes

BRP Bhaskar
Gulf Today

Even as the flagship Make in India programme which sought to attract foreign manufacturers is languishing, Prime Minister Narendra Modi last week launched a “Start-up India, Stand-up India” programme to help domestic entrepreneurs.

The programme, announced last August, has come with a 19-point action plan, which includes a tax holiday, access to new technology and exemption from regulations.

Finance Minister Arun Jaitley said there was no alternative but promotion of domestic entrepreneurship as environmental clearance procedures and other constraints are making it difficult to attract foreign investors. The government, he added, did not want to interfere in the work of entrepreneurs. Its role would be that of an enabler or facilitator.

Under the new plan, entrepreneurs will get a three-year tax holiday on profits, self-certification rights with regard to compliance labour laws and an 80 per cent rebate for patent registration.

The government has committed Rs 100 billion over the next four years for the programme which is expected to create a favourable climate for newcomers to enter the world of business. The Stand-up part is designed to help women and the underprivileged Dalit and Adivasi communities.

Women have reached the top in some private corporations through inheritance and in some public institutions on the strength of their professional record, but they do not figure significantly in the ranks of entrepreneurs. Lack of resources has kept the Dalits and the Adivasis out of the world of business all along. The provisions made for these sections are, therefore, a welcome feature.

However, the programme also has several provisions that will work to the disadvantage of large sections.

The government has already abolished or relaxed legal provisions designed to protect workers from exploitation and prevent destruction of the environment. Given businessmen’s propensity to cut corners to augment profits, the self-certification procedure can harm the interests of the people as a whole and of the working class in particular.

The Harvard Business School used to display on its website a confession by one of its alumni, Rahul Bajaj, who is a third-generation Indian industrialist. In it, he said: “Ignoring a government regulation, I increased my volume (production) by more than the permitted 25 per cent of my licensed capacity.” It has now taken the post off, possibly to protect the image of Bajaj, whom it had honoured as a distinguished alumnus in 2005, as well as its own.

Dhirubhai Ambani, father of Mukesh Ambani, who is at No. 1 in the Forbes list of rich Indians, and Anil Ambani, who is at No. 29, was a first-generation businessman who rose to rival the established industrialists of his time. Such was his clout that journalist Hamish McDonald’s 1998 book The Polyester Prince, which narrated how he negotiated his way around regulations, could not be sold in India.

The Ambanis, however, made no attempt to block a later, revised version of the book, titled Ambani & Sons, presumably because the family is now quite confident about its place.

The Supreme Court has been holding Subrata Roy, a Kolkata businessman, in Delhi’s Tihar jail for about two years to force him to return to small investors about $5.4 billion they had put into a scheme of his Sahara group, which, according to the Security Exchange Board of India, was illegal.

All this raises the question whether the interests of workers will be safe under a self-certification regime.

Enthused by reports of sound industrial growth driven by manufacturing, signs of a pickup in investment and good indirect tax collections, the government claimed last October that the economy might be about to turn the corner. “We are on track. Acceleration switch has been pressed. We are pushing ourselves towards a high-growth trajectory,” said Department of Industrial Policy and Promotion Secretary Amitabh Kant.

However, as the financial year draws to a close, there is little room for optimism. The rupee has fallen below the level at which it was when Modi took office. The stock market is erratic. Exports have declined due to the global slowdown, and the year may well see a record fall of 13 per cent.

In the circumstances, the Start-up programme assumes importance. It has the potential to help in creating jobs, improving skills and boosting production. Many states have evinced keen interest in it, and some have already set up incubation centres for young entrepreneurs. However, they may need time to produce results. -- Gulf Today, January 19, 2016.

The Make-in-India mantra

BRP Bhaskar
Gulf Today

Will India be the next big manufacturing hub of the world? The question is being discussed at home and aboard following the launch of Prime Minister Narendra Modi’s Make in India programme and its vigorous marketing.

Modi, who took office in May, outlined the programme first in the traditional Prime Minister’s address to the nation on August 15, Independence Day. “Be it plastics or cars or satellites or agricultural products, come, make in India,” he told the world. When he visited Washington he sought support for the programme from the US administration and industrialists.

In September the government launched the programme with fanfare. A website set up to market it features its logo — a stylised figure of the lion on which is imposed the mantra “Make in India”.

The government describes it as a new national programme, designed to facilitate investment, foster innovation, enhance skill development, protect intellectual property, and build best-in-class manufacturing infrastructure. “There’s never been a better time to make in India,” it proclaims.

The website lists 25 sectors, from Automobiles to Wellness, in alphabetical order, where the government is looking for investment. These include Defence Manufacturing, Media and Entertainment, Oil and Gas, Ports, Railways and Space. Some of these are areas where the previous government was proceeding with caution in view of their sensitive nature.

Doing business just got easier, it proclaims, and mentions a series of steps which the government has taken or is contemplating for this purpose. India is at the 134th position in the World Bank’s most recent Ease of Doing Business list. Modi reportedly has set a modest goal: raising the country to the 85th place.

Modi’s programme is modelled on the one which made China the biggest manufacturing hub of the world. China had to pay a heavy price in terms of environmental degradation for its phenomenal success. It redeemed itself somewhat by launching, under strong international pressure, an ambitious clean-up programme ahead of the Beijing Olympics.

China began reforms under Deng Xiaoping in 1978. By the time India embarked upon reforms hesitantly in 1991 it had already made much progress in manufacturing by attracting investments from overseas Chinese businessmen as well as others. It is generally believed that with the Communist Party holding the reins China could move ahead faster than India which was struggling with unstable democratic governments.

Modi, who heads a stable government, is making an-out bid to attract global investors as rising costs and an appreciating currency are making China increasingly unattractive. If he succeeds, India’s share of manufacturing, which is now only about 12 per cent of the GDP, will go up to 25 per cent by 2022. Also, part of the labour now in the primary sector may shift to the secondary sector.

To make things easy for investors the government is planning to remove all hurdles in their way and provide in a maximum of 72 hours the clearances needed to start or do business.

It is likely to take a favourable view of the proposals placed before it by the Confederation of Indian Industry and the global financial and business advisory group KPMG to create conditions conducive to large-scale manufacturing. These include streamlining approval procedures, speeding up land acquisition proceedings, creating a proper labour development system, facilitating easy cross-border transactions and rationalising the taxation regime.

While there is a strong case for speeding up the process of clearance, the three-day time-frame cannot be achieved without relaxing legal provisions which safeguard the interests of the workers and protect the environment. Such steps may invite the hostility of the working class movements and involve the risk of ecological disaster.

According to Janice Bellace, professor of legalstudies and business ethics, at Wharton, poor infrastructure, crony capitalism and corruption have done more to dissuade investment than labour laws. She wants Indian labour law reform to focus on ‘decent work’, an International Labour Organisation term which includes security, adequate remuneration and freedom of association.

KPMG has given a boost to the Make in India programme by featuring it in its 100 Most Innovative Global Projects as “one of the world’s most innovative and inspiring infrastructure projects”. Another hopeful development is that Standard and Poor’s, which had lowered India’s credit rating to “negative” in the wake of the economic downturn of the last few years, has now raised it to “stable”.

Last week Home Minister Rajnath Singh, on a visit to Israel, asked that country to set up industries in India in the defence sector. Prime Minister Benjamin Netanyahu responded favourably. --Gulf Today, Sharjah, November 11, 2014.