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Where are the jobs?

Why is an economy apparently on the upswing not being able to

generate enough new jobs? Welcome to jobless growth.

By Dr.Mahboob khan Phd

At 8 pm every day, 200 young technicians at pathology giant Thyrocare

Technologies begin work at its automated clinical chemistry laboratory

at Turbhe in Navi Mumbai. For the next 12 hours, they operate a range

of state-of-the-art diagnostic equipment, which can process up to

200,000 investigations a night for thyroid, kidney and liver diseases,

testing nearly 45,000 samples flown in from 1,300 collection centres in

India. What would have taken several days of investigation by at least

1,000 technicians a decade ago is now being done by a workforce a fifth

the size in less than a day. "Many job-seekers are qualified for the job,

but not skilled," says A. Velumani, the company's CEO, who ensures

freshers are given specialised training. The new challenges are exciting

and even lighten the manual load, but that's for a lucky few. For the

majority of jobseekers in the healthcare segment, the prospects are grim,

with little job security and salaries roughly half what large diagnostic

chains may offer.

Every month, a million Indians become age-eligible to join the

workforce, but the growth in jobs has not kept pace with the rising

number of aspirants. The result: unemployment has been on the rise,

despite India supposedly being one of the brighter spots in a slowing

global economy. Thirty-three-year-old Ratna Shankar Choubey, a father

of two, in Bihar recently lost his job for resisting a change from being a

permanent to temporary in the company. "Employment creation will be

one of our greatest challenges for the next decade," says Jayant Sinha,

minister of state for finance. India's unemployment rate grew from 6.8

per cent in 2001 to 9.6 per cent in 2011, according to Census 2011 data.

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The big picture The situation has only worsened since, thanks to weak industrial growth,

a struggling agriculture sector with widespread drought, cost

rationalisations in several sectors and the knock-on effect of a global

slowdown. Also, traditionally labour-intensive industries are beginning

to increasingly mechanise their operations. While it makes them more

productive and profitable, it also shrinks job opportunities.

According to the labour ministry's 27th Quarterly Employment Survey

of eight employment-intensive industries- textiles, leather, metals,

automobiles, gems & jewellery, transport, IT/BPO and

handloom/powerloom)- there were 43,000 job losses in the first quarter

of FY 2015-2016. The second quarter was better, with 134,000 new

jobs, but even then the 91,000 net new jobs created in the first half of FY

2015-16 look desultory.

At their peak, these sectors had added 1.1 million jobs in 2010. In the

following five years, however, 1.5 million jobs were lost. FY 2014-15

saw a spurt, with 500,000 new jobs added as compared to 300,000 the

year before, but it was still half the peak figure. There have been no

signs of recovery in FY 2016; in fact, there is a decline.

One reason for the decline in jobs could be a reduction in contract

workers (nearly 70,000 of them were retrenched in the first half of FY

2016, compared to 161,000 additions in the first half of FY 2015). Says

labour and employment secretary Shankar Aggarwal:

"Contractualisation is a universal phenomenon. The system of

production of goods and services is different. Value addition is

happening across the world and, depending on the circumstances, people

decide where to go. We are witnessing a decline in growth across the

world. To get jobs, we need flexibility in hiring."

Employment in export units, reeling under shrunken global demand, also

saw a sharp decline. There were only 5,000 job additions in the first half

of FY 2016 compared with 271,000 in the corresponding period of FY

2015. In the automobile sector, for instance, there were 23,000 job losses

in export units compared to the 26,000 job additions in the other seven

labour-intensive sectors in the second quarter of FY 2016.

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Downsizing pain Large manufacturers are trimming operations, throwing many jobs into

jeopardy. Nokia, locked in a tax dispute with Indian authorities, shut

down its handset-making factory in Chennai in November 2014,

rendering 8,000 workers jobless. For Microsoft, the new owner of the

Nokia handset brand, making smartphones in China and Vietnam was

cheaper. Meanwhile, some MNCs in the financial sector have also

recently exited India, after finding the domestic competition tougher

than they had bargained for. Following on the heels of Goldman Sachs

and Nomura, JP Morgan Asset Management of the US exited its onshore

India-based mutual funds business, selling out to Edelweiss Asset

Management, the seventh foreign-sponsored fund house to exit the

Indian MF business in the past three years. Cement major Lafarge is also

planning an exit, after selling its 11 mt business here. Hardly a surprise

as the global cement industry is beset by overcapacity and weak

demand.

"We've only been downsizing in the last few years, especially in

infrastructure," says Sunil Kanoria, president, Assocham, and also vice-

chairman, SREI Infrastructure Finance Ltd. "The financial situation is so

bad, companies are struggling to get more resources."

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Increased use of robots; will need 3.9 mn skilled workers by 2022.

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Photo: Getty Images

Avantha Group firm Crompton Greaves is reportedly divesting its

consumer business for Rs 2,800 crore. A.M. Naik, chairman, Larsen &

Toubro (L&T), has gone on record saying the engineering and

construction giant will exit all businesses with revenues under Rs 1,000

crore, even if it means closing some without finding buyers. The $35

billion Essar Group is reported to be in talks to sell part of its refinery

business as well as a portion of its ports business to pare its steep debt.

Even some celebrated start-ups, touted as the next big thing, have found

themselves in a tight corner. TinyOwl, a two-year-old Mumbai-based

food ordering software start-up, is still in dire straits, even after it fired

hundreds. Zomato, yet another food tech company, laid off 300

employees, or 10 per cent of its workforce, last year as the business went

through a squeeze.

Growth without jobs Many wonder why an economy supposedly growing at a rate of over 7

per cent is not creating enough jobs. Economists say this is because

more work is now being done with fewer employees. "The economy is

generating less jobs per unit of GDP," says D.K. Joshi, chief economist

at ratings and research firm Crisil. Illustratively, in manufacturing, if 11

people were needed to execute a piece of work that generated Rs 1

million worth of industrial GDP a decade ago, today only six are needed.

Joshi's verdict: "The economy has become less labour-absorbent."

Other corporate analysts offer similarly sobering opinions. "India's 7.5

per cent growth is based on the gross value added methodology, which is

being debated, and the growth could be closer to 5 per cent," says Ajit

Ranade, chief economic advisor with the $40 billion Aditya Birla Group.

"Moreover, this growth is capital-intensive, not labour-intensive." D.K.

Shrivastava, policy advisor at consulting firm EY, explains, "Whatever

growth there is does not seem to be translating into jobs. Either the

growth is in sectors that are not employment-intensive, or overall growth

is overstated."

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This year's Budget had specific provisions to expand productive

employment, while also giving a push to certain sectors of the rural

economy and infrastructure that would create jobs. The move to

encourage small and medium enterprises to hire more workers while the

state pitches in with provident fund contributions, and the emphasis on

roads and other infrastructure are all good measures. However, it will

take a lot-particularly significantly increased investments by both private

business and the state-before real benefits appear. As things stand,

private investments have been static, and with the government firm on

its fiscal consolidation targets, public spending too is somewhat

constrained.

Ajit Gulabchand, chairman of the $650 million Hindustan Construction

Company in Mumbai, laments: "New job creation is poor because the

investment cycle has not kickstarted. We are in a slow economy and the

global slowdown is not helping." The government could incentivise job

creation by giving infrastructure a push, finding a way to lower interest

rates and improve ease of doing business, he says. In his assessment,

"the economy will take 2-3 years to get into the fast mode of growth."

Others blame higher levels of automation for the job squeeze. "The

growth rate in jobs has distinctly slowed down with significant

improvements in automation and productivity," says Rajeev Dubey,

group president, HR & Corporate Services, of the $17 billion Mahindra

& Mahindra. CII president Naushad Forbes attributes the job squeeze to

the slow pace of labour reforms. "It has dissuaded companies from

creating formal employment, and incentivised investments in

automation."

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NASSCOM says software start-ups will create 800,000 jobs by 2017.

Photo: Getty Images

The India Exclusion Report 2013-14 by the Delhi-based Centre for

Equity Studies, an autonomous research and social justice advocacy

institution, says only 27 million jobs were added in the supposedly high-

growth period of 2004-2010 compared with over 60 million between

1999 and 2004. The BJP, in its election campaign, highlighted the

previous government's failure to create jobs, reiterating that while the

UPA could create only about 1.5 million jobs a year on average in the 10

years it was in power, the earlier NDA regime had created over 10

million a year. Accordingly, one promise the BJP made in the run-up to

the 2014 election was that it would create 10 million jobs a year,

leveraging the power of youth below 35, who comprise 65 per cent of

the population-the much talked about 'demographic dividend'.

The government's Make in India jamboree held in Mumbai this February

saw investment commitments of Rs 15 lakh crore from Indian and

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overseas investors, but those projects are still largely on paper. The

programme aims to increase the share of manufacturing in GDP from the

current 16 per cent to 25 per cent by 2022, and create 100 million

additional jobs by then. But experts say this may not be an opportune

time for a manufacturing-led model of the sort that created 64 million

jobs in China between 2011 and 2016. "Creating manufacturing jobs

will be tough with the advent of robotics," says Ranade.

Manufacturing blues Currently, the manufacturing sector has an overall employment share of

12-13 per cent. While this share has been growing, even if gradually, in

the past decade, the number of workers per factory has been dropping in

the past 3-4 decades due to increased outsourcing. Moreover, the growth

has not been consistent across the country and is primarily in mid-sized

factories and through informal employment.

In the infrastructure and manufacturing sector, getting good talent at the

leadership level, especially to handle profit and loss responsibilities with

requisite commercial skills, is not an easy task, says Yogi Sriram, vice-

president, corporate HR, L&T. What the country requires, he says, is

youth oriented to working on the shop floor. The 'dignity of labour'

remains an exotic concept in India. "Shuffling papers is seen as more

dignified as compared to holding a torque wrench," he observes. The

manufacturing sector has been losing people to the services sector,

which is seen as more glamorous, and betterpaid. It's also much easier to

switch jobs and gain international exposure here.

The services story Yet, there are some areas that still stand out when it comes to job

creation, notably the financial services and the financial technology

sectors. For example, ever since the RBI granted licences to 10 new

small banks and 11 payment banks in 2015, employment opportunities

have been growing. The traditional banks have been opening new

branches and hiring personnel to augment their services in the face of

intense competition from the new players. Similarly, in financial

technologies, the entry of outfits such as PayTM that combine

technology with financial services is also giving a new impetus to job

creation.

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The other upbeat sector is e-commerce, which is flush with funds and

investing heavily in logistics and lastmile delivery. "Broadly, supply

chain, logistics and distribution-related jobs do well when there is

economic growth and a pick-up in manufacturing," says E. Balaji,

president, People Services, at TVS Logistics. "Logistics services grow at

almost three times the rate of GDP growth, globally speaking."

Jobs below the radar? Some skilling and data experts such as Mohandas Pai, chairman,

Manipal Global Education Services, and Dilip Chenoy, former CEO,

National Skill Development Corporation, argue that the data does not

fully capture the movement in the economy. "When you talk of highest

coal production or power generation or maximum roads built... these

have not been achieved without creating jobs," says Chenoy.

Also, in India, the informal sector accounts for the larger chunk of jobs

created. India has only about 30 million jobs in the organised sector and

nearly 440 million in the unorganised sector. The Economic Survey

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2015-16 highlights this conundrum: of the 10.5 million new

manufacturing jobs created in India between 1989 and 2010, only 3.7

million, or about 35 per cent, were in the formal sector, where proper job

contracts are signed between employers and staff, salaries are fixed and

contributions to Employees' Provident Fund guaranteed under

government labour laws.

Jobs here will emerge in ultra-early diagnosis, senior care and treatment,

artificial functional devices and organs. Photo: Danesh Jassawala

The total number of establishments, according to the Survey, increased

by 4.2 million between 1989 and 2010, but the formal sector accounted

for just 1.2 per cent of this growth. The year 2000 marks an inflection

point, when informal sector growth plateaus and employment falls even

as formal sector employment picks up. However, the Survey states the

informal sector could be credited with creating jobs and keeping

unemployment low.

Industry leaders agree with this hypothesis. "Economists and

policymakers seem to underestimate the contributions of the informal

sector in creating employment," says R.C. Bhargava, chairman, Maruti

Suzuki, India's largest carmaker. The company has not been making any

substantial additions to its workforce, of late. However, when it rolls out

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1.5 million cars a year, it also creates anywhere between 800,000 and a

million jobs, Bhargava estimates. These jobs are in driver training,

repairs, spare parts shops, insurance, dealerships etc. "This applies to a

whole lot of other industries as well, where informal jobs are created in

the thousands in the downstream sector," he adds.

Government data too does not capture this trend in informal jobs.

"Organised sector employment captures only one side of it," says Jayant

Sinha. "The entrepreneurial sector is very poorly tracked. Many of the

jobs in the economy are created by the Flipkarts, Myntras and Snapdeals

of the world, and these jobs are not picked up by the numbers. We are

also focusing on traditional economy jobs like fisheries, embroidery

etc."

The labour department is cognisant of the limitation of its data and is

working towards expanding the scope of the survey. From July this year,

it will include 10,000 establishments, up from the current 2,000-2,500

and expand to 18 sectors from the current eight.

Start-ups, the increased focus on medium and small enterprises and

greater self-employment too do not get accounted for in the data.

According to IT industry body Nasscom, 3-4 IT start-ups are born every

day in India. In calendar 2015, 1,200 start-ups were launched in the tech

space alone, a 40 per cent rise from 2014. India has the third highest

number of start-ups in the world at 4,200, behind the US and Britain, but

ahead of China and Israel. Nasscom estimates software start-ups will

create 800,000 jobs by 2017.

Changing it winds Meanwhile, the traditional IT sector is experiencing big change that will

impact job profiles and opportunities. Automation, self-service portals,

costsharing are all dampeners on job creation in the ITeS segment.

Customers are seeking more productivity and value addition. While this

will require a higher level of skill, it will not result in more new job

opportunities. The model of companies going to engineering colleges to

recruit staff is changing. Disruptive technologies, such as social,

mobility, analytics and cloud are offering new avenues of growth across

verticals for IT companies. Artificial Intelligence (AI) is another

upcoming area. Positions likely to be demand in the coming years

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include data scientists, retail planners, product managers and digital

marketers. In certain instances, the advent of new technology will

require more specialised skill sets. For example, interactive voice

response (IVR) can easily manage a BPO unit of 500 professionals now,

but we will still need technology professionals to ensure correct delivery

of information through IVR.

The other interesting trend is the shift of ITeS jobs to Tier-2, Tier-3

cities and rural areas-a trend that may owe to simple cost effectiveness,

but which will require higher emphasis on interpersonal and

communication skills. The earlier euphoria over call centre jobs has all

but vanished. Here, India seems to be losing out to countries like the

Philippines and Malaysia which have staff trained in non-voice analytics

and accounting work.

Hope on the horizon Nonetheless, there are those who still see a glimmer of hope on the

employment horizon. "India is among the few countries in the world that

has a reason to be optimistic," says N.S. Rajan, member, Group

Executive Council, and Group Chief Human Resources Officer at the

$100 billion Tata Group. "This could be due to the favourable structural

growth story or the presence of a huge demographic dividend or the

stability that is provided by democracy." However, even these assets can

only be redeemed if the requisite skills and capabilities and the right

kinds of jobs are available, he concedes.

For all the turbulence, the significance of new economy enterprises

should not be underestimated. These could be in education, healthcare,

e-commerce and hospitality. More than half the companies that raised

money through IPOs in the equity markets in 2015-16 were from these

sectors. As Sebi chairman U.K. Sinha told India Today in December

2015, "This gives a signal that there is a shift happening in economic

activity-new entrepreneurial energy is betting on new areas. The

traditional sectors such as power and steel have not raised much in fiscal

2016."

This new economy-which is more digital and technology driven and is

slowly but definitely changing how we live-from technology

interventions in rural areas (the 'JAM' trinity of Jan Dhan Yojana,

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Aadhaar and mobile connectivity for targeted subsidies) to buying

groceries online. India is on the cusp of a second-generation digital

revolution, which will spread across the economic spectrum, from

agriculture, rural, healthcare, education, retail, other services,

manufacturing, and create a new set of jobs and render some existing

ones obsolete.

The government, on its part, seems to have grasped this change: new

'thrust areas'-such as Digital India, Skill India, StartUP India and Make

in India-all focus on creating an ecosystem that will generate jobs.

Pankaj Bansal, co-founder and CEO, Peoplestrong, an HR consultancy

firm, talks about the rise of a 'gig economy'- one in which people will

work on a skill- and need-based basis, doing two or more jobs in a year.

HR consultants anticipate a digital divide in the country where the

digital economy will demand very different skills, though some real

economy vocations such as plumbing or carpentry will survive.

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Nearly half India's farm labour will have to move to other sectors

India's skill development minister, Rajiv Pratap Rudy, hopes to address

the challenge through Industrial Training Institutes, but he also believes

one needs to focus on the bottom of the pyramid, as "the volumes there

are higher". "We need to understand that skill development in the

country is being carried out by 22 ministries through more than 70

schemes," Rudy told India Today. While saying his ministry's mandate

is not to create jobs, he agrees there are skills that have either been lost

or are in decline because of the introduction of new technologies.

"However, we need to understand there will always be a trade-off

between technology and the workforce previously performing that task,"

he says.

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S. Ramadorai, chairman, National Skills Development Council and

advisor to the prime minister, speaks of the need to create skills portable

across borders. "Green sectors such as solar energy and wind, besides

defence and aerospace industry, construction, education and healthcare

will be the new job creators," he says. Job profiles too will change.

Mechanical engineers who can build robots will be in demand. "Look at

the transformation in passport kendras. Too much manual work leads to

inefficiencies. Digitisation is the solution," says Ramadorai.

It's evident India has missed the manufacturing export opportunity China

had in the 1970s. Job creation will be a consequence of increased

domestic consumption, which requires macroeconomic stability (low

inflation and interest rates), reduced regulatory hassles, further

decentralisation and an aggressive skilling campaign. Teamlease's

Manish Sabharwal doesn't believe India will ever get to a situation like

China's where 34 per cent of its labour force will be involved in

manufacturing, up from the current 11 per cent, equivalent to post-

industrial United States. However, getting to 20 per cent is possible and

that would account for another 100 million jobs. "The good news is,

policy moves are accelerating the five labour market transitions that are

journeys to higher productivity-farm to non-farm, rural to urban,

subsistence self-employment to decent wage employment, informal to

formal, and school to work," says Sabharwal. Reforms in the labour

market and a greater emphasis on labourintensive industries such as

textiles are needed to boost formal employment and sustain urban

demand growth. "The skilling challenge is across the board," he adds.

Nearly 50 per cent of India's labour force on farms needs to transition to

non-farm jobs, but often does not have the skills. "A million young men

and women will join the labour force every month for the next 20 years,

and many of them will have degrees but will be unemployable," he says.

Not a pretty picture.