Source | LiveMint
A perfect storm is brewing across India’s industrial complex, one that will truly test the country’s demographic dividend. Restructuring in many existing industries is leading to layoffs in thousands while a future in which new projects could be driven largely by automation and robots could put paid to the aspirations of millions of young men and women readying to join the workforce every year.
Simply put, we could be looking at a future in which there are just no new jobs.
As it is, investment proposals have been coming down while the latest numbers from the Reserve Bank of India show that manufacturing contracted for the first time in seven years, from a growth rate of 12.9% in 2009-10 to -3.7% in 2015-16. So far, the focus has been on injecting fresh capital investment under the assumption that this will automatically lead to job creation. But it is increasingly clear, that correlation is tenuous.
According to estimates by International Labour Organization (ILO), India’s employment elasticity, a common measure of how employment growth responds to GDP growth, hovered around 0.3 between 1991 and 2007. Basically, 1% of overall economic growth produced 0.3% of employment growth. That number has been coming down quite alarmingly since, and now stands at only about 0.15%.
Facing uncertain markets at home and abroad and saddled with low capacity utilization, most large Indian companies have been loath to invest in fresh capacities. Even in sectors where there has been fresh investment, net job creation has been negative. Thus, the $25 billion investment by Reliance Industries Ltd in its telecom operation Jio, hasn’t added to the overall number of jobs in the sector as the incumbents have been forced to restructure their operations to trim costs.
Looking ahead, there could be more layoffs coming as the fallout of Telenor India’s sale to Bharti Airtel and the impending merger of Idea Cellular with Vodafone’s India unit, take effect.
If consolidation is shrinking job prospects in sectors like telecom, in others like software services as well as banking, the change is much more structural. Artificial intelligence and machine coding along with a shift away from outsourcing by large US-based companies, have dimmed the prospects of Indian software firms forcing industry body Nasscom to defer its annual revenue forecast for the first time ever. Banking is going through a similar churn and layoffs have been a regular feature over the last two years.
Sadly, start-ups which were expected to pick up the slack in job creation stemming from changes in these sectors, are themselves in the doldrums now. In recent months, hundreds of people have been laid off in the consumer internet space and with venture capital firms taking a jaundiced view of keeping the funding spigot open. According to an analysis by Techcircle over 10,000 people have lost their jobs in the Indian startup ecosystem since August 2015.