Tap potential sectors

Tap potential sectors

More than 90% of the labour force is working in the informal, unregistered sector, with no employer-provided pension, benefits.

In March 2015, e-commerce company Flipkart announced that it would create 2 million jobs within 1 year. It was an astounding announcement and woke us up to the potential of this sector in job creation. Flipkart said 60% of these jobs would come from the logistics and warehousing sector, and mostly from tier 2 and tier 3 cities.

E-commerce has the potential to connect thousands of small and medium industries which become sellers via the marketplace to its large consumer base. As of March 2016, Flipkart claimed that it had 75 million registered users who were potential buyers. As one of India’s home-grown and pre-eminent internet companies, Flipkart’s statement about job creation needs serious attention.

Of course, this column is not about the company per se but about identifying the future of job creation in India (As an aside, it must be noted that since late last year, the e-commerce juggernaut seems to be slowing down. Companies have announced layoffs, sales have slowed down, and company valuations were marked down. Perhaps, this is a sign of early euphoria giving way to realism).

Can e-commerce be a major job-creating engine? As India struggles to create 12 million jobs annually, this question is very pertinent. To the extent that e-commerce does require logistics (including last-mile delivery) and warehousing, all of which can be labour intensive, the jobs promise is credible. But these are not high-quality jobs. If e-commerce can also create entrepreneurs who produce everything from garments, home furnishings and office equipment, which are then sold via the internet, then the jobs promise is more credible.

However, the bigger promise may be in B2B (business to business) e-commerce, which is at a very nascent stage in India. Even in the B2C (business to consumer) space, the merchandise currently is crowded with mobile phones and electronics, much of which is simply imported from China. So, a booming e-commerce business may be supporting entrepreneurs and low-cost producers in China, but not in India! Hopefully, this is only a transitory phase.

Are there sectors that will provide large-scale and well-paying jobs on a sustainable basis? Take another example: India produces more than 3 million 4-wheeler vehicles annually. Presumably, more than half of these are not self-driven. So, this sector too creates more than a million jobs every year for new drivers. How long will this sustain is doubtful, since the western world has already seen the emergence of driverless vehicles that threaten to displace millions of driver jobs in the coming years.

We do not have a systematic way of tracking employment data. More than 90% of the labour force is working in the informal and unregistered sector, with no employer-provided pension or other benefits. Their jobs are much less secure, and the churn is significant. The Labour Bureau tracks 8 employment intensive industries – textiles, leather, metals, gems and jewellery, transport, IT/BPO and powerloom/handloom. Through quarterly sample surveys of firms in these sectors, we get a representative glimpse of the jobs situation in the country. The data is very discouraging.

These sectors used to add more than a million jobs every year, till 6 years ago. That annual rate declined by half, and then further. In 2015, these sectors added merely 1.35 lakh jobs, and in 2016 there has been a net decline. The reasons could be numerous. But one proximate reason is decline in India’s exports.

For the past 16 months in a row, exports have been shrinking by an annual rate of about 15%. This is unprecedented, and our export strategy needs an urgent correction.  Manufacturing output and employment growth in the country is impossible without commensurate growth of exports, too. Even during a global slowdown, most east Asian countries and China continue to show positive growth unlike India.

The jobs challenge is global, and is especially acute for the youth. Many European countries have youth unemployment of more than 20%. The World Bank reports that 1.8 billion young people are jobless and also not studying or in any form of training. Even economies which are growing show signs of “jobless growth”.  The advent of automation, 3-D printing, drones, robotics (and, of course, driverless cars) is not making it any easier to tackle the challenge of job creation.

Public sector jobs

In the near future, in India, it is clear that job creation will be linked to the rebound of the investment cycle. Since the private sector is already burdened with high debt and spare capacity, it is unlikely to lead the resurgence in investment. Hence, the lead will be from public investments like those in highway construction, railway and ports, airports and urban infrastructure.

All of these do create jobs, as also lead to demand for materials like steel and cement, leading further to revival of those ancillary industries and second round effects. India also has to tap into the emerging opportunity of job migration out of China due to labour shortages and rising costs. This is especially evident in textiles, leather and auto-components.

In the services sector, tourism is a labour-intensive sector with high potential. This can also be a significant foreign exchange earner. India can also be a global hub for higher education. We spend more than $8 billion in sending our children to colleges overseas, mainly to the US, the UK and Australia. If similar facilities come up in India, it will save foreign exchange and create jobs here. Healthcare, too, is a sector with a large potential.

The challenge of employment creation should be restated in terms of livelihoods and incomes. As Prime Minister Narendra Modi has said, “If you can’t find a job, create one.” It is better to be an employer rather than an employee. Livelihoods can come from entrepreneurship, not just jobs. That calls for focus on ease of doing business and reforms like the passage of GST. All economic policy discourse should firstly be answerable to the question of job and livelihood creation.

(The writer is a Mumbai-based senior economist) (The Billion Press)