India Must Rethink Employment Strategy

Good morning. India has an unemployment problem and the government isn’t doing much to acknowledge it. The Unified Pension Scheme only makes government jobs attractive and does little to solve the problem in the private sector. What does the government need to do going forward? Read on to know more. 

In other news, housing prices have increased manifolds in Indian cities. Meanwhile, India is reportedly probing messaging service Telegram. 

THE TAKE

Instead Of Denying Joblessness, Govt Must Fill Its Knowledge Vacuum

All governments wrestle with the idea of two constituencies — the political constituency and the economic constituency. The government's earlier concern in the economic constituency was about pension costs and the layering of liabilities in the future. The political constituency has spoken in the past few elections, so the government has made some adjustments. 

The recently introduced Unified Pension Scheme, which ensures government employees get 50% of their last drawn salary as a pension, falls in the overlap of the political constituency and the economic constituency. It could satisfy both and also those who are concerned about liabilities.

There is an assured family pension and employees can choose between the National Pension Scheme and the new one. The scheme is set to benefit 2.3 lakh central government employees. If state governments implement the scheme it could benefit as many as 9 lakh employees. However, this isn’t a holistic solution for jobs or job creation in the country. 

This scheme will once again underline the advantages of a salaried government job, which is already looked at with high regard in India. It could lead to more people applying when new posts are announced or tests for government jobs take place. Historically, families which have had a government job have had a more secure future. In rural India, it is an aspiration. If you get a government job, you get a better bride, better house and better everything. 

In India, there is too much dependence on government jobs because the private sector does not create enough jobs. It’s not like India has not thought about this problem. When Narendra Modi came to power 10 years ago, he spoke about India becoming the manpower solution for the world. While there was an attempt to take this idea forward at the time, we must take stock of where we are at in the present, something the government doesn’t seem to be doing. 

There is a surfeit of information and a vacuum of knowledge in the government. There are global opportunities and local opportunities. There have been agreements with Japan or Israel for the movement of skilled Indian labour to those countries. At the state level, each state has investment summits, but there is no review of the actual investment being made in those states. 

Ideally, there should be an evaluation of whether the investment conferences lead to investments, and whether those investments are creating jobs. The NITI Aayog is the best institution to study this and advise governments. States also need to share the best practices for attracting investments. 

The way forward lies in looking at data and being prepared for geopolitical situations across the world. The government has an understanding of the skill set, and how much skill training has happened, and private companies also have databases on skilling. Align all of this, and you’ll know the number of jobs that need to be created versus what is actually being created. 

As geopolitics unravels across the world and disruptions unravel, the ability of the Indian economy to support jobs will be challenged, whether it be moving to net zero in a fossil fuel economy or artificial intelligence. There will be other disruptions too. For instance, in the US, weight loss drugs such as Ozempic are set to impact everything from fast food chains to cigarette makers. Similar things could happen in India. 

The government has not paid sufficient attention to how to process this information every month. Instead of going blue in the face and denying joblessness and underemployment, the government must analyse all this information and find the missing opportunities. 

Already this year overall growth will not be as robust as last year, which has consequences for job creation, global growth will be lower, which has consequences for the IT sector, which is the largest employer. The government should have an interstate council that meets every month and discusses what's happening to the economy and thereby job creation.

By Shankkar Aiyar, as narrated on The Core Report podcast.

CO:RELATION

IRCTC On A Roll

Just like many other government-owned businesses, the share price of The Indian Railway Catering and Tourism Corporation (IRCTC) has lately underperformed the broader market. Analysts seem concerned about the volatility in profits in the flagship catering business. However, a lot is rolling for IRCTC. It generated record revenue and profits by selling catering and ticketing services, tourism and mineral water. The company is sitting on cash worth Rs 2,500 crore. The IRCTC management hopes to increase catering volume as the government introduces new trains and lift profit margins from the present 13-14% as more premium Vande Bharat trains are introduced. IRCTC generates a significant convenience fee of Rs 224 for ticketing. That mainly adds to the bottom line. The volatility in profit margins was due to the seasonal nature of advance ticket bookings, the management told analysts.

PODCAST

Markets Catch Fed Fever

On Episode 372 of The Core Report, financial journalist Govindraj Ethiraj talks to Aditi Nayar, chief economist at ICRA as well as Jawahar Bekay, managing partner at CaptiveAide Advisory.

• The Take: Why India should now think China plus 2

• Markets catch Fed fever, ride on interest rate cut hopes.

• Oil prices rise once again on war tensions.

• Economists are polling lower GDP numbers for the first quarter, why there is uncertainty here on.

• WIll GCCs eat Indian IT Services companies’ lunch?

CORE NUMBER

Rs 1.02 Lakh Crore

This is the total amount of money that foreign portfolio investors (FPIs) have poured into the Indian debt markets in 2024 so far, according to data from National Securities Depository Limited (NSDL). In August so far, an addition of Rs 11,366 crore was made, while the equities market saw a withdrawal of funds by FPIs to the tune of Rs 16,305 crore on the back of the unwinding of the Yen carry trade, geopolitical conflicts and the US recession. Analysts say that the uptick in FPI investments in the debt market is because of India's inclusion in JP Morgan’s Emerging Market government bond indices in June this year.

FROM THE PERIPHERY

—📱 Days after Telegram’s founder and CEO Pavel Durov was arrested in Paris for failing to prevent criminal activities on the app, the Indian government is probing the app. A government official told Moneycontrol that the government was investigating the messaging app over concerns of criminal activities like extortion and gambling. The platform could also be blocked based on the investigation. 

—🏠 Over the past five years, housing prices in India's top-7 cities have surged 44%, with Hyderabad and Bengaluru leading the way. According to Anarock Research, a real estate consultancy firm, the growth has accelerated, especially in the last two years post-pandemic. Hyderabad saw the steepest increase at 64%, followed by Bengaluru at 57%. Kolkata had the lowest rise at 25%. Both NCR and Mumbai experienced 48% hikes. In micro-markets, Bengaluru’s Bagaluru topped with a 90% rise, closely followed by Hyderabad’s Kokapet at 89%, and Bengaluru’s Whitefield with an 80% increase from 2019 to mid-2024.  

—🚘 Uber has been fined 290 million euros by the Dutch data protection watchdog DPA for cross-border transfer of data. The ride-hailing platform was sending personal data of European taxi drivers to the US, in violation of EU laws. Uber called the fine “completely unjustified”, adding that the company would appeal. 

—🧓 Shifting Gears. ITC Foods is launching a new range of products targeted at consumers over 45 years of age, under the brand “right shift”, The Times of India reported. The health-oriented range will include upma, oats, cookies and atta. The opportunity is big, the FMCG company says, with 40% of India crossing 45 years of age by 2050. This move is in line with ITC’s larger goal of creating a future-ready portfolio of products to address new market needs.  

–📉 Shares of One 97 Communications tumbled 8.88% to Rs 505.25 on the Bombay Stock Exchange (BSE) after reports surfaced that founder Vijay Shekhar Sharma received a show-cause notice from SEBI. According to Business Standard, The notice, tied to Paytm's 2021 IPO, alleges misrepresentation of facts and non-compliance with promoter classification norms. Sharma had reduced his stake from 14.6% to 9.6% before the IPO, but SEBI questions whether he should have been classified as a promoter. The probe, spurred by RBI inputs, also scrutinises former board members and the granting of ESOPs to Sharma post-IPO.

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