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Double trouble at home, abroad

Double trouble at home, abroad
United States President Donald Trump's latest executive order, which seeks to tighten norms for the issuance of H-1B visas, may force Indian IT firms to lay off staff at home, according to a recent report by the Associated Chambers of Commerce of India (Assocham). Nearly 86% of the H-1B visas issued for workers in the computer space go to Indians. This figure will now be scaled down to about 60% or even less, the report said. Following Trump's executive order, Australian Prime Minister Malcolm Turnbull also announced that he was abolishing the 457 visa program, a migrant worker scheme very popular among Indians looking to move to Australia. As experts on the subject have argued, this is double standards on the part of these developed economies, which are seemingly fine with the free flow of capital, but then build walls when it comes to the free movement of labour. These developments also suggest that New Delhi has failed to convince foreign governments in accommodating Indian interests when formulating policy. Under these changing circumstances, India will have little choice but to generate more employment at home. How is the ruling National Democratic Alliance government performing on this front?

These developments also suggest that New Delhi has failed to convince foreign governments in accommodating Indian interests when formulating policy. Under these changing circumstances, India will have little choice but to generate more employment at home. How is the ruling National Democratic Alliance government performing on this front?


One of the major planks that Prime Minister Narendra Modi campaigned on in the run up to the 2014 general elections was the promise of more jobs. Going by the government's assessment, it isn't doing very well on this front. In reply to a question in Parliament earlier this year, Minister of State for Planning Rao Inderjit Singh said that overall unemployment was rising, but the rate was highest among the Other Backward Classes (OBCs). The overall unemployment rate in the country is 5 percent, while it is 5.2 percent for OBCs. From 3.8% in 2011, the unemployment rate has only gone up. At a time when 12 million join the labour force every year, experts are worried about the implications jobless growth could have on India's social fabric. The economic reforms of the early '90s, which saw India take its first steps towards liberalisation, sought to encourage the growth of labour-intensive industries, job creation and reduce income inequality. Even though the first decade of this millennium saw the fastest rate of growth ever for the Indian economy under the previous United Progressive Alliance government, the rate of job creation was abysmally low. Ideally, high economic growth should translate into greater employment opportunities. In its first three years in office, the Modi government has struggled in coming to grips with the spectre of jobless growth. There has been no significant pickup in private investment, and credit growth remains in the doldrums. Measures like demonetisation have resulted in severe job losses across the informal economy. However, this is not to suggest that the government's struggles with employment generation are of its own doing. The current downswing in the global economy, allied with greater automation across various industries, have also played a significant role, and facing up to these challenges is hard for the NDA government. Nonetheless, it now has to also deal with the reality of countries like the USA and Australia turning increasingly local in hiring and assertive in getting rid of foreigners. For the remaining period of its five-year term, the challenges are indeed immense.

The economic reforms of the early '90s, which saw India take its first steps towards liberalisation, sought to encourage the growth of labour-intensive industries, job creation and reduce income inequality. Even though the first decade of this millennium saw the fastest rate of growth ever for the Indian economy under the previous United Progressive Alliance government, the rate of job creation was abysmally low. Ideally, high economic growth should translate into greater employment opportunities. In its first three years in office, the Modi government has struggled in coming to grips with the spectre of jobless growth. There has been no significant pickup in private investment, and credit growth remains in the doldrums. Measures like demonetisation have resulted in severe job losses across the informal economy. However, this is not to suggest that the government's struggles with employment generation are of its own doing. The current downswing in the global economy, allied with greater automation across various industries, have also played a significant role, and facing up to these challenges is hard for the NDA government. Nonetheless, it now has to also deal with the reality of countries like the USA and Australia turning increasingly local in hiring and assertive in getting rid of foreigners. For the remaining period of its five-year term, the challenges are indeed immense.

Measures like demonetisation have resulted in severe job losses across the informal economy. However, this is not to suggest that the government's struggles with employment generation are of its own doing. The current downswing in the global economy, allied with greater automation across various industries, have also played a significant role, and facing up to these challenges is hard for the NDA government. Nonetheless, it now has to also deal with the reality of countries like the USA and Australia turning increasingly local in hiring and assertive in getting rid of foreigners. For the remaining period of its five-year term, the challenges are indeed immense.


It is a fact that many firms are investing more in digitisation and automation—artificial intelligence, machine coding, etc. In a bid to slash costs, these companies are hiring fewer employees. However, greater automation, which is a lasting structural change to how existing businesses function, is not the only factor responsible for job cuts. Others include restructuring in many existing industries, poor investment sentiment, low capacity utilisation in the face of uncertain markets at home, abroad and weak credit generation, and greater consolidation by major firms, especially in the telecom sector. These factors could dent the aspirations of millions of young people preparing to join the workforce every year. As per recent media reports, the number of employees brought on board by the likes of as TCS, Infosys, Wipro, Cognizant and HCL Technologies this year will be 40% less as against last year—from 60,000 engineers this year against 100,000. In a separate development last year, the country's second-biggest private lender HDFC Bank cut down its staff by 4,581 employees in a single quarter. Even in the banking sector, there has been greater emphasis on automation, as algorithms reduce dependence on workers and accomplish the same task at a much faster pelt. "Over the next five years, India will need to create 12-15 million non-agricultural jobs per year. However, between 2005 and 2012, only eight million such jobs were created. Hence, the gap of 4-7 million jobs a year needs to be addressed, which is likely to rise with the rise in young people joining the labour force," a joint report by Boston Consulting Group and the Confederation of Indian Industry (CII) said. According to the Sixth Economic Census, the proportion of workers across agricultural enterprises in rural India has increased while the proportion of those working in non-agricultural jobs has declined. It is a worrying trend. Small companies are obviously in no position to take up the burden of employment generation. They just aren't productive enough. Meanwhile, many large corporate houses are submerged under a mountain of debt, sparking a circle of low growth, weak bank credit, job cuts, low output and low growth. Where does India start-up sector stand regarding employment generation? The answer is not very high, considering how influential companies like Snapdeal and Flipkart issuing the proverbial pink slip to hundreds of people in recent months. These companies are on a major cost-cutting spree while trying to save the money they have raised from investors.

As per recent media reports, the number of employees brought on board by the likes of as TCS, Infosys, Wipro, Cognizant and HCL Technologies this year will be 40% less as against last year—from 60,000 engineers this year against 100,000. In a separate development last year, the country's second-biggest private lender HDFC Bank cut down its staff by 4,581 employees in a single quarter. Even in the banking sector, there has been greater emphasis on automation, as algorithms reduce dependence on workers and accomplish the same task at a much faster pelt. "Over the next five years, India will need to create 12-15 million non-agricultural jobs per year. However, between 2005 and 2012, only eight million such jobs were created. Hence, the gap of 4-7 million jobs a year needs to be addressed, which is likely to rise with the rise in young people joining the labour force," a joint report by Boston Consulting Group and the Confederation of Indian Industry (CII) said. According to the Sixth Economic Census, the proportion of workers across agricultural enterprises in rural India has increased while the proportion of those working in non-agricultural jobs has declined. It is a worrying trend. Small companies are obviously in no position to take up the burden of employment generation. They just aren't productive enough. Meanwhile, many large corporate houses are submerged under a mountain of debt, sparking a circle of low growth, weak bank credit, job cuts, low output and low growth. Where does India start-up sector stand regarding employment generation? The answer is not very high, considering how influential companies like Snapdeal and Flipkart issuing the proverbial pink slip to hundreds of people in recent months. These companies are on a major cost-cutting spree while trying to save the money they have raised from investors.

However, between 2005 and 2012, only eight million such jobs were created. Hence, the gap of 4-7 million jobs a year needs to be addressed, which is likely to rise with the rise in young people joining the labour force," a joint report by Boston Consulting Group and the Confederation of Indian Industry (CII) said. According to the Sixth Economic Census, the proportion of workers across agricultural enterprises in rural India has increased while the proportion of those working in non-agricultural jobs has declined. It is a worrying trend. Small companies are obviously in no position to take up the burden of employment generation. They just aren't productive enough. Meanwhile, many large corporate houses are submerged under a mountain of debt, sparking a circle of low growth, weak bank credit, job cuts, low output and low growth. Where does India start-up sector stand regarding employment generation? The answer is not very high, considering how influential companies like Snapdeal and Flipkart issuing the proverbial pink slip to hundreds of people in recent months. These companies are on a major cost-cutting spree while trying to save the money they have raised from investors.

They just aren't productive enough. Meanwhile, many large corporate houses are submerged under a mountain of debt, sparking a circle of low growth, weak bank credit, job cuts, low output and low growth. Where does India start-up sector stand regarding employment generation? The answer is not very high, considering how influential companies like Snapdeal and Flipkart issuing the proverbial pink slip to hundreds of people in recent months. These companies are on a major cost-cutting spree while trying to save the money they have raised from investors.


What can the Modi government do to improve the situation? "Logically, it needs to work on areas that create hurdles for new private investments, aggressively push public spending to create more demand and promote local entrepreneurship that can result in the creation of more jobs. The changes in the global employment market will push more professionals back to their home countries creating the need for more local jobs, although it might help reducing the problem of a country losing talent," according to Dinesh Unnikrishnan, the financial editor of a popular Indian news website.
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