Indian Economy - News & Discussion
Posted: Tue Oct 03, 2017 1:46 pm
Indian Economy - News & Discussion
Voice of the Republic
https://forum.bharatganrajya.com/
Finally, someone in GoI addressing employment generation matter-of-factly.IT, BPO no longer job creating sectors; focus on renewable and medical technology, says Jayant Sinha
According to United Nations unemployment in India will rise to 18 million in 2018 with automation as the major threat
Think service sector, think Information Technology; but don’t look at them for jobs, feels the government, which believes that automation and technology are the new areas that will push jobs in the market.
Jayant Sinha, minister of state, civil aviation, today said that the economy is “going through a paradigm shift” and that there is a lot of innovation happening.
“Right now, we are going through a paradigm shift in the economy… We are going through a fundamental and structural transformation and that’s why the job numbers, which are sort of a traditional way, are really not a good way to understand the jobs of the future…,” he said at the India Economic Summit 2017 organized by World Economic Forum and the Confederation of Indian Industry (CII).
He said that India is moving towards newer ways of employment, like micro-entrepreneurship, and that such technology-driven sectors will create jobs.
“Every time a new economic cycle starts, it’s not the old industries that really power it, it’s the new industry,” said Sinha. “Don’t look at IT services and business process outsourcing (BPO), that industry is maturing. Look at aviation, for example, or renewable energies or medical technology, that’s where the new growth is going to come from”.
Modi government rose to power in 2014 on the pretext of job creation. It has now taken a stand of being a “job enabler” and not a job “creator”.
Sinha said that the government can only enable people to apply for jobs but can’t create direct employment.
Also read: Economic Survey: Employment creation a great challenge
According to Associated Chambers of Commerce and Industry of India (ASSOCHAM), a trade body, Indian labour market sees an addition of approximately 72 lakh people to potential workforce.
Data revealed by Centre for Monitoring Indian Economy, a business information company that produces business and economic database, also showed that potential workforce bloated by 9.7 million people during January to April, 2017 to touch 960 million mark.
It was, however, reported that 1.5 million people lost jobs during this period.
“While the number of persons employed fell by 1.5 million, the number of people who declared themselves unemployed fell much more - by 9.6 million. As a result, the labour force fell by 11 million,” the data said.
A recent study by United Nation’s International Labour Organisation’s study said that “unemployment in India is projected to increase from 17.7 million last year to 17.8 million in 2017 and 18 million next year”.
Unemployment rate has been rising in India and stood at 4.5 percent on October 3, higher from 4.47 percent during September as per BSE data.
A study by World Economic Forum also shows that beyond 2020, world would be looking towards more technologically driven jobs rather than manual tasks.
As per the report, cognitive skills would be required as much as 52 percent for any job by 2025, while manual skills would be reduced to only 31 percent.
India’s big business conglomerates, from the Tatas to the Birlas to the Ambanis and many others, are products of the licence-quota-permit raj. When business opportunities were not open to all comers, when access to capital depended on the blue chip nature of your entrepreneurial parentage, and when multi-point tax structures (both excise and sales tax) were in vogue, it made sense to keep all businesses – whether related or unrelated – in one conglomerate, or even one company.
But that’s no longer the case. Conglomerates have become slow-moving leviathans as they are overloaded with debts, and unrelated businesses keep demanding lots of equity to grow. In a brilliant articulation of the conglomerate dilemma, N Chandrasekaran, chairman of Tata Sons, told a sister publication of this newspaper that the Tata group needs to reduce its complexity. He would rather see the Tatas as focussed on five, six or seven broad businesses, and not as a conglomerate of 110 or 120 companies.
What he said about the Tatas may be equally true of the Birlas, Ruias, GMRs, GVKs or any of the other major business groups, all of which diversified into multiple businesses when the going seemed good, but are now having to downsize, sell or seek new partners.
Put simply, in the age of hyper-competition and economic slowdown, depending on debt for growth is simply not on. One of the key reasons why India Inc is not investing is because it is busy disinvesting, recovering from an excess of diversification and over-investment based on borrowed capital.
Conglomerates face tougher dilemmas in this age because of the sheer diversity of the business portfolios they hold. In the past, their sheer size was an advantage, since that gave investors comfort that their loans or equity investments were safe. But at a time when the Reserve Bank of India is forcing banks to resolve bad debts by seeking recourse to the National Company Law Tribunal, which administers the Insolvency and Bankruptcy Code, this comfort is gone.
Banks will lose money while resolving debts, but so will investors, and this means conglomerates have to downsize and focus in order to restore their old standing with lenders and investors. Even internally, conglomerates face dilemmas that they never did before.
The most important decision a business group has to make is the allocation of capital between different, unrelated businesses in the group. In the case of the Ruias, for example, they had interests in oil refining, steel, telecom, power and many other sectors. They exited telecom well in time to emerge winners from it, but they have had to sell their biggest business – oil – recently to Russia’s Rosneft to reduce group debts. Their steel plant too is being taken to the bankruptcy court.
Elsewhere, GVK had to sell its stake in the Bengaluru airport to achieve the same end, and the Jaiprakash Group had to do the same with its cement assets. The Tatas, despite having no problem raising equity or resources from banks, now have the unenviable talk of writing off their telecom business, which the Tata Sons chief clearly says is now up for divestment.
The problem is simple: when banks lend to you because you are a big group, it means you are putting the entire raft of businesses at stake to get larger and larger loans for cash-hungry pet projects. Vijay Mallya, for example, staked large shares in his very profitable spirits business to invest in Kingfisher, and is now paying the price for it.
A related problem in conglomerates is cross-holdings between group companies. Equity in new ventures has come not from one promoter company, but also from related companies. This means the capital invested by Company A is blocked in Company B, even though Company A has no interest in Company B. If many group companies have invested in a failing business everybody has to take a loss, which may well upset shareholders in those companies.
Another issue is the stock market. Most conglomerate ventures are listed entities, and investors have trouble understanding their finances. When you are a conglomerate, especially a large company invested in multiple, unrelated sectors, how does an investor figure out your intrinsic value?
An interesting case is that of Reliance Industries, which is into oil, petrochemicals, refining, retail, telecom and media, among other things. As an investor, you now have to figure out the fortunes of each one of those underlying sectors to know whether the current share price of the company is too low or just right. What if you want to invest in just the oil business and not the media part; or you are keen on telecom, but not retailing?
For the company, life becomes more complex as it has simply too many stakeholders, both internally and externally. India’s conglomerates were appropriate for another era, when businesses were small, and there was safety in aggregating the risks in one larger entity called the business group which could vouch for the creditworthiness of its component companies.
Today, the same structure is slowing down the progress of larger groups which have become too complex and entangled with one another to manage efficiently. Debts in one unviable entity are dragging down the performances of more profitable ones.
India’s conglomerates need to slim down to reasonable sizes and focus on a few core businesses so that the viable parts can grow faster. Right now, complexity is slowing them down.
What is not stated is some of these Big shopkeepers(T Nagar area) have had NPA worth crores with Nationalised Banks since 2008 which was window dressed until a few years but kept doing their Business and enjoying the cashflows.Schmidt wrote: ↑Wed Oct 11, 2017 10:28 amhttp://www.thehindu.com/news/cities/che ... 837450.ece
Drab Deepavali season has shopkeepers worried
How does zig-zag data prove anything?MehtaRahulC wrote: ↑Mon Oct 23, 2017 10:48 ammonthly cement production after oct-2016 in thousand tons
.
https://tradingeconomics.com/india/cement-production
.
sep-2016 = 22627
oct-2016 = 24262 <------
nov-2016 = 20516
dec-2016 = 22001
jan-2017 = 22480
feb-2017 = 21454
mar-2017 = 25208
apr-2017 = 23773
may-2017 = 25397
jun-2017 = 24591
jul-2017 = 22704
aug-2017 = 21993
.
So overall, cement production seems to have decreased. One can post annual data if one has. This is the best I could google.
That is absurd. This is how license raj came into being - post a gobirmant inspector at every nook & corner to catch evil Hindu baniya evading taxes. Where did that land us?
SirChandragupta wrote: ↑Mon Oct 23, 2017 11:11 amThat is absurd. This is how license raj came into being - post a gobirmant inspector at every nook & corner to catch evil Hindu baniya evading taxes. Where did that land us?
If a shopkeeper is jacking up prices it is because he wants to have the same profit as he made earlier, perhaps without tax. If earlier he charged X amount to make Y profit, now he will charge X+18% to make the same profit. Why would he shell out the 18% out of his own pocket? If the consumer doesn't like it, he can go to another shopkeeper who can provide the same stuff cheaper. Pure market economics.
Fair argument, but the fact is that GST has caused significant increase in price for these commodities.Chandragupta wrote: ↑Mon Oct 23, 2017 5:34 pmThat rural daily wage earner will get looted one way or the other, no GST play there. If you want to counter that, you need better rural infra, connectivity and electrification. Entirely different issues than taxation. No easy solutions there. Government tried public distribution and we all know how that turned out. Modi's way is the right way - of improving rural economics.