India’s Employment Crisis

Nandan Nilekani who is one of the founders of India’s most respected company Infosys and the architect of India’s universal digital indentity infrastructure, thinks that India’s employement and growth problems can be solved by focusing on services and India’s domestic consumption. He says that industry will not be able to solve the employement crisis, as huge global overcapacity already exists in industry and the export led growth model is no longer feasible with a rise in protectioism in develped countries, increased automation and growth in robotics. This is a statement that I agree with.

Read more about the Indian IT industry here.

What I don’t agree with is when he says that India should focus on making services the sole engine for growth. Tourism, education and health will enable growth and employment. The differentation for India will be that most of the transactions will be low cost by building on the Aadhar, Jan Dhan and mobile phones. This will enable to gain an edge over other nations. However, I am not at all convinced by his argument. The platforms that he is talking about such as Amazon, Google and Uber are all owned by foreign companies. They keep all the margins and profits, leaving little for the Indians using these platforms. Rather than being service coolies, Indians need to create those platforms.

Also read India’s Employment Crisis takes a turn for the worse with E-Commerce Industry Losses.

Tourism, education and health cannot be growth engines, given the pathetic infrastructure and systematic issues facing India. Massive population and inadequate resources are a huge problem that first needs to be surmounted, in order to grow anything whether it be industry or services. With all pervasive corruption and inefficiency at the ground level and a huge parasitic government, a radical change cannot occur. The increase in pay for governemnt servants has compouned the problem, making the inefficient government sector eat up a bigger chunk of resources without adding anything at all to productivity. This is sending wrong signals to the economy and the citizens.

Aadhar and digitization will not alone solve the problems on the ground. India needs to tackle the problems at the source, which is corruption, infrastrcutre and population. The new NDA governemnt has made a number of incremantal changes, which needs to be appreciated. However, India needs some radical surgery in order to grow quickly. Publishing high growth GDP numbers alone will not help. There should be growth on the ground and more importantly, India needs growth in employment not growth of the already large conglomerates ruled by billionaires.

The India Stack – a set of programming interfaces built on the trifecta of government-created people’s bank account of Jan Dhan, Aadhaar and mobile phones – in brief JAM – enables paperless, presence-less and cashless transactions. The Reserve Bank of India introduces Unified Payment Interface on July 31, allowing all payments to be made by mobile phone, which backed by JAM will lead to dramatic leaps in productivity.

Dramatic consequences will follow creating thousands of startups and billions of dollars of capitalization. Four shifts will happen. First, banking at scale because everything a bank can do, individuals can do on a mobile phone. Second, investment at scale – people can buy a mutual fund on the phone with one click. Third, credit at scale where entrepreneurs can get a loan with just a click by aggregating their own data. And fourth, skilling at scale – as platforms happen, India will have thousands, millions of people gathering skills to operate in this new economy with great strides in reading and math literacy happening at scale.

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