Indian business is getting more efficient and workers more productive. That may actually be ominous news for India, writes Samar Halarnkar.india Updated: Jun 20, 2013 11:28 IST
About seven years ago, an old-world south Mumbai hotel (it would rather not be named) senses hard times. It decides to cut costs and improve productivity — without firing anyone.
This is not easy: labour laws restrict work to eight hours. The hotel — known for its silver cutlery, polished daily — faces union unrest when it announces there will no longer be a sweeper on each floor with the waiter and ‘helper’, a junior waiter.
The helper will now sweep rooms and clean bathrooms. In a country wedded to caste and hierarchy, this is revolutionary. The union and management reach a compromise: the younger helpers will clean and sweep, the older helpers will not. Multi-skilling is now common.
Waiters double up as watchmen, work at the bar, banquets and the lounge. In the kitchen, where there were once English, tandoori, staff and Indian cooks, there are now just cooks, fewer of them. The total number of employees is down from 160 to 135.
Those who retired or resigned were not replaced. “Productivity has gone up a lot, that’s why we are surviving,” says one of the owners.
To be sure, new hotels across India have generated lots of employment, but in general, over the last seven years or so, existing companies have navigated the growing current of hard times by becoming leaner and more efficient, from automating factories to hiring fewer people and getting more work out of them.
A widely quoted government statistic — which the Centre initially tried to discredit — tells us that India added only half a million jobs over the five years to 2010.
It’s easier to understand this painfully slow growth in employment when you consider that labour became 34% more productive over the same period.
Over the last decade, India’s output per worker almost doubled, according to the International Labour Organisation.
The do-more-with-less mantra affects the nation’s elite employees as well, whether bankers or engineers. Consider the challenges facing India’s bellwether $108-billion information-technology sector.
To earn $1 billion in 2003, India’s large software companies needed 37,798 engineers, according to calculations done by Mint and Nasscom, a lobby group, earlier this week.
In 2012, no more than 19,783 engineers were needed to earn $1 billion. This year, the IT industry will hire fewer workers than it did last year.
Indian techies are becoming casualties of automation. It’s no different with auto, steel and other workers in what is called the organised sector, which ironically struggles to find employees with the right skills.
As this column previously reported, government data reveals that the average number of workers per factory dropped by six in a year, between 2009-10 and 2010-11.
Despite the national belt-tightening and the current global economic gloom, the Indian economy is predicted to do reasonably well in 2013, with a million new jobs likely.
It’s hopelessly inadequate: India needs more than 10 million jobs every year over the next decade, according to a Planning Commission report.
India’s problems, it appears increasingly evident, require solutions from within. A global economic high tide, even if it occurs, is unlikely to be enough to lift our boats.
Nothing lesser than an extensive reskilling and restructuring of the economy will help India avert the coming crisis, the squandering of its demographic dividend, the looming inability to deploy the world’s largest and youngest working-age population.
A 2010 report from Crisil, a consultancy, predicts that if India continues with business as usual, about 430 million people from the working-age population will be unemployed or unemployable in the next 17 years.
“If the current pattern of employment distribution across agriculture, industry and services continues, employment in services would rise from 135.5 million in 2010 to around 177.4 million in 2030, whereas labour demand in the industrial sector would only increase from 91 million to 119 million over the period,” says the report.
In short, Indian industry is likely to become more efficient and productive. It will do things better, cheaper and quicker.
What it won’t do, not without a great expansion of manufacturing, is contribute significantly to the 100 million jobs that India requires over the next decade.
That expansion only has a chance if there are extensive changes in obvious sectors, such as education and healthcare — the fuel to develop human capital for the next, great investments — and not-so-obvious but equally important areas, such as housing for those who will flood the cities looking for jobs, lives and answers for their aspirations.
It is instructive to consider housing. For instance, a clear school of thought that questions the wisdom of promoting home ownership has emerged.
In a blog earlier this month, Ajay Shah, a professor at Delhi’s National Institute for Public Finance and Policy, argued that owning a house restricts the mobility of labour.
The mainstream view of policy-makers, that home ownership is a good thing, needs to be questioned, Shah wrote.
At the IFMR Finance Foundation in Chennai, researchers Anand Sahasranaman and Aditi Balachander used a mathematical model to find that rental housing lowers risks for urban low-income households.
The larger point is that without a major reboot in conventional wisdom, policy and implementation, India has little chance of finding answers to its explosion of aspirations.
As the owner of the south Mumbai hotel explains — mirroring the national irony of burgeoning joblessness amidst corporate anxiety over the shortage of employees with the right skills — it is a good thing they cut positions.
Earlier, a tenth of the jobs were filled by employees’ children. Now, the children do not want to be waiters and cooks. A captain’s daughter is an engineer with Infosys, Hyderabad, an Indian dream gained.
Could Indian IT’s new, efficient avatar now imperil that dream? The revolution of ever-spiralling aspirations is throwing up more questions than India is presently prepared to answer.
Samar Halarnkar is a Bangalore-based journalist.
The views expressed by the author are personal.