Skills, Jobs Ahoy

On the eve of the Union Budget 2024 presentation, I sat down for a chat with Mike Cannon-Brookes, Co-CEO of the $45-billion market cap enterprise software company Atlassian. Right from the get-go, he made it clear that his enterprise was in India to create and do R&D from India for the world. He also said that his company was clearly in the country to tap into its immense talent pool, which continued to grow despite the global economic pressures and cycles affecting the corporate world everywhere.

The Nasdaq-listed company recently launched an AI-powered product, its first in some time, with a major contribution from its Indian team. These stories of building tech from India are no longer a rarity for global companies as many are setting up Global Capability Centres (GCCs) in India and inducting thousands of Indians in their workforce. The skilled workforce in the country can be categorised into three groups: ‘skilled and employed’, ‘skilled and heading abroad’ in search of greener pastures (aka brain drain), and the ‘unskilled and unemployed’.

Atlassian addresses the first bucket of ‘skilled and employed’ in India. “We are expanding our AI initiatives, and much of this growth is driven by the exceptional talent, hunger for learning and high skill levels found in India. These attributes are quite unique for us, making India a critical priority as we look to the future,” Brookes tells BW Businessworld.

Meanwhile, last bucket of the ‘unskilled and unemployable’ population was highlighted in the Economic Survey 2023-202, which found that 65 per cent of India’s growing population is currently under 35 and most of them lack the skills needed by a modern economy. Although the employability rate of the youth has improved from 34 per cent to 51.3 per cent over the last decade, it still means that 1 out of 2 young Indians are unemployable. 

The findings of this survey became the bedrock of the Union Budget 2024, which placed a heavy emphasis on skills, jobs and employment like never before. During the budget presentation, Finance Minister Nirmala Sitharaman announced a comprehensive package comprising five schemes and initiatives aimed at facilitating employment, skilling and other opportunities for 4.1 crore youth over a five-year period. The central outlay for these schemes was set at Rs 2 lakh crore, with an overall budget provision of 1.48 lakh crore specifically allocated for education, employment and skilling for the year. 

The detailed plan includes internships, incentives for employers, involvement of EPFO, incentives for first-time employees and women, skilling programmes and even skilling loans. Quite comprehensive, to say the least, and India Inc has largely reacted positively to this aspect of the budget and the Centre’s acknowledgment of the gap.

However, the feasibility of these plans is quite questionable. For example, let’s look at the internships. A significant concern is that, despite the incentives, companies would be reluctant to onboard interns when they lack the necessary skills. The presence of an incentive alone will not be enough to address the underlying issue of skill gaps, potentially rendering the initiative less effective.

Swati Vaidya, Assistant Professor and Head, Department of Economics at B. M. Ruia Girl’s College in her tweet on 24 July 2024 rightfully critiqued the budget’s plan to create one crore (10 million) internships over five years across the top 500 companies. She noted that the proposal would require each company to provide about 4,000 internships annually. This would mean that interns could constitute over 27 per cent of the current workforce in each company, which she argued is impractical and could strain company operations. She also pointed out that companies would need to use their CSR funds for intern training, potentially diverting resources from other important CSR activities.

Answering The Obvious 

Employment can often be viewed through the lens of individuals seeking jobs, but on a macroeconomic scale, its impact is far broader and more significant. Now, it’s obvious that there is a given, current need to reduce the fiscal deficit and India faces limitations on increasing public spending or providing stimulus. During the pandemic, fiscal and monetary policies played a huge role, but now the focus must shift to minimising the economic contraction caused by reduced expenditure. 

With the fiscal space constrained, the burden of driving investment falls more on the private sector, which faces challenges due to global competition and low demand visibility. Of course, this is further exacerbated by the influx of excess capacity from China, which impacts local businesses and reduces their ability to invest.

To address these challenges, boosting domestic consumption and exports is crucial. Improved employment quality is essential to increase incomes and drive consumption, which can then stimulate investment. Additionally, the growing capital intensity in manufacturing needs to be addressed by rebalancing incentives between capital and labour. This requires a comprehensive approach, including enhancing education, skilling and employability to improve labour quality and create a more favourable environment for both consumption and investment. But this is a long-term endeavour.

This idea strikes a chord with Aparna C Iyer, Chief Financial Officer at Wipro as well, who lauded the government’s initiatives. In addition to fiscal prudence, Iyer pointed out the budget’s special focus on enhancing employability, skilling and job generation, alongside a focus on energy security and infrastructure development. “If you’re able to spend in all the right directions, your capex spends are far more powerful, that can give impetus to growth,” she says.

Workforce Will Grow

Jobs are a global problem and it is a pervasive issue across many countries. Anybody looking at the growth of jobs in India and the charts related would concur that they will be on the uptick, albeit gradually, in the years to come.

If we look only at the GCCs, reports indicate that these units will increase their workforce from the current 16.6 lakh to 45 lakh by just 2030. While this represents only a portion of India’s population, it points to substantial growth. Government support, alongside private sector contributions, will further support this expansion over the long term with the gap in skills, hopefully, reducing over time. Companies such as Atlassian are likely to continue their expansion in the country too, owing to its already strong talent landscape. 
With the initiatives in place via the budget, it is now imperative for the Centre to double down on implementation to ensure that there’s RoI from the schemes introduced.