Demonetization – Impact on small business
An authored article of Kunal Sen in World HR Diary talks about how demonetization has impacted the small businesses.
The media generally believes that demonetization has been a political success and won the hearts of millions who think Modi is the only politician willing to take tough decisions to hit black money. Middle-class folks standing in long queues mostly seem to be willing to suffer a bit for a greater cause.
On the other hand, much has also been written about people dying for want of cash for medical care, of farmers unable to sell their produce, of weddings unable to function and of substantial distress in parts of India which function on currency notes.
What the media seems scarcely aware of is the change occurring in the small and medium enterprises (SMEs) sector.
Short term Impact
Of India’s 100 million shopkeepers, barely 2% have the machines to accept credit and debit cards: the rest are cash-based. Much the same is true for other small businesses, transporters and traders. These have all suffered a sharp drop in business. Many are parts of a value chain, starting from raw material producers and ending at the retail level. One the one hand, customers have reduced spending for want of currency notes. On the other hand, businesses do not garner enough currency notes to make cash repayments of loans or payments for weekly labour wages etc.
The enterprises have hailed the move to tackle black money circulation in the economy and expect that it will provide benefits to the sector in the long run. If their current problems last just a few weeks, they will recover. If the problems continue for longer, the damage will be substantial.
Many of these will not be wilful defaulters. They are willing to pay but cannot because of bungled demonetization. One top transport finance company says that only 60% of normal payments are coming in. Some of the smallest micro-finance loans, entailing a weekly repayment of a few hundred rupees, are being repaid because the women borrowers are able to garner notes worth Rs 300-400. But larger borrowers who need to repay instalments of over Rs 1,000 say they cannot find the currency notes to do so.
The RBI lays down strict rules for finance companies, which have to classify loans overdue beyond a point as dubious or bad loans, and set aside money to cover the gap. The RBI can relax its rules for financial provisioning, and create ample space and time for small businesses and small finance to recover. What look like defaults should be formally recognized as exceptional events arising out of demonetization, not as inability to pay?
Long term Impact
In the long term sense, the war on black money has hugely positive implications for India’s formal jobs because 100% of net job creation in the last two decades has happened in small, low-productivity enterprises; of India’s 6.3 crore enterprises, 2.4 crore do not have an office or address, only 85 lac have any form of tax registration, only 15 lac pay the mandatory Provident Fund, and only 18,000 companies have a paid-up-capital of more than 10 crores, only 45000 companies have ever posted a job on any job portal in the country
Most of our enterprises remain small and informal, 85% of our manufacturing is done in companies with less than 50 employees. This poses huge productivity challenges, if you rank manufacturing companies by size, firms at the 90th percentile and 10th percentile have a 22 times difference in productivity; firms that are not productive cannot pay the wage premium. Productivity comes from the access to talent and credit that comes from formalization. Over the next decade it is anticipated that the number of India’s enterprises will decline by over 50% ending the self-employment that is self-exploitation and low-productivity informal firms that operate in cash. The US economy is more than 7 times our size yet has 1/3rd the number of our enterprises because informal enterprises find it very hard to exist and exploit workers.
Entrepreneurs can create two kinds of companies– a baby or a dwarf. Both start small but one is going to grow. The difference between a baby and a dwarf finally comes down to not more food or money but their DNA. India has remained a country of corporate dwarfs.
Analysts suggest that many small businesses will not be viable in the white economy because their survival depends on tax or labour law arbitrage. A reduction in the number of enterprises may be welcome; the destruction of low productivity informal enterprises that don’t pay minimum wages or provide safe working conditions and leave is welcome. Demonetization destroys past gains of informality; complementing this with infrastructure building and ease-of-doing business interventions that reduce regulatory cholesterol could raise formal employment from 10% of our workers to 50% in the next decade.
This article was published in World HR Diary: https://goo.gl/qzrexq
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Read MoreGST Report
An article in Economic Times talks about the Report of GST Bill and Jobs by TeamLease; along with inputs from Rituparna Chakraborty.
The implementation of the Goods and Services Tax (GST) will lead to 11 per cent growth in hiring activities, says a report released today.
HR services provider TeamLease said that GST would not only have a positive impact on the ease of doing business but also propel formal job creation.
“Adoption of GST will lead to an 11 per cent growth in hiring across sectors. Further, from a region perspective though marginally South India will top the job generation chart,” it said.
Automobiles, logistics, home decor, e-commerce, media and entertainment, and cement sectors are projected to create 11-18 per cent additional jobs annually after implementation of GST.
In the case of IT/ITeS and BFSI segments, the growth rate has been pegged between 10 and 12.5 per cent.
According to TeamLease, around 10 to 13 per cent additional jobs are expected to be created every year by consumer durables, pharmaceuticals and telecommunications sectors.
“The uniformity and the reduction in the average tax burden offered by GST will provide a great impetus to employment creation,” TeamLease Services Co-Founder and Executive Vice President Rituparna Chakraborty said.
The report noted that the predictability of cost of products manufactured or services rendered across the country would improve enterprise productivity.
This would also trigger expansion of services, capacity and product ranges, resulting in a subsequent increase in manpower requirement, it added.
With GST, TeamLease said revenue collection from general sales tax would grow from the current level of 6.3 per cent to 11.49 per cent.
“Service tax, central excise and customs will also witness growth leading to greater funding towards workforce welfare and sustained job creation initiatives,” the report said.
The study, aimed at understanding the impact of GST on job creation, covers 11 industry verticals including BFSI (Banking, Financial Services and Insurance), automobile, telecommunication, pharma, IT/ITes and e-commerce.
This article was published in Economic Times
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Read MoreJobs vs Wages
An authored article of Manish Sabharwal in Indian Express talks about how the creation of high-paying private sector jobs is being murdered by three faultlines in wages: Government vs private, nominal vs real, and gross vs net.
Three faultlines in wages sabotage private formal job creation. Demonetisation will undo some damage.
Two events that trigger the most predictable, irrelevant and frenzied media circus around jobs are the application numbers for a government recruitment advertisement and small moves in the official unemployment rate. Both are irrelevant; India doesn’t have a jobs problem but a wages problem. Our official unemployment rate of 5 per cent is not a fudge and anybody who wants a job has one; they just don’t get the wages they want or need. The creation of high-paying private sector jobs is being murdered by three faultlines in wages: Government vs private, nominal vs real, and gross vs net.
Why? Because we estimate that almost 85 per cent of the 30 lakh applicants with PhDs, degrees, etc for government peon posts in Uttarakhand recently already had a job (they were chasing above market wages with the additional upside of an employment contract that is marriage without divorce). Because we know that a child equates a salary of Rs 4,000 per month in Gwalior with Rs 18,000 in Mumbai (the difference in not salary but cost of living reimbursement for rehna, khaana and office jaana). Because we know that applicants in job fairs make decisions on haath waali salary rather than chitthi waali salary (there is a 45 per cent difference between gross and net wages for poor-value-for-money statutory deductions). Let’s look at each faultline in a little more detail.
One, government vs private wages. People at the top of the government get paid too little but people at the bottom of the government get paid too much. Unfortunately people at the bottom are 85 per cent of the numbers and greatly distort the labour market because Class 3 and 4 employees get paid more than 200 per cent of their private sector counterparts for the same job not including low performance accountability and high job security. The huge number of government job applications is not people running away from insecure low-paying private sector jobs but people running towards overly secure high-paying government jobs. Government employment should be public service with reasonable wages; not a rigged rate like LIBOR that distorts the market.
Two, nominal vs real wages. Since we cannot take jobs to people in the short run, we need to take people to jobs. But the migration to cities is being retarded by the huge mispricing of land that directly affects living, eating and commuting costs in India’s few job magnets (we only have 50 cities with more than a million people versus China’s 375). The economic wastelands of Mumbai, Delhi, Chandigarh can’t compete with job magnets like Gachibowli, Mohali, Gurgaon and Bangalore because the new clusters combine an infinite supply of mixed use commercial and residential real estate (happiness economists suggest that commute time is a key component of happiness).
Three, gross vs net wages. A monthly salary of Rs 15,000 per month in a cost-to-company salary world only ends up as a Rs 8,000 bank credit because employers are required to make mandatory deductions of 45 per cent of salary for poor value programmes like provident fund, ESI, LWF, EPS, and much else. Government data suggests that workers with annual incomes of Rs 1.8 lakh do not have any saving and cannot live on less than half their salary; consequently they prefer working for the informal sector where haath waali salary is equal to chitthi waali salary.
These faultlines murder high-paying formal private jobs and we need three regulatory interventions: Faster urbanisation, lower regulatory cholesterol, and broader human capital. Faster urbanisation means an increase to the number of Indian cities with more than a million people from 50 to 200; bad urbanisation is better than no urbanisation but high quality urbanisation like having real mayors, robust city finances, etc could create the virtuous cycle of higher formalisation, higher productivity and higher wages.
Making bribing a core capability for builders has been bad for formal job creation and labour migration and demonetisation will bring down land prices, accelerate construction, and raise labour mobility. Land was the most inefficient and unfair of the three factor markets of land, labour and capital and demonetisation is a wonderful intervention. Lower regulatory cholesterol for job creation is important because most of our workers work in low-productivity enterprises that are not productive enough to pay the wage premium; our 6.3 crore enterprises only translate to 18,000 companies with a paid-up capital of more than Rs 10 crore. Human capital is key; neglecting primary school education for decades after Independence is a mistake being amplified by the new world of work that disproportionately values reading, writing, arithmetic and soft skills.
As the long-term plans for formalisation, urbanisation and human capital yield results, it’s time for a time-bound monitoring on three overdue and impactful interventions in regulatory cholesterol by the ministry of labour. First, we must overrule its self-serving case for an Establishment Number and replace the 27 different numbers issued to every employer with a single Universal Enterprise Number. Second, we must set a date for 100 per cent paperless, presenceless, and cashless compliance for all state and Central labour laws. Second, we must end the shameful stonewalling of the ministry of labour of the provident fund and ESI reforms announced in the budget by making employee contribution to the provident fund voluntary and creating competition for ESI and EPFO by allowing employees to choose alternatives like NPS and health insurance.
Recent youth unrest — the idealisation of Burhan Wani by Kashmiris and the reservation agitations by Patels, Jats, Gujjars — have roots not in a job emergency but a formal job emergency. Gandhiji said the difference between what we do and what we are capable of doing would suffice to solve our problems. Time to remind the ministry of labour.
This was published in Indian Express
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Read MoreRituparna Chakraborty Named Winner Of The Inaugural Telstra Business Woman In Asia Award
An article in Business World talks about Telstra choosing Rituparna Chakraborty, EVP & Co-Founder, TeamLease Services Limited as the winner of Business Woman in Asia Award.
At the Telstra Business Women’s Awards 2016 Rituparna Chakraborty from India was announced as the winner of the inaugural Telstra Business Woman in Asia Award.
Rituparna Chakraborty is a co-founder of TeamLease Services, one of India’s leading providers of human resource services. With a vision of “Putting India to Work”, the company enables young workers to have a formal job so that they can have secure wages, social security and healthcare. Rituparna is recognized for making a significant impact in India by influencing a change in labour laws in the country to enable apprenticeships. With her effort, TeamLease has employed 30,000 apprentices who have the opportunity to move on with enduring careers.
“Putting India to work has been a big challenge but it also represents a huge opportunity for me to transform the labour force of India. We need more women in leadership to influence change in the country,” said Rituparna Chakraborty.
“Winning the Award means a lot of responsibility for me, especially to inspire women to overcome gender inequality by not giving in and asking for what they want. I encourage women to believe in themselves and do not give up easily.”
Cynthia Whelan, Telstra’s Group Executive of International and New Businesses, said the new Asia Award was a significant milestone for the Telstra Business Women’s Awards and had already been a great success in celebrating brilliant women in Asia.
“In India young women now have an inspiration role in Rituparna Chakraborty who has helped young people enter the workforce. The idea of apprenticeship is a great way to nurture innovation and drive further growth for a developing country like India,” said Ms Whelan.
The other the finalists of the Telstra Business Woman in Asia Award are: Anu Sheela Themudu from iGene (Malaysia), Beth Lui from APEC Schools (the Philippines), Gabrielle Costigan from Linfox International Group (Thailand), Kimberley Cole from Thomson Reuters (Hong Kong), Marion Fromm from Cambodian Harvest Dried Fruit Co., Ltd (Cambodia), and Shinta Witoyo Dhanuwardoyo from Bubu.com (Indonesia).
“As a member of the Telstra Business Women’s Awards Alumni myself it is my pleasure to welcome the Asia Award finalists to join the network of more than 2,000 women who have been award finalists over more than two decades. This is an amazing group and together we will continue to look for ways to inspire the next generation of business women and address barriers that stand in the way of their success,” said Whelan.
This article was published in businessworld.in
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Read MoreWomen More Sympathetic Towards Teammates Says This HR Company’s Woman Founder
A feature story about Neeti Sharma, SVP, TeamLease Services Limited; in Entrepreneur Magazine.
Neeti Sharma, the co-founder of Teamlease Services – India’s top recruitment – says while management capabilities remain same for men and women managers, women are more sympathetic towards their team members.
She calls women more approachable, more creative and better at relationships and networking.
Sharma, who has over 15 years of experience in the field of human resources, says India continues to have a higher male entrepreneurship ratio as compared to their female counterparts.
But much has happened in the areas of technology and investments, which has enabled women entrepreneurs to step out in the entrepreneurial world on their own says Sharma.
Ministry of micro, small & medium enterprises has indicated in their 2014-15 annual report that the percentage of women entrepreneurs is only 7% of their total enterprises. However, the number of female entrepreneurs has been on the rise especially for the last decade or so.
Sharma says while traditionally most rural women have been working independently on their farmlands and continue to do so; many service sectors such as IT / ITeS, Ecommerce, BFSI, R&D, MSMEs are seeing a definite increase in women entrepreneurs.
At a time when young women are taking the entrepreneurial leap in India, Sharma says women can do a lot better if they have adequate information about available opportunities, decent market linkages, and adequate financial support. A German study indicates that investing in women brings in more economical and non-economical returns compared to investments in men, as women are more likely to share their benefits with their children, communities, and society at large.
An experienced HR firm can play a crucial role in bridging this gap by offering guidance, access to resources, and training programs tailored for aspiring women entrepreneurs. Moreover, a forward-thinking HR firm can help design inclusive hiring and development strategies that support women in scaling their ventures and building sustainable careers.
“On one hand, entrepreneurs are men and women and on the others investors are also men and women. Everyone needs a vibrant & viable ecosystem that enables them to perform,” says Sharma.
According to the Senior Vice-President Learning Services of the company while women are not risk averse, their businesses tend to be more. Sharma says many investors are aiming to make investments in enterprises run by women.
This article was published in Entrepreneur
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Read MoreWhy demonetisation will work?
One of the most interesting bets in Mumbai’s financial community last week was the about percentage of Rs 12 lakh crore—the total physical currency of Rs 17 lakh crore less Rs 3.5 lakh crore with banks and Rs 1.5 lakh crore in small notes—that will not be exchanged by or deposited in banks by December. This demonetisation is only the 10th of the 25 things needed, because ending black money is not a regulatory beheading but death by a thousand cuts. Not every action will work, and every action will have loop-holes that make interesting stories but are not available at volume. I’d like to make the ease that the five key criticisms of demonetization—flow — Flow vs stock, price of real estate and money, SME impact, lower consumption, and inconvenience — are more than negated by the long term effects of formalisation. Let’s look at each criticism in diminishing order of importance in more detail:
Flown stock: Analysts suggest that demonetisation is “merely” a one-time intervention that reduces stock and does not nothing about flow (the fresh creation of black money with new currency). They are right; stock and flow are two different problems with different solutions. But dealing with stock creates conditions for even more aggressive action on flow; expect further curbs on cash payments, a smaller number of high-value notes put back into circulation, the application of big data algorithms to saving, consumption, and investment data, and much else. This builds on previous actions such as goods and services tax (GST), tax deducted at source (TDS) and PAN requirements, the Undisclosed Foreign Income Act, Benami Transactions (Prohibition) Amendment Act, multiple multilateral information exchange agreements, ease of doing business, and the voluntary disclosure scheme. None of them are perfect or complete alone, but seen together, the flow plan is nicely complemented by this stock intervention.
Price of real estate and money: India has long mispriced land and money, and analysts suggest a huge impact on both. Saurabh Mukherjea of Ambit suggests that India’s low rental yields of two per cent reflected our black economy because globally rental yields and borrowing rates are similar. He estimates that rental yields will double as the price of residential real estate halves. Mr.Mukherjea also estimates the shift from black to white savings (banks have received 2 lakh crore in deposits on the last two days of last week) could reduce our interest rates by 350 basis points over the next four years. Ending the mispricing of real estate and money is wonderful for entrepreneurship, global competitiveness, and job creation.
Bad timing: Analysts suggest this could have been timed differently because of the rabi crop, Diwali, and Uttar Pradesh elections. A country of India’s diversity and size will always have some harvest, election, or festival coming, and a decision of this impact is probably – best made in the middle of a government’s tenure rather than too close to the next national election. An important part of the fairness of this move was secrecy and surprise; announcing the decision as soon as it was logistically possible with new currency was crucial to its impact.
SME destruction: Analysts suggest that many small businesses will not be viable in the white economy because their survival depends on tax or labour law arbitrage. A reduction in the number of enterprises is welcome. Of India’s 63 million enterprises, only 8.5 million have any tax registration, and only 1.5 million pay the Provident Fund. The US economy is eight times our size and only has 25 million enterprises. The destruction of low-productivity informal enterprises that don’t pay minimum wages or provide safe working conditions and leave is welcome. Demonetisation destroys past gains of informality; complementing this with infrastructure building and ease of doing business interventions that reduce regulatory cholesterol could raise formal employment from 10 percent of our workers to 50 percent in the next decade.
Lower consumption: This is the trickiest to estimate. Analysts agree about short-term pain but are divided on impact. Some suggest pain will be concentrated in the north, rural areas, and consumer durables, while economist Surjit Bhalla suggests no problem because individual consumption is 13,910 per month at the 99th percentile. My sense is that pain will not be as prolonged and as widespread as expected except in jewellery and real estate, that delightfully will have a long and overdue cold winter
Inconvenience: This is a real short-term pain but the amount of tears shed by rich people for the inconvenience of poor people and farmers would probably fill an ocean. Poor people don’t have black money and fanners are untaxable. This pain would have been greater before Jan-Dhan, Aadhaar, Direct Benefit Transfer, mobile banking, universal payment interface, Bharat Bill payment, new bank licences, mobile wallets, and other financial inclusion measures that are blunting the traditional defence of cash as access. A counterintuitive but effective measure to reduce this temporary pain is the (2000 note but the numbers of this high value note should be capped and this new accomplice of black money storage should be demonetised in a few years.
An important upside lost in the black money vaporisation debate is counterfeit money destruction. To somebody born in Kashmir such as me, it is obvious that much of valley terrorism is fuelled by money not printed by India. Getting rid of black money is not the solving of a sum but the painting of a picture; no single action moves the needle but a series of action can change the norms of acceptable, accepted, and expected behaviour. The boldness of demonetisation suggests a bias for action, however imperfect, after decades of rhetoric. The estimates in Mumbai’s financial betting pool of the 12 lath crore high value notes that will not be exchanged or deposited by December vary between 20 per cent and 40 per cent. Whatever the final number, as Karl Marx said “Philosophers have only interpreted the world, in various ways; the point is to change it.”
—
This article was published in Business Standard
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To train 40 cr youth by 2022, India needs 10 lakh teachers per year; here’s how to get them
For training 40 crore youth by 2022, we will require over 10 lakh skilled and certified teachers year on yearVocational skills is the one solution that everyone agrees to for solving many of our problems like skill deficit, slow economic growth, low enterprise productivity, poor workforce efficiency, career development, life satisfaction and even crime reduction.
But just any vocational education or training programme will be futile if we do not enable the stream with industry-oriented curriculum, better infrastructure, improved teaching methods and quality teachers. For a nation that aims to skill 40 crore youth by 2022, we will require over 10 lakh skilled and certified teachers year on year. So where do we get these teachers from?
To develop skilled vocational teachers, we need an environment that fosters teaching and learning of vocational education. While there are no specific courses mandated for a vocational teacher, having certain attributes will have a positive impact. To be a vocational teacher, one needs to have good organisational abilities, fine communication and presentation skills, and sound decision-making expertise. The ability to use the right pedagogy is essential. Technical acumen and work experience in a speciality subject will make the vocational teacher more desirable.
Provide adequate infrastructure. The trainer must have access to enough tools and equipment, and raw material. Enough workshops, laboratories, classrooms should be provided to enable students acquire practical experience. For example, if we are training teachers on fabrication, fitting & assembly for a manufacturing unit, then the schools need to have adequate simulators and tools such as external micrometers, vernier caliper, surface finish equipment, rules, squares, caliper thread gauges, height gauges, hand saw, drilling machines, power tools. This can help teachers get enough practise before they start teaching. If a teacher needs to be skilled and certified in a sector such as beauty & wellness, then the infrastructure should be a replica of a beauty parlour or a spa.
Provide funds. Proper funding is a prerequisite for success in creating an enabling environment in the teaching and learning of vocational and technical education. Allocation of budgets to development of vocational teachers is crucial for the success of our skilling initiatives. MSDE, NSDC, central or state ministries and industry should set aside a budget for these teacher training programmes. Can CSR be another route to funding?
Improvise signalling value of vocational skilling. In countries like Austria and Germany, over 40% of the workforce comes through vocational skilling route. But in India it is perceived as something that is for others’ children, calling for a change in mindset both at the student as well as at the industry level. All stakeholders must be fully aligned to the vocational skilling route and present a roadmap for trainers taking up vocational teaching as a career. A positive attitude towards vocational education will enhance the interest of student enrolling into a programme. A BVoc degree can change the outlook many have.
Improved training quality. This will require the curriculum to include vocational and technical entrepreneurship skills, with emphasis on acquisition of practical knowledge and skills rather than theory and certification. Competency acquisition and proficiency testing should be the core of the programme. Another area of focus during training is that vocational education graduates are expected to possess some entrepreneurial skills as well, such that they can enable their students to become entrepreneurs.
Improved training quality. This will require the curriculum to include vocational and technical entrepreneurship skills, with emphasis on acquisition of practical knowledge and skills rather than theory and certification. Competency acquisition and proficiency testing should be the core of the programme. Another area of focus during training is that vocational education graduates are expected to possess some entrepreneurial skills as well, such that they can enable their students to become entrepreneurs.
Continuous learning and skills upgrade. According to Gerhard Fischer, director of the Center for LifeLong Learning & Design at the University of Colorado, “Lifelong learning is an essential challenge for inventing the future of our societies; it is a necessity rather than a luxury to be considered. It is a mindset and a habit for people to acquire.” Teachers should be given the flexibility and resources for continuous learning, only then can they improve teaching.
Industry partnerships. We need to create closer collaboration between teacher training institutes and industry. This will encourage trainers to gain industry experience and bring that to teaching practices. There should be flexible career paths between industry and trainer institutes.
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Read MoreThe war on cash
The central bank tool of negative interest rates (charging somebody to take their money) being used for $13 trillion in rich country government debt seems like it belongs to a different universe from India; the government issued 10-year bonds last week at seven percent. But, anecdotal evidence suggests that the government’s war on black and paper money via five tools is having a wonderful side effect: Negative interest rates offered by traditional channels for holding large amounts of physical cash. I’d like to make the case that, over the next decade, these negative interest rates will be wonderful for formal job creation.
A wonderful new book, The Curse of Cash, by Harvard Professor Kenneth Rogoff suggests that paper currency lies at the heart of many of today’s intractable problems. He believes that moving to a society where cash is used less frequently and mainly for small transactions will have a positive impact on the corruption of public officials, terrorism financing, the drug trade, tax evasion, human trafficking, informal employment, money laundering, and extortion. He acknowledges cash substitutes – cryptocurrencies, uncut diamonds, gold coins, prepaid cards-but believes that physical cash is still king amongst criminals because of its absolute anonymity, portability, liquidity, and near-universal acceptance. Since 80 percent of physical cash is in $100 notes in the US -and a million dollars only weighs 10 kg and can fit into a shopping bag – he suggests that getting rid of the $100 note will make it harder to count, verify, handle, and store large amounts. Mr Rogoff believes that physical cash is used far more for illegal activi-ties than for legal ones and advocates a “less-cash” society, not a cashless one.
The government has approached its war on black money with five tools; fear, financial inclusion, policy creep, tax reform, and tax organisation reform. Fear created via the law (Black Money Bill, Mauritius Revamp, Benami Bill, etc.) is finally changing the advice of chartered accountants. Financial inclusion through Jan-Dhan, Aadhaar, direct benefit transfer, mobile banking, universal payment interface, Bharat bill payment, new bank licences, and much else are blunting the traditional, defense of cash as access. Sahara was possible because identity verification is not mandatory for deposits less than Rs. 120,000. Ninety percent of our workers are employed informally because salaries can be paid in cash. As finance becomes synonymous with smartphones, both these must end. But the biggest change has been clever use of tax deducted at source (TDS), permanent account number (PAN), and caps on cash acceptance for jewellery and real estate. The government imposed a one percent MS on land purchases beyond 150 lakh (the TDS rate becomes 20 percent if PAN is not given) and jewellery purchases beyond 15 lakh need a PAN number.
Unfortunately, the Rs. 1 lakh cap on cash acceptance for jewellery was rolled back, but thankfully, the Supreme Court-constituted special investigation team on black money has recommended caps on cash transactions (13 lakh) and cash holdings (MB lakh), which the government must accept. Chartered Accountant Shailesh Haribhakti estimates that about 20 percent of last year’s gross domestic product (GDP) growth came from cash conversion running away from real estate and gold and advocates a phased de-monetisation of the Rs. 1,000 note. The fourth tool of tax reform has made huge progress with the goods and services tax (GST), but the rate should be no higher than 18 percent. It’s also time to end deductions, move to lower TDS and tax rates. The fifth tool is furthest behind; ending corruption, randomness, and terrorism in the tax organisation is urgent and overdue, however difficult.
This war on black and physical money has hugely positive implications for India’s formal jobs. 100 percent of net job creation in the last two decades has happened in small, low-productivity enterprises. Of India’s 63 million enterprises, 24 million do not have an office or address, only 8.5 million have any form of tax registration, only 1.1 million pay the mandatory Provident Fund, and only 18,000 companies have a paid-up capital of more than Rs. 10 crore. Decent wages can only be paid by enterprises that have the productivity that comes from the access to talent and credit that comes with formalisation. Over the next decade, I anticipate the number of India’s enterprises to decline by over 50 percent, ending the self-employment that is self-exploitation, and low-productivity informal firms that operate in cash. Black money often goes to goofy investments; it’s the only reason India’s banking system does not have a sub-prime real estate crisis, and the new joke about 24 percent return schemes for cash deployment is that you get 24 percent of your money back. Now, much of this money will become available to fuel growth in formal jobs, productivity, and wages.
The war on cash also forces political parties to think creatively about financing and finally create the grassroots and retail funding machinery that political scientists suggest, at the margin, creates more accountability and political participation than wholesale financing by interest groups. Negative interest rates have often been thought of as irrelevant for a capital starved India. But anecdotal evidence of their emergence for holding in large amounts of physical cash in parts of Uttar Pradesh, Andhra Pradesh, Karnataka, Maharashtra, and Tamil Nadu are surely a sign that the government is winning its war on cash. This is wonderful for India.
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Read MoreESIC raises wage threshold to Rs.21,000, aims to add 50 lakh workers
The move is expected to bring in 2 crore people—assuming a family of 4—under the Employees State Insurance Corporation net
The government on Tuesday overruled opposition from employers to allow an increase in the number of people eligible for Employees’ State Insurance (ESI), which provides medical care to industrial workers and their dependents, by raising the salary cap of beneficiaries to Rs.21,000 per month from Rs.15,000.
This means all industrial workers drawing a salary of up toRs.21,000 will be eligible for health care—from primary to tertiary—at more than 1,500 clinics and hospitals run by the Employees’ State Insurance Corporation (ESIC) directly or indirectly.
The move will add three million workers to the ESIC pool, benefiting 12 million more people when their dependents are taken into account.
Tuesday’s decision will add nearly Rs.3,000 crore to the labour ministry-run ESIC’s corpus annually.
The pro-worker step comes days after a nationwide labour strike disrupted normal life in parts of the country.
Under the Employees State Insurance Act, eligible employees contribute 1.75% of their salary (basic+allowances) and employers contribute 4.75% to the ESI corpus every month.
“The ESIC board approved the wage ceiling hike to Rs. 21,000,” said Michael Dias, an ESIC board member and secretary of the Employers’ Association, Delhi.
While the labour ministry and the employees’ representatives were for increasing the wage ceiling toRs.25,000 per month, the employers’ representatives resisted, leading to the board settling for Rs.21,000 per month, Dias added.
The last increase in the salary cap for ESI was made back in May 2010, when it went from Rs.10,000 to Rs. 15,000.
As of 31 March 2016, there were some 21 million insured persons or members of ESIC and a total of over 60 million beneficiaries.
A labour ministry official, who attended the board meeting, said that while labour unions are portraying the National Democratic Alliance government as pro-industry, “we are taking several measures which will benefit the workers. After hiking the minimum wage for unskilled labourers in the central government sphere, we have now increased the salary cap for ESI benefits.”
The official, who declined to be named as a formal announcement is slated to be made in a few days’ time, said that Tuesday’s move will widen the social security benefit net for millions of workers.
The decision will be effective from 1 September.
“It’s a pro-worker move and in a way historic. After hiking the minimum wage late last month, the Union government has again taken a pro-employee stand that will benefit 1.2 crore more beneficiaries,” said S. Mallesham, another ESIC board member.
Mallesham is also president of Bharatiya Mazdoor Sangh (BMS) in Telangana.
BMS is a national trade union affiliated to the ruling Bharatiya Janata Party.
But industry representatives said the move will not benefit workers much.
“We said that unless the quality of medical facilities improves increasing the wage ceiling will not be a great decision. When you have some 14,000 vacancies in the ESIC system, how can you serve more people,” Dias said.
Rama Kant Bharadwaj, vice-president of Laghu Udyog Bharati, a federation of small and medium industries, said that while pro-worker decisions are a political compulsion, the government must remember that to stay competitive in the global economy, workers’ costs need to be competitive.
Relaxing the wage ceiling adds to the financial burden of employers, as they have to pay 4.75% of an employee’s salary as ESI contribution salary limit every month.
Sonal Arora, vice-president of staffing company TeamLease Services, said, “Though the decision to increase the wage limit for inclusion in ESIC from the current Rs.15,000 toRs.21,000 is well intentioned, it will have a far-reaching negative impact on employees and corporate India.
“For employees, it will mean a reduction in their take-home salary by as much as 6.5% at the onset of the festive season when they would rather have money in their hands. For employers, it will lead to more hassles as compliance and documentation will increase,” he added.
Other than hiking the wage ceiling, the ESIC board also allowed employees to continue as members even after their wages cross the Rs. 21,000 threshold.
Currently, a worker goes out of the purview of the ESIC once their salary crosses the wage ceiling.
“This is a good move, as older employees need more medical attention and it should be left to the workers to decide if they want to stay with ESIC after their salary crosses the threshold,” Bharadwaj added.
ESIC: Wage ceiling hikes over 20 years
- From Rs3,000 to Rs6,500: effective 1 January 1997.
- From Rs6,500 to Rs7,500: effective 1 April 2004.
- From Rs7,500 to Rs10,000: effective 1 October 2006.
- From Rs10,000 to Rs15,000: Effective 1 May 2010.
- From Rs15,000 to Rs21,000: Effective 1 September 2016.
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Read MorePart of your salary comes in cash? Employers likely to change pay structure
Do you get part of your salary or reimbursements in cash? Then your employer may have to re-think the remuneration rollout.
The government on Wednesday suspended road toll across the country for two days
In one stroke, Prime Minister Narendra Modi turned the tide on black money as cash remunerations which feeds informality in the job market is set to end.
Rituparna Chakraborty, co-founder at staffing firm, Teamlease Services, said: “The move would cause inconvenience to some employers immediately. “However, soon, we shall see recalibration of transactions which will become forcibly legit and would be in compliance with the law of the land.”
Top sectors where salaries or part of salaries are paid in cash are real-estate and infrastructure.
However, headhunters expect that a massive shift will be witnessed as the undeclared economy will slowly move into the organised sector.
Also, with lesser cash transactions, more employees will now fall under the ambit of other necessary benefits such as provident fund.
Moorthy K Uppaluri, managing director, Randstad India, a headhunting firm, said: “This reform will benefit everyone as more employees can avail benefits provided in the formal job sector such as provident fund, medical claim, gratuity and additional benefits.”.
Industry echoed similar benefits. Ronesh Puri, managing director at Executive Access, an executive search firm, said, “The initiative will now force the companies to re-consider the salary structure.
Most professional organisation in any case doesn’t pay any component in cash and hence should not affect them at all.”
This article was published in Hindustan Times
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Read MoreReskilling to keep your job in the future workforce
These skills will help you forever remain relevant in the fast-changing job market
An article in Economic Times the changing skills requirements from the workforce; along with inputs from Kunal Sen.
He says “More and more jobs are likely to get reinvented with automation. Tech companies in the US have shed about 63,000 jobs this year alone.”
Today, innovation is heralding change in the dynamics of workforce — existing jobs are evolving and some skills that were relevant some years ago are becoming redundant. Only those who proactively align their skillset to match the fast-changing changing industry demands will succeed in transitioning into the ‘future workforce’, say experts.
Most of the jobs, or roles, that need the biggest amount of change are in the technology, fastmoving consumer goods, banking and finance, infrastructure, and telecom sectors.
“Rapid developments and transformations across sectors are likely to reinvent the way we work. Additionally, jobs that currently don’t exist may become the hottest jobs in the future,” said Irfan Abdulla, director of talent solutions at LinkedIn India.
The top roles that require reinvention:
1. Manual Testing: Technology: A tester works with results to provide inputs to product development teams on vulnerabilities and also interacts closely with the architect, development, integration, user interface and implementation teams. What is bringing disruption to the space is automation. “More and more jobs are likely to get reinvented with automation. Tech companies in the US have shed about 63,000 jobs this year alone,” said Kunal Sen, senior vice president, TeamLease. With the rise in complexity of technology, automated testing will stay and grow.
2. Digital Architect: This is the fastest-growing field in the information industry. An enterprise architect is required to shape solutions for clients and provide the delivery of it. Digital technologies have evolved from Web technologies but taken a form of enterprise applications at present. The role is necessary for integration, ERP, SCM, ecommerce, etc. A digital architect must know Java: Servlets, JSF, Spring, JUnit, Hibernate, Log4j or other logging framework. This skillset is evolving to add understanding Design Patterns, XP, .NET, Java/J2EE or similar industry standards.
A person with 15 years of work experience in this function can draw Rs 45-60 lakh a year in salary, said Shiv Agarwal, managing director at ABC Consultants.
3. Product Manager in FMCG sector: Traditional forms of delivery for FMCG managers i.e., the way they reach out to the consumer, is changing and that requires reskilling. People who have branding skills for FMCG are valuable to the ecommerce space as well. Ecommerce requires social media connect. Someone who heads a product on a website is responsible for this delivery, unlike traditional FMCG product managers who never did this. Their responsibilities include point of sale, branding and dealer distributor work. Salaries have changed dramatically here and job changes can bring a 30-35% increase in salaries. ESOPs also come with this profile.
4. Data Analyst in FMCG sector: FMCG companies — and indeed most companies across sectors — are focusing heavily on data analytics as a function, which means the profile of a data analyst is undergoing major reinvention.
“The role of a data analyst is itself undergoing a sea change, primarily because better technology is available now to aid in decision-making,” said Sumit Mitra, head of group human resources and corporate services at GILAC.
Companies require employees working in this role to analyse how data can be useful. Today’s data analysts need to be able to identify trends quickly, which, in turn, will ensure the company can leverage these to its best benefit. There is currently a demand-supply gap for this role.
5. Chief Digital Officer in BFSI sector: Nearly a decade ago, when banks and financial institutions started pushing online connectivity tentatively, the role of the chief digital officer came into the picture. His job was to oversee digitisation of core banking processes, ensure smooth functioning of ERP software and speedy transactions. With greater efficiency and quick development on the digital front, it has evolved into one that has manifold responsibilities today.
“They are now responsible for looking not just after payments and transactions, but also acquisitions, engagement, and customer service — all of which are done through the digital medium,” said Deodutta Kurane, group president for human capital management at YES Bank.
At senior levels in this function, one can expect salaries upwards of Rs 1.5 crore, compared with about Rs 75 lakh four years ago.
6. Project Manager in infra sector: There are fewer changes in infrastructure jobs compared with a sector like FMCG, said S Venkatesh, president of group HR at the RPG Group. But the whole project cycle is getting tighter so there is pressure on business managers to fill up product timeline. “Engineering procurement construction or EPC projects have to be delivered not just on time but have to be profitable as well. Reskilling is happening in project processes. All of these have to follow a templatised process and follow a project guideline,” he said.
Salaries haven’t dramatically changed in this space. But a lot of Chinese and Indian companies are going to Latin American markets since they enjoy cost advantage in material and contracts — so, people will have to learn to live and work in new geographies.
7. UX Designers in Technology: Today’s user experience designers are fusionists who have evolved the field of UX from stylistic endeavor to one that solves spiky technology and social problems. “We’re moving into things like robotics and autonomous car driving, so one can’t be stuck on UX and visual design skills any longer. Employees in the field of design should augment their skills and correlate with fields like affective science, machine learning, contextual intelligence, environmental and material design, etc., and the talent to merge product and service design,” said Mohan Krishnaraj, global head – Litehouse (The User Experience Design Group) at Harman Connected Services.
This article was published in Economic Times
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Read MoreThe challenge in diversity hiring
We feel concerned when companies reach out to us to help them with their diversity Hiring. The concept of introducing and encouraging diversity hiring is to give equal opportunity to all individuals, regardless of their gender, race, age, physical ability, ethnicity, or religious beliefs. But this is largely practiced as diversity hiring more female employees to maintain the gender ratio in the organization. This helps them to attract more female employees and to maintain a healthy, diverse atmosphere.
It is now almost a decade that I have been managing large recruitment teams, comprising freshers, experienced professionals, some returning after a sabbatical etc etc. Recruitment fortunately has more female employees, but I have now realized that in these 10 years, I do not see more than 14% of my ex-colleagues continuing to work in full-time or part-time assignments. And this genuinely makes me feel concerned and scared. If the ratio is better elsewhere, I am sure organizations have helped these employees stabilize their work-life balance better. When I go back and spend some time on the reasons behind 86% of my female colleagues not being in the industry, it is disturbing.
It is easy to generalize why many females drop out from a promising career: getting married, being on the family way, husband in a different city, or maybe a new family does not want them to work (the usual suspects). I am not sure if this helps any of us in the society. While I understand that as a woman, we need to manage and fulfill multiple roles of a caring wife, good mother, responsible daughter, or daughter-in-law, we have been taught from the very beginning that each of the roles has to be performed to the fullest. In these roles, a career aspiration doesn’t exist, and if somehow any woman decides to take up this option, then she naturally feels she has compromised on her other roles. Many women quickly end up dropping out of their careers.
Is this a situation we have to accept? Do we have to choose between office demands and pressure and household workload? While the family can be a challenge or a support for a long-term career plan but it is the same family that has taught us from the very beginning that whatever situation one has to face, we are never allowed to drop out of our schooling. Then why drop out of your career today? Why not figure a solution for every situation? Do some of us see this as an easier option—taking our partners for granted to manage our expenses and our lives at the cost of us managing their household work? We need to take a stand for a better individual, a better family member, a better mother, and a better Indian.
I have known families where the daughter-in-law is the only earning member in the family. There is one exceptional manager I have seen in my team; she manages her drunkard father-in-law, she is abused daily at her home, and she manages her preschool-going son, an experimenting husband, and a retired mother-in-law. The courage to face all this and continue working with the best of productivity is not easy. You need to have your mind and goals in place. Obviously giving up on the job and accepting the family situation could have been the easiest option, but I feel so proud seeing her in the office every day. She just lights up my day. She has made a decision and worked on her ambition day in and day out without letting her family life get in the way.
I remember, females started opting for HR as this was an easier office job. There was a time when males would pick up sales and marketing and females would opt for HR in their final programs, but I feel sad to see many of these potential women HR leaders disappear. I sincerely request my female graduates and postgraduate students to give some shape to their ambition after putting in 16-19 years of their lives in academics. Life is not about compromising every time. Life is about creating solutions and working things out for everybody around, which includes you to begin with. I understand we need some support from our families, friends, and colleagues, but our confidence behind our decision will help them to see a better future.
This article was published in World HR diary
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