Revamping India’s 3E’s

A radical reboot of India’s employment, education, and employability ecosystem is making good progress

Solving India’s problems of poverty are complicated by the 10 lac kids joining the labour force every month for the next 10 years – our demographic dividend. But the only sustainable solution to both is recognizing that jobs and skills change lives in ways that no subsidy ever can. I’d like to make the case that India is rising because we finally have a long-term policy vision that recognizes three things; a) India doesn’t have a jobs problem but a good jobs problems and higher wages don’t come from regulatory diktats but formalization, urbanization, industrialization and human capital, b) India needs to move from deals to rules because it is economically corrosive for an entrepreneur who follows a rule to feel she has missed a deal, and c) the government is organized vertically but jobs and skills are policy horizontals that require teamwork across ministries.

India’s unemployment rate – 4.9% – is not a fudge. Everybody who wants to a job has one but they don’t get the wages they need or want. Most jobs in India don’t pay enough to live and most self-employment is self-exploitation.

The project of empowering India’s youth and poor involves declaring war on informal jobs and enterprises while simultaneously creating a Cambrian explosion of formal jobs that pay higher wages.

This explosion needs enterprise formalization (our 60 informal enterprises don’t have the productivity to pay the wage premium), smart urbanization (we only have 50 cities with more than a million people relative to China’s 350 and most of ours have an average rush hour commute speed of 7 km/h), rapid industrialization (50% of our labour force works in agriculture but only generates 11% of GDP) and upgrading human capital (fixing schools, skills and higher education). All this needs replacing the lower ambition of Keynes quip “In the long run we are all dead” with the steady purposefulness of Sardar Patel’s quip that “the best time to plant a tree was 20 years ago but the second best time is now”. I’d like to make the case that rapid changes to our entrepreneurship and human capital regime are laying the foundations of a New India that is employed, educated, and empowered.

Is the role of the government setting things on fire (industrial policy and huge government spending) or creating the conditions for spontaneous combustion (efficient factor markets of land, labour, capital and low regulatory cholesterol)?

Having spent my early career in the license raj, I can attest that the first strategy fails to deliver massive formal job creation because regulatory cholesterol creates companies that don’t have clients but hostages. This is not an argument against the state – if the lack of a state led to job creation than SWAT valley in Pakistan and Waziristan in Afghanistan – would be hotbeds of entrepreneurial activity. An effective state does fewer things but does them better (primary education, public health, law and order, enforcing rules and competition, roads, etc.) while catalyzing entrepreneurship, investment and growth.

India is becoming a fertile habitat for job creation – the abolishment of FIPB, labour reforms, vibrant IPO markets, growing venture capital pool, fiscal discipline, lower inflation, rapid road construction, coming GST rollout, bankruptcy bill, lower corporate tax rates, consolidation of permissions, algorithms to guide inspector behavior, uninterrupted power supply, airport and port improvement, and massive road construction means that first generation entrepreneurs can credibly challenge incumbents because entrepreneurship is no longer about substituting, managing or interfacing with the state. The job is far from done and pending agenda includes a universal enterprise number (replacing the 25+ number issued to employers by various government departments), a PPC portal (moving to Paperless, Presenceless and Cashless compliance could save more than 2 lac trees and greatly reduce corruption), and lower mandatory payroll confiscation (formal employment is crippled by the 45% difference between haath waali and chitthi waali salary deducted for poor-value-for-money schemes). Competitive federalism is an important new lever for job creation; China’s job creation genius was decentralization. The accelerated devolution of funds, functions, and functionaries from Delhi to state capitals over the last few years robs Chief Ministers of their “Delhi” alibi because land and labour markets are local.

The challenge for India’s human capital has never been ideas but execution – you could change the date on the Kothari committee report of 1968 and do well in education reforms and Apprenticeship reforms were the 20^th point in the 20 point program of 1975.

Shifting from poetry to prose in skill development is starting to pay-off; more has been done on skill development with the creation of New Ministry in the last few years than the many decades before that.

The Apprenticeship Act amendments mean that apprenticeship growth rates are more than 150% annually after decades of stagnation. Our target should be crossing Germany’s 2.7% of its labour force in apprenticeships that would raise our current 5 lac apprentices to 1.5 crore. Even though the Sector Skill Council performance is uneven, the high performing ones are creating a superb employer and demand driven skill ecosystem. The conversion of employment exchanges to career centers has begun but needs acceleration. Work has begun on linking skills to school and college; the Right to Education Act is morphing to the Right to Learning Act by shifting focus to learning outcomes and the ban on online higher education that sabotages marrying skills to degrees is being reviewed.

India is on the move because the government now recognizes that our problem is not a bad job vs. no job but a good job vs bad job.