Manish Sabharwal: A Look at India

Summary

In this insightful conversation, Manish Sabharwal, Chairman of TeamLease Services, discusses India's pressing economic challenges. He emphasizes the importance of addressing wage issues rather than job shortages, advocating for structural reforms in industrialization, urbanization, and human capital. He highlights India's growth in digital payments, demonetization's role in promoting financial inclusion, and the need for civil service reforms to improve execution. Manish also touches on the future of crypto currencies, TeamLease’s progress in vocational education, and the company’s shift to public listing, reflecting on growth opportunities and operational risks for the future.

Takeaways

• 😀 India faces a wage problem rather than a jobs problem, with many people employed but not earning desired wages. Addressing wages requires improving productivity.
• 😀 The official unemployment rate of 4.9% is not manipulated, reflecting a realistic view of job availability in India.
• 😀 India has a significant informal economy, with 75% of employment being informal rather than the often-cited 90%. This requires better data collection and reform for formalization.
• 😀 India's labor market reform should focus on improving the regulatory environment and reducing informal sector advantages, especially through reforms like GST and bankruptcy laws.
• 😀 Demonetization, despite criticism, has positively impacted India by pushing financialization, increasing banking deposits, and promoting digital payments.
• 😀 The demonetization initiative has increased the volume of digital transactions, from 0.1 million to 73 million per month, contributing to a shift toward digitalization.
• 😀 India's government faces execution deficits in implementing reforms, particularly in taxation and law enforcement, which have slowed progress in initiatives like GST and demonetization.
• 😀 Civil service reform is critical for improving government execution, focusing on performance management, specialization, and a younger, more dynamic leadership.
• 😀 India is advancing in digital payments, with a rapid shift towards lower-cost, digital transaction models, potentially displacing traditional payment networks like Visa and MasterCard.
• 😀 The rise of cryptocurrencies presents challenges for central banks in managing monetary policy. The RBI is still forming its stance, acknowledging that cryptocurrencies could become a part of the financial system in some form.
• 😀 TeamLease, a prominent player in India’s workforce development, emphasizes the importance of skill-based education and vocational training, with an increasing focus on job-readiness rather than just academic degrees.

Q & A

Does India have a jobs problem or a wage problem?

India faces a wage problem rather than a jobs problem. Most people who want a job already have one, but the wages are not adequate. The official unemployment rate of 4.9% is not misleading. The real issue lies in the low wages and the lack of productivity, which are holding back economic growth.

Why is formalization of the Indian economy important?

Formalization of the economy is essential because it would lead to higher wages, productivity, and a reduction in poverty. It also requires structural reforms in areas like industrialization, urbanization, and financialization, which would transform the economy from a low-level equilibrium to a higher growth trajectory.

How does India’s informal sector compare to its formal sector?

India’s informal sector is often perceived to be 90% of the economy, but a more accurate estimate is about 75%. Many workers are in informal jobs that lack benefits like health insurance, pension plans, and social security, despite a growing number of enterprises operating formally.

What are the challenges in formalizing India's labor market?

Challenges include outdated and unreliable survey data, a significant gap between the official employment numbers and actual employment practices, and a lack of a consistent rule of law. Additionally, only a small percentage of companies comply with formal regulations like GST and social security contributions.

How does demonetization impact job creation and digitalization?

Demonetization has had a positive impact on job creation and financial inclusion by incentivizing the use of digital payments. It has led to increased digital transactions, which in turn has fostered financial literacy and inclusion. The influx of funds into the banking system post-demonetization has also helped stimulate lending and financial asset growth.

What role does digital payment play in India’s economy?

Digital payment systems have gained significant traction, with mobile transactions increasing dramatically. The move towards digital payments lowers transaction costs and promotes financial inclusion, contributing to the country’s push towards a more formalized and transparent economy.

How does cryptocurrency impact the monetary policy of central banks in India?

Cryptocurrency poses challenges to central banks' ability to direct monetary policy due to its volatility. While some view it as a speculative asset, central banks are still exploring its potential and the possibility of introducing their own digital currencies, as seen with the ongoing research and experiments in India.

What are the key takeaways from demonetization for India’s economic future?

The key takeaway from demonetization is the necessity of improving civil service efficiency and aligning the public sector with India’s growing scale. While the initiative led to some disruptions, it has ultimately supported digitalization and increased financial transparency.

What are the challenges faced by India’s civil services?

India's civil services face significant challenges in execution due to underinvestment in technology and a lack of specialization. Civil servants often lack the skills necessary to handle the country’s rapid growth, which leads to inefficiencies in implementing policies like GST and demonetization.

How is TeamLease contributing to India’s skills development?

TeamLease has made significant strides in skills development by offering vocational training and creating India's first skills university. The organization focuses on bridging the employability gap by providing students with practical, hands-on training to prepare them for the workforce, particularly in sectors like sales, customer service, and logistics.