India’s jobs crisis

When a major emerging economy grows significantly you would expect job growth to follow closely.

Sadly this is not the case for India. Between 2005 and 2012, India’s GDP growth was 54% but its net job growth was only 3%. There were only about 15 million net new jobs.

This giant disconnect will worsen in the coming decade. Assuming 7-8% annual growth, 2025 will see GDP double. India will add over 80 million net new job seekers. But at current rates only 30 million net new jobs – mostly informal, and low-wage ones – will be created.

India should therefore prioritise policies that link GDP growth with job growth. Recent initiatives like ‘Startup India’ and ‘Skill India’ are crucial, but insufficient to achieve this vision.

India should create a technology platform that enables startup and SME growth. This would provide the technology and knowledge infrastructure that powers all of the proposed startup and SME initiatives: enable digital/ mobile delivery of interactive curriculum and content to entrepreneurs, innovators; and connect them to mentors, angel investors and other key ecosystem participants.

These are exciting times for India – with a once-in-a-lifetime opportunity to translate our demographic dividend into economic leadership. But it can only happen if India creates tens of millions of quality job opportunities and skills its youth to take advantage of them.

Mukesh Bansal has quit Flipkart. Is it welcoming or not?

When Mukesh Bansal sold Myntra, his own e-commerce creation, to Flipkart in 2014 for an estimated value close to Rs 2,000 crore, the ground was set for the present parting of ways. Flipkart strengthened its fashion retail portfolio, and Mukesh and fellow investors in Myntra booked profits. Why did Mukesh stay on at Flipkart, instead of moving out then itself ? Perhaps, the common investors in Myntra and Flipkart wanted it that way, so as to keep the fashion brand appeal Myntra had built up intact in its new avatar as a division within Flipkart. Once the integration had stabilised, there was no operative reason for high-cost Myntra staff to continue with Flipkart. 
       So, Mukesh’s exit is likely to benefit both Mukesh-less Flipkart and Mukesh himself. Flipkart has to grow leaner and faster, to take on Amazon and Snapdeal. It would do no harm to have a more unified leadership and leaner costs. That means that Mukesh should quit. For Mukesh himself, it is an opportunity to strike out on his own, once again, but backed by far greater amounts of self-confidence, own funds, experience and investor trust.

Net neutrality: A truly digital India is on the way

With its verdict on Monday barring differential pricing of data services, the Telecom Regulatory Authority of India (TRAI ) has upheld best practices in line with what is best for long-term public discourse towards India’s broadband needs.

India has set an example for the rest of the world to preserve innovation and transparency on the internet. The verdict will go a long way in establishing network neutrality as a benchmark for future upgradation of networks, bandwidth services and introduction of new services. While some telecom service providers (TSPs) and content providers have argued that a differential pricing model helps them with bettering their response to customers, it is laudable that TRAI has taken a larger view of the situation.

It has, in fact, stated that differential pricing is “anti-competitive, nontransparent, discriminatory and against content innovation”.

A key takeaway from the verdict is a clear message to the likes of Facebook that discriminatory practices, such as the proposed Free Basics programme, are not welcome in India.

A correct decision has been taken. This is not only ideal for India, but also shows leadership in the digital domain for other developing nations to safeguard themselves against exploitative programmes in the garb of ‘internet for all’.

The war for achieving a truly digital India may have just begun. But the first struggle for net neutrality has just ended in favour of the Indian public. India needs to take its mission forward by demonstrating strategies through which internet adoption by the poor is not only encouraged but benefits them in meaningful ways.

India to Become Fastest-Growing Big Economy

India is on course to overtake China to claim the position as the world’s fastest growing, big economy in the next two years, the World Bank said Tuesday, the latest vote of confidence in the roadmap set out by the new leaders of the South Asian nation to revamp the economy.

The Washington-based development institution raised its forecasts for India, saying growth in Asia’s third-largest economy would accelerate in the coming years even as much of the world is slowing down. What might be the reason? New Delhi is implementing changes that will make the country’s economy more efficient and vibrant.

Prime Minister Narendra Modi took office in May after his party won a rare majority in Parliament on a campaign promising smaller government and bigger growth. Since taking office, he has unveiled ambitious plans to change how India’s economy is managed.

India has been struggling to emerge from China’s shadow for more than a decade but in 2017 it may at last outgrow its neighbor to the north, expanding 7.0% that calendar year while China’s growth slows to 6.9%.  Some other economists–including those at Goldman Sachs—predict India could outpace China as early as next year.

Of course the end of 2017 is still a long way away and a lot of things will likely change in the interim to force economists to fix their forecasts. In India, they will be watching closely to see if the country continues to tweak laws and regulations to give companies and consumers more confidence to invest and help the economy expand.

Rupee value sliding down : a major worry

Movements in the rupee and Sensex continued to worry market watchers. The rupee tanked below the level of 68 per dollar on 21 January, trading at its lowest level since Raghuram Rajan took over as the governor of the Reserve Bank of India (RBI). On the same day, the Sensex slipped to its lowest level of 23,962.21 since Prime Minister Narendra Modi took office in May 2014. The clamour about the rupee going below 70 per dollar has increased in a scenario in which most emerging market currencies are under pressure.

The recent fall in the rupee might be due to conditions in the euro zone, plunging stock markets, falling foreign investment inflows and strengthening of the dollar.

As India runs a large current account deficit, it needs a constant inflow of dollars, which was not there. High oil prices inflated the import bill and resulted in further widening of the current account deficit, which accelerated the rupee fall.

So what can possibly save Indian rupee??

To begin with, there needs to be a true gold alternative. In the past few years, gold ETFs and loans added to its liquidity. Banks and PSUs pushed gold coins to cash in on the craze. Also there is nothing wrong in heavily taxing imports of luxury consumables and durables; and preventing low-value imports that can be produced locally. Our manufacturing sector has to grow aggressively and has to be provided with enabling infrastructure. India needs to promote its own economic union with the goods and services tax. Most importantly, we need a majority government with a clear mandate for development.

How does the interest rate hike in the US affect Indian economy?

Actually its not the Indian economy that alone will be affected. World over all the economies will be affected. Only the degree will differ depending on the individual economies.  

Let me analyze how the Indian economy will get affected.

When US increases interest rates, investors evaluate the whole set of things. They dispose off risky asset classes and repay. This process will set off a selling spree in the asset classes. Sudden outflows cause temporary mismatches in currency positions, causes currency depreciation,  aggregates selling across asset classes. 

Worldwide there is always a universal demand for US dollars. When interest rates are increased in US, this causes liquidity of  dollars to dry or diminish. The external commercial borrowings of corporate in India will face pressures for repayment of principal and interest payments.  

What would be the real impact is that it affects the currency more than the economy.

Some of foreign money has to come to India because they do not earn attractive returns there. If that situation is going to change, and as the interest rate spread benefit reduces, some foreign investors may want to pull out from India to invest in their own country. That will put a pressure on rupee. But it may not affect Indian economy severely though a weakening currency will have some impact.

Industrial output to 5 year high..a positive growth....

With 17 of the 22 industry groups in the manufacturing sector showing a positive growth, the industrial output in October recorded a five-year high of 9.8 per cent year-on-year.

The higher growth was on account of a favourable base.The industrial output in September 2015 was 3.6 per cent.

Though manufacturing registered a high growth in October, the low base in major sectors like capital goods and consumer durables has contributed significantly to this high growth. Nonetheless, the outlook for growth remains positive and can be strengthened in coming months if pace of reforms continues.

The global slowdown continues to impact trade and affect India’s exports adversely thus impacting manufacturing growth especially when the domestic demand is also sluggish.

What we can infer from this is that it is a positive growth. After five years, for the first time industrial growth is 9.8 percent . It is a welcome note. Environment for industrial growth is cordial in India now. It may slowly increase step by step due to the actions of central government. Foreign direct investments are flowing into the country because of efforts of PM Narendra Modi through Make in India and other initiatives like Indo-Japan relations. Inflation is 5.5 percent. If the production increases in many sectors, essential commodities rates will come down and be beneficial to the people.