By Arindam Bhattacharya
The National Democratic Alliance got its third successive mandate in an election with many political narratives. But one economic narrative took centre stage—lack of jobs.
In recent years, there has been much confusion over job data. One view says we have had jobless growth (Centre for Monitoring Indian Economy, International Labour Organization data). The government says 49 million jobs were created in 2019-23 (Reserve Bank of India, Periodic Labour Force Survey), but these were mainly in agriculture and informal sectors, rife with underemployment and low wages. India is not creating enough well-paying jobs.
In its first post-election Budget, the government implicitly acknowledged this by putting employment as its top theme (others are skilling, MSMEs, middle class), and proposed several initiatives to promote it. But this is not the first Budget to emphasise jobs. Soon, it becomes business as usual. It has taken the electorate to remind us that policies haven’t delivered, and we face a crisis.
I am not an economist, and will not attempt to add value to the debate on the right economic paradigm(s) (labour- vs capital-intensive, manufacturing vs services) for job creation. However, as a management consultant, I am trained to look beyond the obvious, take a systemic view, and explore if there is a meta-theme that can coalesce the “symptoms” into a focused actionable objective, avoiding costly band-aid solutions with uncertain outcomes.
In business, often, the best way to start is by talking to the “customer”. Over the past few years I have had many conversations with leaders on this topic. Let me relate three.
The first was with an Indian business leader enjoying significant exports. I asked him how to increase investment for exports; he responded with a rhetorical question: “Why has private investment in India slowed down despite good growth and a huge potential? In such a (poor) investment climate, expecting big investments for exports is a big ask.”
The second was with the India CEO of a global industrial firm. I asked him two related questions. Why has India not been able to replicate the China model despite all the talk? Specifically, what would it take for his firm to make a bigger investment bet in India? His answer: “When our global board evaluates investment proposals, they always have several options. The board asks us how long it will take to set up the plant. My answer is usually in years. Thailand says they will do it in months. The risk-adjusted attractiveness of India is often less than others.”
To get a fuller sense of the “system”, as consultants, we also understand the “internal” customer’s views, which in this case are senior government officials. A conversation with a former secretary of a ministry was quite interesting. “Talking about ease of doing business, how many regulations have been simplified, etc.
is not helpful. We can thump our chests, but the key question to ask is that does an entrepreneur, big or small, find it easy to make investments (new or brownfield)?” His answer was no. He added, “We announce lots of policies covering jobs in every Budget. But the ‘instrumentality’ to convert the policies into outcome is weak at best.”
I drew several insights from the customer discussions. While there are many economic levers, at a fundamental level, jobs are created by investments. We have to make our investment climate far more attractive and the process easy, transparent, and quick. Investors should “want” to invest in India ahead of other nations and not only when they have limited choices (such as the China+1 pitch).
Investors, especially foreign, evaluate proposals and use comprehensive financial metrics like the cost of goods sold (CoGS), which combines factor, regulatory, and social costs with those of risk and “speed to market”. Policy-driven improvement in one could easily be offset by weaknesses in others. And today, unlike three decades ago when the big shift of manufacturing capacity from west to east started, CoGS comparison is not with the west but among competing developing countries. We have to at least achieve parity on overall “system” competitiveness.
Such metrics measure “system performance”. But historically, India’s industrial policies have individually targeted different parts of the “complex industrial system” with often indifferent outcomes. The performance-linked incentive scheme implicitly recognises this disadvantage.
This leads me to my most important conclusion. A top-notch investment climate or competitive CoGS, which involve central ministries and departments, states, and expertise domains working in “silos”, are complex “systemic” policy outcomes. Our governance structure was designed primarily to deliver sectoral outcomes. We have to rethink the “instrumentality” for executing today’s complex multi-sectoral and multi-domain policies.
Here again, the market can give some pointers. As every large company knows, large-scale transformation cutting across business units, countries, and functions is tough. Success has several key ingredients.
First, leaders acknowledge the “root cause(s)” and do not react to symptoms. They build consensus among key stakeholders with different positions. They take risks, often adopting a de-novo approach to break out of legacy thinking. They create structural ownership, even if it means setting up teams outside the “core”, with clear targets, accountability, and seniority-cum-decision rights over resources. The implementation plan breaks the “system” objective into smaller time-bound projects, with close coordination among different multi-functional project teams with cross-linked incentives. Finally, they are metric- and real-time data-driven. We have to customise and adopt such a playbook.
One of my former colleagues in BCG used to say that you can’t fly over a tall mountain in the flight path by becoming a more efficient turboprop. You have to transform into a jet. India faces a looming artificial intelligence and job-creation mountain. No doubt, we have become a more competitive turboprop, but we need to transform into the jet to deliver well-paying jobs.
The author is Senior advisor and emeritus partner, Boston Consulting Group.
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