Job creation, investment to take time: CEA

Chennai: There is no “magic wand” to create jobs unless issues regarding availability of skilled labour is addressed, says Krishnamurthy Subramanian, Chief Economic Adviser to the Government of India. Though the government has been running several skills development programmes in collaboration with the industry, the CEA finds that it will take time for the efforts to bear fruits. Investments and credit offtake by the private sector too will take time to catch up, he beleives.

“When we talk about jobs, everybody asks where are the jobs and that is a supply side question. On the demand side, where are the skilled people to take those jobs? That question a lot of people are not asking. Skilling is an activity that does not happen overnight. It is a phenomenon that actually takes time. So you have to be patient,” Subramanian told Financial Chronicle in an interaction.

According to Subramanian, building skill is a process that takes time and there are some cultural aspects as well to be addressed. “A lot of the youngsters, once they are 18, start looking for government jobs in many parts of the country. You can try getting government jobs till you are 28-29 and after 18 you are picking up Competition Success Review and memorising some facts and doing some arithmetic here and there. None of these matters for the private sector jobs. So you have a 10-12-year period when skilling is basically not happening for taking up private sector jobs or self-employment. So the question is about skilling and nobody will have a magic wand to create jobs unless the skilling aspect is taken care of,” he said.

When asked about the skills development programmes, he said: “There is no paucity in efforts to skill people. Remember skilling starts from education itself. It takes time to manifest and nobody has a magic wand”.

With the advancement in technology, labour is being substituted by capital and more automation is coming in. As a result, jobs are being lost in several sectors and then there are sectors where jobs are being created. ‘When you combine all these, net-net in the economy what you see is many jobs are being created. It is important to look at which sectors are creating jobs and which are basically not creating jobs. Therefore, net-net job creation is not the right question to ask,’ he said.

The CEA also feels that it will take time for the pace of investment and credit offtake to catch up in the private sector.

“(With) the process of better governance coming in, there will be some slowdown, because we are seeing a structural change in the way in which money is lent to projects by banks and the way in which corporates invest that money, in a lot more prudent manner. Therefore, this is something that will take some more time. But I think, this is a good thing because we will have a much healthier way of capital budgeting as a result of these reforms,’ he said.

According to him, until 2014 we saw an increase in private investments because real rate of interest was negative and as a result there was easy money available in the absence of institutional checks and balances.

“That is why credit flowed into projects which did not necessarily deserve it. You had stress in the corporate balance sheet as companies invested without thinking that the projects were viable or not and built up excess capacity and you had banks that were lending indiscriminately until 2014, which is why we had a dual balance sheet problem. Now both of these are getting corrected. Since 2017, the NPA (non-performing asset) scenario has started coming down, because of the recapitalisation as well. The trend has turned. Corporates now have to be very careful before taking a loan,” he added.