Looking at job creation in both services and manufacturing: Nirmala Sitharaman

Supriya Shrinate, Chief Editor - News, ET Now, in a panel discussion with Piyush Goyal, Power, Coal & Mines Minister, Nirmala Sitharaman, Commerce & Industry Minister, Sachin Bansal, Co-Founder & Executive Chairman, Flipkart, R Seshasayee, Chairman, Infosys and Sunil Mittal, Founder & Chairman, Bharti Enterprises, talk about India's growth potential, job creation and the performance of the Modi government in th ehalf-way mark of its tenure.

Edited excerpts

Supriya Shrinate: Ms Sitharaman, India is a beacon of hope, we are an oasis in an otherwise troubled neighbourhood and in an otherwise troubled world but this is not a very insular world anymore. We are seeing the world being very distorted whether via Brexit or the win of Donald Trump in the US. We are obviously coupled with the world. How does India win in this volatile world? What do we do to sustain our own growth?

Nirmala Sitharaman: Well first thing I would think we will have to keep steady not really get carried away by extreme developments around the globe and I think in that our industry is fairly level headed, I have at least very closely monitored the situation for last two-two and a half years. I can say the sense of caution, the sense of balance and the sense of priority with which our industry deals with its agenda itself has stood by India and I am sure with the government which we represent which is keen to hear, keen to respond is always ready for suggestions. I suppose we will be able to hold out.

Supriya Shrinate: Mr Goyal, how do we generate growth momentum in an increasingly protectionist world?

Piyush Goyal: We are exaggerating the problem. Whether it is Brexit or the Trump victory, we should get out of this psychology that some catastrophe has hit the world. After all there are systems and in any system, there are processes, the world does not move only on election rhetoric. I would suspect that America is also not going to swing as sharply as some people make it out to be. As far as Britain is concerned, in a post-Brexit world, India will have great opportunities which we can encash. If at all, they have problems with the rest of their neighbours. It will be great time for Indian companies to make their presence felt there.

The big picture advantage that India has is that all of these countries be it America, be it European countries would look at leveraging the huge billion plus people market place that India offers. We will attract people from across the world for doing business and given the cost structure or the comparative advantage that is available for manufacturing in India, they have no choice but to Make In India both to serve India and the world.

I will just share one small example. Recently in Sweden, the energy minister of Sweden actually told me that thanks to the massive deployment of LEDs in India, to scale we are almost at about 180 million right now by one company. Now thanks to that massive deployment, they said LED prices in Sweden have fallen. So now is the time when India is actually going to help the world meet their people’s requirements at more affordable prices because we provide opportunity at scale and opportunity to really bring technology cost down and bring manufacturing cost down and also bring Indian ingenuity on the table.

Supriya Shrinate: Talking about opportunities I do not want this to be a discussion about taking stock. It is fortunate that we are speaking at a time when the government is going to clock in its half term in office but at the end of this discussion, we should have 10 broad themes that the government needs to focus on.

Mr Mittal I must begin with you. Over the next two and a half years what do you want the government to do that has not been done? What should be the focus areas according to you and all of us in this space here and on the panel here acknowledge that plenty has been done?

Sunil Mittal: What we really need to first off all look at is there is a shrinking global growth and that is a fact that cannot be denied now and there is a rising Indian aspiration. So there is a clash at the moment globally where the markets are shrinking globally.

WTO has said the growth rates down from 2.5% to slightly to be at 1.8% this year and this is going to be the fifth continuous year where the globe is see less than 3% of growth and that is a serious global issue.

Within that India as we all know is doing extremely well and the world is coming to India, FDI is rising but our aspirations are rising so we have to find our aspirations within the smaller global growth rate and that is a challenge and I think that is where ministers who are present here today need to completely focus on the charging many of us who are here from industry and the trade to ensure that we double up our efforts in a shrinking global pie how do we increase India’s growth rate and I think lot of things have been done and three of us are here from the technology world the massive fierce debate, noise, buzz around demonetisation actually plays into people like us in a positive way because we are all for digitisation of Indian economy.

The other factor that is at play is the growth that is coming through as small globally and reasonably good in India, is a jobless growth and that to my mind is a cause of worry for political leadership. As to how do you ensure that while we are growing at a reasonable cliff of 7.2%, we are generating enough jobs for the country and country as young as India.

Supriya Shrinate: I wanted to get a reaction from the Ministers but I will combine and get a reaction in just a bit because Mr Seshasayee when we talk about jobs there is always in the same breath we speak about manufacturing you have of course had your skin in the game as far as manufacturing is concerned jobs is a key challenge what is ailing us there. Is it because the manufacturing models the means of manufacturing have changed so much with automation and artificial intelligence or is there some part of the pie that we are still missing that we still do not have?

R Seshasayee: I think the fact that the global growth is slowing down and that we also are seeing some trends that are not catastrophic trends. We tend to exaggerate the political events as being catastrophic I do not think Trump or Brexit’s are really that much impactful but clearly the trends like the technology, automation trend and the trend towards a little more of protectionism to walk a little backwards in terms of opening up.

The ground under our feet is shifting south when you are wanting to go north and that is what Sunil was saying that we really have to double up our speed in order to make this progress happen and from that point of view I think the biggest challenge that we have is the issue relating to job creation. Now that is again where the trend is moving south whether it is manufacturing or in services. Automation is certainly going to have an impact in terms of not merely the quantity of jobs that you create but also the quality of jobs that you create. It is not something which we can wish away.

There is an inexorable tide of technology which we cannot fight and we have to accept it. Therefore the challenge is within manufacturing. Do we see job creation happening despite this kind of automation and will these manufacturing jobs get created by merely feeding the demand from India? My sense is no. Non-linear growth in manufacturing will happen only if we plug ourselves to the global demand today. If you look at it, there is no capacity constraint, there is no issue of supply constraint, India is getting all that it needs in terms of manufacturing goods. Indians are getting everything that they need. If we do therefore want to have a non-linear growth, that can happen only with the kind of new technologies that are coming particularly in the electronics and to some extent in defence.
We need to create a larger base of new sunrise industries which can get plugged into a global demand, create that ecosystem for us to create jobs. That is not easy.

Supriya Shrinate: Ms Sitharaman, growth is good only when there is job creation. Over the next two and a half years, I am presuming your focus will be to do that but some of the constraints that Mr Seshasayee pointed out or the challenges that Mr Mittal pointed out.

What is going to be the focus area to create more jobs and a lot of people here perhaps believe and commentators have written India is naturally inclined to a services economy, why are not we focussing more on there there is abundant talent there are we chasing?

Nirmala Sitharaman: I do not think we are overemphasising on manufacturing but we need the manufacturing base to get going with absorption at a level which we need. The scaling up of employment is not going to happen by trickles which can get into let us say the IT based industries.

Services is just not IT based. It is widening, it has got a wider scope for which again our manpower is not adequately trained. So what we are doing is whilst we are focussing on manufacturing so that large absorption of labour force can be brought in when you are placing emphasis on manufacturing, again manufacturing not on the big scale alone but looking at SMEs and focusing on SMEs and promoting SMEs but the shift and the emphasis you are right in saying we have to place emphasis on services because India is a progressive state moving towards a service sector dominant economy.

We already have nearly 51% of our GDP coming from services, this government is widening the base of service sector. We are getting international recognition for many of the things that our service sector can provide but to say service sector also has a problem of the kind of skills which is required, skill set which is required by youngsters who can get a job in the service sector also.

Therefore this government is at the same time investing in skill development, looking at each pocket for itself mapping districts to see what is the service requirement which will be, skill sets which will be required in that district not blindly training everybody to be A or B but requiring them to be adequately trained for that set of skills will be required in the place where they are. At the same time, we are looking at the manufacturing base to be widened so that the contribution of manufacturing sector from what it is today somewhere between 13% to 14% to the GDP to rise to 22 to 25%.

It is a two-pronged strategy -- looking at both the service sector and manufacturing again. We are also looking at the exodus of labour from agriculture. They will have to be given adequate at least some kind of a basic training so that they can get into some kind of a low end jobs at least in the manufacturing sector. So there is a strategy for both manufacturing and for services.

Supriya Shrinate: I must ask you a counter question. Demonetisation, GST, these reforms that India needs is going to make a lot of jobs redundant and add to that automation and artificial intelligence. We will need very few of the kind of jobs that have been traditionally spoken about. Is that a challenge and do you see that as a focus area of the government over the next two and a half years?

Piyush Goyal: This government from the day it came into office, has worked to a plan and in that plan one of the critical elements has been jobs creation. We are not looking at creating jobs only through a short cut fata fat method of some temporary incentives of subsidies or benefits given to a section of an industry so that that can have some growth in that.

If you look at the various programmes and policy measures of this government, they are like beads in a necklace. Each one is incomplete without the other and it is only when you look at the holistic impact of each one of those measures that you will realise the deep thinking that has gone into creating an ecosystem of framework on the basis of which India can hope to see maybe 10-20-30 years of double digit growth.

Now one may find that Swachh Bharat, Clean India is not important enough for the prime minister to talk about it but it has impact on different aspects whether it is health, whether it is tourism, it is a game changing move effecting a plethora of areas of the economy. Unless you have Skill India, you are not preparing your children for a better job profile or a better income ability or working opportunity. Unless we go digital, we would not be able to meet the kind of technological challenges and integration with the rest of the world particularly in precision engineering that Mr. Seshasayee was talking about.

Now each of these including GST, including demonetisation, after all what is demonetisation, it is a question of providing equal opportunity to all stakeholders, all people to work in a new ecosystem and let the best benefit out of it instead of a system which drives everybody to cheating or gaming the system or evading their taxes because somebody else did it.

Similarly, think of the impact, let us say any amount of money is uncovered out of this-- at the end of this demonetisation when put to use to encourage specific sections of the economy. Let me just do a hypothesis, suppose housing is given an impetus with a huge interest subvention scheme to promote affordable housing, to promote the housing sector, if you recall NDA-1 had created nearly 60 million jobs from the construction and infrastructure sector.

Now our effort, first of all I mean to untangle the legacy issues whether it is in road construction, in the power sector, different sectors and we have now reached a stage where all of these sectors are waiting to take off. My own schemes are not finding enough contractors to bid for $20 billion worth of schemes for rural electrification and upgrading technology in the power sector.

Now all of these things are going to give mushrooming job opportunities and demonetisation in fact will give that last impetus to manufacturing and industry and services and the very pride of doing business honestly which will I think help us integrate with the world. World wants to work in an atmosphere where they can be assured that they will not be short-charged by somebody else, wants to work in an atmosphere where there would not be hauled by the American government or any foreign government for corrupt practices in any third world country or any developing country also. And I think that is the ecosystem we are trying to create.

Supriya Shrinate: Sachin, you represent the new age businesses. I am curious to know are things a lot better than they were two years back from a regulation point of view? Are policy makers better adapted today to understand and empathise with the needs of your businesses and what more needs to be done to see the meteoric rise that perhaps potentially possible for a sector and for companies like yourselves?

Sachin Bansal: Yes, I think technology a little bit like manufacturing or electronics manufacturing has not been traditionally the focus area from a policy point of view. But before I talk about India I will talk a little bit about Europe and China.

Europe today has almost no internet technology ecosystem of its own, there are no technology companies coming from there. Capital ecosystem is absent over there as well. The talent ecosystem is also missing because of companies not being present over there as well and now we are seeing a tussle between the governments and the internet companies to collect taxes from them. There is a constant push and pull and companies are finding ways to avoid those taxes. If you look at China, China is absolutely focussed. Whatever they have done is through self reliance, reliance on their own industries or in their own companies to build their ecosystem. They have a great capital ecosystem, great talent ecosystem.

Piyush Goyal: With the make in India programme, can we get the world majors to come to India and look at deep pocket investments but huge market of a billion people to serve? Once we start serving them with the most modern technology, then we will start serving the world. So it is going to be a mix of domestic capacity, domestic manufacturing, serving India to begin with international and world class precision technology, state of the art technology and then leveraging our comparative advantage, our competitive strength to serve the rest of the world.

Supriya Shrinate: For India and for the world, China has done a wonderful job by nurturing its own start ups. Indian start ups are still struggling with regulation. You say things are a little better than two years back. You have a game changing reform like the GST coming which is going to change lives, you have got two policy makers on the panel and you have the architect of that reform sitting in this audience. What is the pitch you are going to make for companies like yourselves as far as the GST is concerned, will that compound your problems or actually ease it?

Sachin Bansal: I think it will ease it tremendously. I think it makes India a unified market for us although we are an e-commerce company which operates all over India but we cannot take a unified view today of all of India. The whole of India market will become one for us. The movement of goods will become much more smoother, the placement of inventory, the placement of goods, the logistics network will be optimised based on cost and time to the customer rather than taxation and ease of movement of goods, I think that will be the largest impact on this but it is all positive for us.

Supriya Shrinate: Two and a half years done, two and a half years still to go, what are the metrics that you and Mr. Seshasayee is finally going to asses this government on its performance on? What are the ticks in the boxes that you would be watching out for at the end of the next two and a half years?

Sunil Mittal: As business people, we look for bold decisions. I think that part is very well established, I cannot say this government is not making big, bold, great moves and sometimes perhaps even risky moves. I think that is done now and I think the job really sits on our side to start to deliver on some of the bold promises that are being made.

My expectations for the next two and a half years would be really in the area of people, ensuring that the advantage that we have on the demographic side, the young population.

Ms Sitaraman has already proposed to WTO to take up the TFA, the Trade Facilitation Agreement for services. This is going to be heavily opposed, I as the chairman of ICC I am working alongside talking to the WTO and already the countries are raising the red flag, we will not allow easy visas, we will not allow movement of people. And so wherever our finance minster goes and he is on to many-many bilateral and multilateral forums and so is Ms Sitaraman, major thing to ask for India by this government in the next two and a half years has to be how do we use our people not only for India but for the globe.

In my opinion, I the prime minister made a very nice statement in a forum about a year and a half back that India should be looking at not only serving from India but serving by Indians across the world whether that is peacekeeping force as diverse as that or to sending teachers or nurses or plumbers or electricians to the most sophisticated IT engineers, I think that naturally belongs to us, we have to fight for that and I will look forward this government ensuring that as we open our country to the rest of the world which we have opened in a dramatic manner, in fact today to my mind this the most open economy anywhere in the world, we need to ask for our rightful movement of people from India.