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Can the Indian Government Provide Jobs to India's Young?

Aug 24, 2016

In this issue:
» Is Make in India being fully realized in mobile handsets space?
» The shake-up in the start-ups world
» ...and more!
00:00
Radhika Pandit, Managing Editor of ValuePro

Why is the developed world in such doldrums today? It all began with the 2008 global financial crisis of course. And after many rounds of bailouts and big bond buying programs, the sovereign debt of these countries has only ballooned. But the US, Europe, and Japan have another problem you see: an aged population that is only getting older. And costs related to this have only put further pressure on government finances.

Thankfully, India does not have to deal with an ageing population. In fact, it is the youth population that is expected to grow and become the driving force behind India's growth story.

Therefore, it only follows that India's young have to be well equipped to take India's growth to the next level.

It's a view that President Pranab Mukherjee reinforces. In an article in Livemint, he states that if India has to achieve a knowledge economy, it is important to have a deeper interface between academia and industry. This is by building world-class laboratories and infrastructure.

The idea is that the government needs to focus on building capabilities as a large portion of the country's population is expected to be below 25 years of age by 2020. This is the so-called 'demographic dividend' that is constantly bandied about as positive for India.

But is it really that simple? Because you see, growth in youth population is quite meaningless unless it is followed by job creation as well. This means that it is important to equip young Indians with the requisite skills and educational standards. Only then will their chances of gaining employment rise.

It means the pace of jobs creation has to match up. Where are we on this front? Sadly, far behind.

Indeed, Vivek Kaul has explained how there are 33,000 new job seekers per day but only 4.4 million jobs created from 2009-2015. And this year's total (as recorded by the Labour Bureau) is at 0.15 million...among the lowest.

Indeed, in his recent article, India and the Fallacy of the Demographic Dividend, Vivek pointed out the demographic dividend benefits a country if the government of the day is able to create the right environment for job creation.

So if job creation continues to lag, there will be no demographic dividend for India. And this could create problems of another kind for the country and even derail its growth story.

But this is just the beginning. For the last few months, Vivek has been working on something big, a unique project. It is an effort that will help you to stay on top of big macro trends in India. The ones that could directly impact you and your family.

Besides India's disastrous jobs situation, these are the big issues like the government's handling of oil prices, the mess in public sector banks, the current state of India's real estate bubble...and a lot more!

In fact, as you read this, Vivek has just come out with a full note that details all...including how this trend could impact you.

Click here to know more.

02:45 Chart of the day

The government's Make in India initiative to transform the country into a manufacturing hub is finally yielding results in the mobile handset segment. Backed by the setting up of electronic clusters, chip fabrication and assembling units, there has been a steep jump in the domestic manufacturing of handsets. As per Indian Cellular Association (ICA), the overall value of handsets manufactured surged by 186% in FY16 to Rs 540 billion. Nearly 50% of the mobile handsets sold where produced within the country. Not only the Indian handset makers such as Micromax, Lava and Intex, even Chinese companies such as Vivo and Xiaomi are increasingly localising their manufacturing operations. The industry body has projected mobile phone production to grow by 74% and reach Rs 940 billion in FY17.

However, with a large part of the components used in mobile phones still not available in the country, most of the local units remain at best assembly lines. The problem is further compounded by low duties on imported components. Additionally, companies also grapple with problems such as poor infrastructure and logistics facilities, land acquisition woes, lack of skilled labour and tough labour laws. So the local value addition for most of the companies continues to remain low. Therefore, if India is to graduate into a manufacturing powerhouse, it needs to work towards overcoming all these hurdles. It also needs to undertake reforms to incentivise research & development and intellectual property rights to fully reap the benefits of domestic manufacturing.

Mobile Handset manufacturing surges ahead


03:51

After growing at a scorching pace, the tech start-up space in the country is witnessing a major shake-up. The boom had witnessed over 19,000 technology-enabled startups mushroom in the country as per the Ministry of Finance's Economic Survey. But with scores of me-too companies scrambling to grab a pie of the digital boom, the sustainability of their business operations took a backseat and purely rode on funds pumped by venture capitalists. With most of the start-ups failing to break-even, it is clear that the party could not have continued forever. Venture investments fell to USD$ 2.7 billion in first half of 2016 after peaking to a record USD$ 8.9 billion in 2015, according to research firm Prequin.

Drying up of funds has led to the demise of a number of tech startups. As per Tracxn Technologies, the Deadpool list comprises of 800 startups in every segment of technology including e-commerce, online education and mobile software. Recently Pepper Tap, a hyper local grocery, shut operations whereas e-commerce portal AskMe is likely to wind up its operations in the absence of funding. Even established players such as Jabong could not survive and was sold off to Flipkart at discounted valuations. The fact of the matter is that tech start-ups with their revolutionary business models may looking enticingly attractive but they still continue to burn cash. The churn is likely to continue until consolidation brings in sustainability and visibility of earnings in their operations.

04:45

After opening the day flat, Indian equity markets continued to stagnate. At the time of writing, BSE Sensex was trading higher by 9 points and NSE-Nifty was trading up marginally. Both mid cap and small cap stocks are trading higher by 0.5% and 0.6%, respectively.

04:56

"The critical investment factor is determining the intrinsic value of a business and paying a fair or bargain price." - Warren Buffett

This edition of The 5 Minute WrapUp is authored by Radhika Pandit (Research Analyst) and Madhu Gupta (Research Analyst).

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