Tech disruption, bank NPAs and jobs are interlinked

The biggest asset of India is its demographic profile. It has a young population which, when entering the work stream, will provide an impetus to economic growth for several years. This is called the demographic dividend.

The key phrase here is ‘when entering the work stream’. Without jobs, the demographic dividend cheque will bounce. India needs at least 12 million new jobs every year; but for a variety of reasons, the number of new jobs created is far lower.

The main reasons are technology disruptions that tend to make entrepreneurs wary, and the inability of banks to collect past loans and re-deploy the funds.

Two of the biggest technology disruptions will come in the automobile industry and in the renewable (especially solar power) industry.

Nitin Gadkari, Minister for Roads, Waterways & Ports, has threatened the internal combustion (IC) engine automakers to quickly convert to EVs or electric vehicles. The push towards EV is a global one and is desirable, but it would necessarily have to evolve over time, based on consumer demand and industry needs, and cannot be enforced. This is because a lot of infrastructure is needed (such as enough charging stations, perhaps in each petrol pump) to be in place.

To put things in perspective in India, India sells a little over two lakh IC cars a month, while Tata and Mahindra plan to boost combined EV capacity to 10,000 a month. So, to ramp this up to two lakh is going to need a lot of things in place.

Demand for EV will manifest when the cost of buying one is comparable to an IC, simply because EVs have almost no maintenance costs. The environmental case for an EV is indisputable.

Car buyers, however, are put off by the long time taken to charge batteries, unlike the 10 minutes to fill petrol in a tank. But a clever solution to this was found by an Israeli start-up called Better Place which was to sell cars without battery ownership. The batteries would come with a usage plan, like a mobile tariff plan. This enables the depleted battery to be replaced by a fully charged one, in less time than it takes to fill a petrol tank.

Technology can be used to help, if there is a clear vision. As RN Bhaskar points out in his article ‘ Look Up, Mr Modi, the Sun is Shining ’, if India followed Germany’s model under the late Dr Herman Sheer, the employment generation potential is huge! In Germany, more people are employed in the solar power industry than in their vaunted automobile industry.

Basically, the million+ jobs needed every month will not come from industry or from services. Agriculture is already over-burdened. The jobs will have to come from individual entrepreneurship. This requires institutions to impart new skills. The government has tied up with Japan to send three lakh youth to Japan for skill development, the cost of which will be borne by the very generous Japan! It is important that the youth are selected properly for this to be a sustainable initiative, for Japan is a very structured and disciplined society.

(The writer is India Head — Finance, Asia/Haymarket. The views are personal.)

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