Deregulate, do not give goodies
At a session organised by a media group, Gita Gopinath, a well-known economist, categorically stated that one of the crucial changes that India needed was deregulation. She explained that what the industry wants and desires is the freedom from the clutches of the central and state governments, and the tentacles from the myriad number of laws. Despite past regimes’ efforts to do away with the archaic laws, new laws have come in their places, and the executive still has enough discretionary powers to influence businesses. The business environment needs to change radically.
According to media reports, Finance Minister Nirmala Sitharaman’s Union Budget this year is likely to focus on deregulation, and not subsidies, tax breaks, and other financial benefits. In the past 11 years, the central regimes experimented with two grand schemes to increase the share of manufacturing in the GDP, which has slipped to 16-17 per cent, a low figure for a middle-income emerging economy, which is the fastest-growing among the major economies. The idea was to boost the figure to 25 per cent of the GDP by 2030. However, think tanks, and even official statements now indicate that this will be possible, possibly by 2047, or 100 years after Independence.
Although the ‘Make-in-India’ scheme achieved results, it did not measure up to the expectations and goals. The pandemic, and the resultant China+1 strategy among foreign investors pushed investments towards nations like India, but it was in dribbles. MNCs were keener to relocate fresh investments in nations like Vietnam, and the Philippines, which were nearer to China, or back home in Europe and the US, largely due to geopolitical, ideological, and political pressures. As a recent article in The Economist magazine indicated, MNCs are more swayed by these factors. India seemed like a ‘nowhere nation’ as it realigned its diplomacy.
A much-touted ‘Productivity-Linked Incentive (PLI)’ scheme too failed to achieve its objectives. Although the officials reported “successful surges” in manufacturing, they were restricted to a few sectors, a tiny percentages among the limited sectors that PLI targeted. Experts say that one of the problems was the “low fund utilisation,” or a mere 1.5-3 per cent of the INR1,97,000 crore disbursed under the scheme. This was because the bulk of the money remained “undistributed” in sectors such as textiles, white goods, and solar panels. Two factors responsible included “stringent, complex, and slow-moving procedures,” and “limited scope for small firms.”
Thus, Sitharaman is likely to make a giant attempt to move away from subsidies, benefits, and doles to structural changes like deregulation. This will indicate the broader introduction of Reforms 2.0, or Reforms 3.0, whatever one may dub them, which will be as dramatic as what the Narasimha Rao-Manmohan Singh duo did in 1991. In that year, the old Indian business environment was almost demolished in favour of a new market-oriented one. Today, the need is to make the market more efficient, fair, competitive, and transparent to help both businesses and consumers. The currently-opaque, and officially-controlled regulatory system needs to change.
As the Government changes tracks, which may force businesses to rejig their strategies, the employees, both existing and future ones, will be caught in a different bind. In her Davos speech, the IMF head Kristalina Georgieva gave a warning about the future of jobs. “We expect over the next few years, in advanced economies, 60 per cent of the jobs to be affected by AI (Artificial Intelligence), either enhanced or eliminated or transformed, (or) 40 per cent globally. This is like a Tsunami hitting the labour market,” she said gravely. At present, in advanced economies, one in 10 jobs were “already enhanced” by AI.
According to Georgieva’s predictions, the worst-impacted will be entry-level jobs, which will wipe out the traditional roles of the young workers. At the mid-level, even as employees survive, they will be squeezed by AI, “with their pay potentially falling without a productivity boost from AI. So, the middle class, inevitably, is going to be affected.” This may sound better news for India, since it does not fall in the category of ‘advanced economies.’ But the opposite is true. The worst hit Indians will be in the organised sector. This will make the best jobs vanish, or reduced. There may be more reliance on the informal sector, which will be worse for the workers.
This trend has begun. According to a latest hiring survey in India, the organised segments across sectors plan to hire less in 2026. More importantly, at the entry-levels, the firms wish to hire graduates-plus aspirants, or those who have a degree and a host of AI, and other skills. This implies that the employers want employees, who are ready to hit the job road running, and are ready to take on the requisite responsibilities. There is no leeway for on-job training, or lag time to prepare the employees, as was the case earlier.
The hiring of workers from STEM (science, technology, engineering, and math) background has dipped from 4,00,000 to 2,00,000 in the past few years. A survey by TeamLease, and another media firm, predicts the figure to be 1,50,000 in 2026. Experts told a pink newspaper that “even fresh graduates are expected to start working with cloud platforms, data pipelines, automation, and AI tools, making hiring skilled talent all the more valuable.” As start-ups focus on leaner-and-meaner teams, they wish to only add employees who can help to build internal AI strength, and data analytics work.
Hence, Sitharaman will need to focus on skilling, and re-skilling, but from a modern viewpoint. The old mindset of how to deal with skilling will no longer apply. In addition, there needs to be a distinction between skills imparted in rural areas, and semi-urban and urban ones. Each one will be different. As one expert contends, “India and Sitharaman need to prepare Indians for future jobs, not the present ones. This is because the future is already here, or will be here within a few years, faster than one anticipates.” This requires an official recognition and understanding of how jobs will change.
However, there is a caveat. There is another elephant in the room, which gets attention, but no solution on what to do about it. As Gopinath said at the India Today session, pollution was worse than the US tariffs. The former kills 1.7 million Indians every year. Hence, as India improves the environment in which businesses operate, and employees work, it needs to address the real environment.
