Budget 2017 may have failed to remove the regulatory hurdles that hamper creation of jobs, especially in the education sector, according to the chairman and co-founder of one of India’s leading human resources services providers, TeamLease. Budget 2017 did nothing to bridge the gap between degrees and skills, nor did it remove the ban on online higher education, Manish Sabharwal told BloombergQuint’s Menaka Doshi in an interview.
But the move to formalise the economy, will eventually create more jobs, he added.
Prime Minister Modi’s attempt to formalise the economy through the Goods and Services Tax and the demonetisation drive, could be the only solution to India’s jobs problem, said Sabharwal.
Here are the edited excerpts of the conversation:
You wrote for us, a column that identified the six interventions that you expected the finance minister to make in Budget 2017 to help the jobs economy. Not one of those have featured in the Budget. Are you a disappointed man?
The six things that I pointed out are in the nature of regulatory cholesterol for ease of doing business in any economy and in educational reform. If you step back from the jobs problem, we don’t have a jobs problem, we have a wages problem. Everybody who wants a job has a job. They just don’t have the salary they want or need. So at a certain level, formalisation, urbanisation and industrialisation in human capital are what any Budget can do if they decide the problem is wages. If you think the problem is jobs, you do a Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). We’ve spent Rs 2.5 lakh crore on MGNREGA since the programme started and I know this Budget has a large allocation for MGNREGA. But MGNREGA is never going to solve the jobs problem and nor is it going to create skills. So if the one thing that I would be disappointed about was that this was just not enough regulatory cholesterol was gotten rid of in the education sector. So we didn’t see new connectivity between degrees and skills, we didn’t remove the ban on online higher education. But that said, a ten year plan for jobs is not 10-one-year plans. So what I am delighted with is formalisation. I think the thrust of formalisation is the only solution to India’s problems.
The two big economic efforts of the Budget were towards housing and a tax break for Micro and Small Medium Enterprises (MSMEs). These measures have been praised, across the board, as measures that will help achieve economic growth and also help create jobs. Is that how you see it as well?
It’ll achieve formal jobs. I repeat myself, our problem is not jobs, it is good jobs. We have 6.3 crore enterprises in India. 1.2 crore of them don’t have an office and work from home. Only 85 lakh enterprises have any sort of tax registration, only 10 lakh are companies but most tragically, only 18,000 companies in India with a paid capitalisation of more than Rs 18,000 crore. So 6.3 crore enterprises in India means nothing if it only translates into 18,000 companies with a paid up capital of more than Rs 10 crore. So its not just the tax reduction for MSMEs, its also the cap on paying more than Rs 3 lakh in cash and following up on Goods and Services Tax (GST) implementation and demonetisation, if the government stays the course on formalisation, this what the government can do for jobs. The world is a hostile place right now with Trump and Brexit. When China started thinking about jobs in 1978, they saw a super cycle of global growth, global openness for trade and global manufacturing. We don’t have that. Domestic consumption is our ticket and formalisation of enterprises is the only way we are going to accomplish it. They did ten things on formalisation and I think they all take us towards the direction of better jobs.
In which case even though the six interventions you had asked for were not met with, the big effort or push towards formalising several elements or aspects of the economy should make you a happy man at the end of this budget exercise except for the fact that I think skills building may not have found as much mention in this Budget, so I think there are many out there who believe that this in not necessarily something a government can do in any direct fashion. Would you agree with that?
The role of the government is not to set things on fire. It is to create the condition for continuous combustion. I think they are obsessed about regulatory cholesterol in ease of doing business, formalisation. I think that there obsession has to translate to getting rid of the regulatory ‘ayatollahs’ (high ranking religious leader) like University Grants Commission (UGC), All India Council for Technical Education (AICTE) who are today preventing connection of skills to college, fixing school education, they did talk of learning outcome. So my sense is if the Budget is evolving to towards becoming an accounting statement, then we got the wrong expectations, may be that’s what it is supposed to be. But I think following GST, demonetisation and their formalisation with massive changes to the regulatory cholesterol in human capital would be nice over the next few months.
Beside GST and limit on cash transactions would you like to list some of the noteworthy ones?
Differential tax rate for the companies, I think that’s really the kick for formalisation and I think the lower regulation, the revamp of the human capital in the tax department. I know a lot of people missed that. People have been worried about tax terrorism but the move to data driven algorithm is a move towards rule of law...We need to move from deals to rules for everything in India to formalise. One of India’s tragedies is somebody follows a rule they feel like they have missed a deal so I think there was a lot in the budget sort of moving away from deals to rules so whether you think about what they are doing for the tax department, whether its about the threshold that they did for reopening the cases, I think there is a lot of plumbing...your campaign is poetry, but how you govern is prose. I think this Budget was an overdue dose of prose in ease of doing business.