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Skill building
The paradox of India’s labour market is that despite favourable
demographics, employers face a labour shortage. A skew towards the
informal sector, employability issues and policy are the key culprits. The
National Skill Development Mission has taken on the goal of training 500
million people by 2022 and the private sector participation is rising. In
the interim, corporate India, especially companies in construction,
retailing and PSUs in general, will feel the pressure; if employee cost in
FY13 is 10% higher than base case, earnings growth will drop to 8%.
Look at structure, not demand-supply
q Our macro-level estimates suggest that the overall demand-supply balance may not
change significantly in the medium term.
q The pace of job creation has slowed, but rising rural incomes, education and the
government’s rural-employment scheme are also curbing participation.
q However, employment quality and thus income generation is an issue - reflected in
the 91% share for the informal sector, 50% ratio for ‘self-employed’ workers.
Employability – the core issue
q Employers across the spectrum cite issues with employability - whether for highend
software engineers or shop attendants.
q In some cases, this may relate only to last mile issues like the absence of soft
skills, but a broader reform of the education system is needed for a lasting solution.
q Poor-quality primary education, neglect of vocational education - not least due to
social factors – are the key culprits.
Winds of change
q Under the National Skill Development Mission, a framework to map labour markets,
match employers/trainers/employees and fund skill development is coming in.
q Some states are pushing ahead with private-public initiatives in primary education
as well as vocational training.
q Issues like candidate funding, accreditation and trainer shortages need addressing.
Impact points
q The micro impact, on growth and profitability, will be determined by three factors -
labour intensity, the phase of the cycle and company-specific initiatives.
q However, wage inflation is likely to exceed the historical average of 12%; a 10%
escalation in employee cost from base case can cut FY13 PBT growth to sub-8%.
q The companies that have the highest sensitivity of PBT to a 10% higher employee
expense are Voltas, Bharat Forge, Jubilant Food, Tata Motors, Ranbaxy, RCOM
q The flipside is the business opportunity for companies looking at a potential
US$22bn training market.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Skill building
The paradox of India’s labour market is that despite favourable
demographics, employers face a labour shortage. A skew towards the
informal sector, employability issues and policy are the key culprits. The
National Skill Development Mission has taken on the goal of training 500
million people by 2022 and the private sector participation is rising. In
the interim, corporate India, especially companies in construction,
retailing and PSUs in general, will feel the pressure; if employee cost in
FY13 is 10% higher than base case, earnings growth will drop to 8%.
Look at structure, not demand-supply
q Our macro-level estimates suggest that the overall demand-supply balance may not
change significantly in the medium term.
q The pace of job creation has slowed, but rising rural incomes, education and the
government’s rural-employment scheme are also curbing participation.
q However, employment quality and thus income generation is an issue - reflected in
the 91% share for the informal sector, 50% ratio for ‘self-employed’ workers.
Employability – the core issue
q Employers across the spectrum cite issues with employability - whether for highend
software engineers or shop attendants.
q In some cases, this may relate only to last mile issues like the absence of soft
skills, but a broader reform of the education system is needed for a lasting solution.
q Poor-quality primary education, neglect of vocational education - not least due to
social factors – are the key culprits.
Winds of change
q Under the National Skill Development Mission, a framework to map labour markets,
match employers/trainers/employees and fund skill development is coming in.
q Some states are pushing ahead with private-public initiatives in primary education
as well as vocational training.
q Issues like candidate funding, accreditation and trainer shortages need addressing.
Impact points
q The micro impact, on growth and profitability, will be determined by three factors -
labour intensity, the phase of the cycle and company-specific initiatives.
q However, wage inflation is likely to exceed the historical average of 12%; a 10%
escalation in employee cost from base case can cut FY13 PBT growth to sub-8%.
q The companies that have the highest sensitivity of PBT to a 10% higher employee
expense are Voltas, Bharat Forge, Jubilant Food, Tata Motors, Ranbaxy, RCOM
q The flipside is the business opportunity for companies looking at a potential
US$22bn training market.
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