India’s GDP growth has declined for six straight quarters. The growth rate for the second quarter of FY20 was reported at 4.5 percent, the lowest in six years. The slowdown is a result of consumption decline that is visible in the rural and urban economy, forcing companies to cut down production and lay-off workforce. Sectors like automobile, FMCG, and retail and real estate are the most affected due to domestic reasons, and the anti-globalization sentiment that began five years ago has continued to keep the growth of the IT sector muted.
The decline in GDP numbers has had its bearing on the ratings from international agencies. Moody’s Investors Service downgraded India’s outlook to ‘negative’ from ‘stable’ on concerns of subdued growth prospects. Though, another international rating agency, S&P, has reaffirmed its sovereign rating on India as ‘stable.’ These developments have naturally raised questions on the future of the Indian economy. However, The Confederation of Indian Industry (CII) expects generation of 10 crores jobs by 2025 in sectors like automotive and other eight sectors. Let’s have a sectoral analysis for 2020 and beyond:
The ongoing financial year has been one of the worst in over two decades for the automobile companies, with passenger vehicle sales declining over 20 percent in the April-October period of FY20. The impact is likely to continue for the next two quarters, at least. However, the introduction of BS-VI fuel compliant vehicles by automobile companies from April 1, 2020, is likely to bring interest back in the market, which has been affected by radical policy changes with regards to engine category. Another factor that will be positive for the automobile sector is the cut in personal income tax rates, which is currently being discussed by the government. By all means, this would be the best thing for consumption-led sectors that relies on liquid money in the hands of people.
Similarly, a slowdown in the country’s consumption demand is affecting the consumer goods space. In the September quarter of FY20, the growth in the FMCG sector came crashing down to a mere 2 percent from 16 percent a year ago. In the past, FMCG companies had achieved double-digit growth on the back of higher consumption by the rural population, but this is not the case anymore. However, this is one sector that may not see a revival until the rural incomes grow significantly. Rural India accounts for 36 percent of sales for the overall FMCG sector and has historically been growing 3-5 percent points faster than urban India. A good Rabi crop harvest and normal monsoon are what the industry needs to be able to revive in 2020. More emphasis would be required in the right market penetration, advertisements, and supply chain management, and blue-worker talent requirements. According to a 2018 WEF report, 59 percent of organizations said that there will be changes in value chain composition, and for 74 percent talent availability in the local market is a key consideration.
This is the one sector that has been in recession for many years now. Industry estimates suggest that there are 1,509 stalled housing projects in India, comprising around 458,000 units. While the government is trying to revive these projects, the experience so far suggests that it’s easier said than done. Unless the government comes up with a bail-out package for the stalled projects of the real estate sector, it will continue to be in a slump and affect various associated industries. If all such challenges are met adequately, then, according to a 2017 CREDAI, real estate will create 25 percent more jobs by 2025.
There was a time when the IT sector was India’s golden goose. It generated high-end jobs for engineers and MBAs and also earned foreign exchange for the economy. Unfortunately, the anti-migration policies of the West, especially the US, have hurt this sector the most. Most Indian companies are still struggling to find projects in international markets. However, despite missing the initial targets, Nasscom anticipates that the sector will still have good news to read on in the later phase of 2020. In the wake of newer job roles in new-age domains like cloud, artificial intelligence, and cybersecurity, the sector will see more demand in terms of an increasing number of jobs with decent pay scales. Thanks to the evolving technology trends and advent of modern advances that are keeping the sector alive and kicking despite various slumps and downturns.
According to the World Economic Forum’s Future of Jobs report, there will be emerging demand like data analysts, data scientists, and software and application developer. Though skills-gaps would hamper new tech adoption, reskilling in new technologies like AI, ML, cybersecurity, robotics, and data analytics would be highly required. Business growth is dependent on how future-ready the organizations are to adapt to and invest in new technologies. The WEF report quotes a projection that predicts about 75 million jobs may be displaced, while 133 million new roles may emerge.
It’s evident that 2019 was big on growth in some sectors with a slump in others. Like any other year, this year was a mixed bag too. As the new year starts, there are a lot of positive growth trends that will mark various sectors, and different industries seem ready to work on their talent requirements to meet the new opportunities of the new decade.
*Views are personal.