Article: Budgeting for the future

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Budgeting for the future

Modi government gung-ho on job creation, skill development; economy forecasted to grow 7-8 percent, as per Union budget
Budgeting for the future
 

In a FICCI poll, most CEOs described the budget as pro-growth and applauded the emphasis given to various job-creating sectors like manufacturing, infrastructure and tourism

 

The finance minister announced a national multi-skill programme called Skill India, which would skill the youth with an emphasis on employability and entrepreneurial skills

 

On July 10, Union Finance Minister Arun Jaitley finally presented the maiden budget of the NDA-led government at the Centre. Since the new government has come to power, the country has been in a state of anticipation, waiting for Prime Minister Narendra Modi to pull out a magic wand and wish away all the troubles ailing the Indian economy, which has clocked sub 5 per cent growth for two consecutive years. Modi had made a lot of big promises in the run up to the general elections, chief among them being creating more job opportunities and opening certain sectors to foreign direct investment. Let us find out if they have lived up to their promises.

Promising to leave no stone unturned in creating a strong and vibrant India, Jaitley has forecasted that the pace of economic growth will accelerate to 7-8 per cent in the next three to four years. India is still grappling with high inflation and the worst slowdown in years since the recession in 2009. Creating job opportunities is the topmost on the mind of the government as it has placed a lot of emphasis on sectors like manufacturing, infrastructure, tourism, textiles and housing–these sectors have the potential to create both skilled and unskilled job opportunities. Also, opening up of FDI will go a long way in stabilizing the Indian economy and opening up avenues for investment in the country.

If one were to go by the sentiment of India Inc after the Budget, one would assume that the industry is very happy with the proposals put forward by Jaitley. In a FICCI poll, most CEOs described the budget as pro-growth. Underlining the need to return to the pre-crisis growth level in order to generate jobs and assure inclusive growth, the corporate leaders applauded the emphasis given to various sectors.

Moorthy K Uppaluri, CEO, Randstad India, said, “Broadly, the budget presented seems to be in the right direction, with intent on economic growth by containing fiscal deficit and inflation. The focus has been on investments in key fundamental areas to revive the economy and spur job growth with a priority on execution and implementation of the schemes and projects. However, we feel that four keys areas have emerged as growth levers to put the economy back on track and achieve an annual growth of 7-8 per cent over the next couple of years. These areas are the opening up of FDI in a few sectors like insurance and defence, prioritizing the infrastructure, construction and agriculture sectors for growth, focus on skill development and intent to create a predictable tax regime.”

Highlights of the budget

The common man: Relief for the average Indian came in the form of extension of the basic exemption limit from Rs 2 lakh to Rs 2.5 lakh; for senior citizens, the non- taxable income limit was raised from Rs 2.5 lakh to Rs 3 lakh. The budget also enhanced the annual deduction available under Section 80C from Rs. 1 lakh to Rs. 1.5 lakh, which was a long-pending demand of taxpayers.

Education sector: There has been marked focus on education with allocations for school education going up by 10 per cent and for higher education by 13 per cent from the interim budget. Five new IITs, five new IIMs, four new AIIMs, 12 more government medical colleges and new agriculture and horticulture universities have been announced in the Budget. Educators are still debating the consequences of this move and was wondering if it was a hasty decision to take. However, the education and skills development sector reaped rich dividends from the Modi government's focus on these areas.

Kamal Karanth, MD, Kelly Services India & Malaysia, said, “We believe the budget has addressed a lot of areas that ushers well for the job market. Investment of Rs 500 crore for setting up IITs and IIMs will help to meet the huge demand for skilled workforce in India. The setting up of biotech clusters in Bangalore and Faridabad will not only promote the sector in a huge way but will increase the job opportunity for biotech graduates.”

Human Resource Development: The total budget of the human resources development ministry saw an increase of 12.3 per cent from last year to Rs 83,771 crore this year. Modi had said last month that the country should be known as ‘Skill India’ instead of ‘Scam India’. With that precedent set, the finance minister announced a national multi-skill programme called Skill India. It would skill the youth with an emphasis on employability and entrepreneurial skills. It will also provide training and support for traditional professions like welders, carpenters, cobblers, masons, blacksmiths and weavers etc.

Vinay Pradhan, Country Manager, Skillsoft, India spoke to us about the government’s focus on skill development and said, “The incentives outlined will foster the youth to learn and thus indirectly contribute towards the “New India Inc.’s” growth. Further, Skill-India is an excellent initiative to encourage the millennial generation to enhance their on-the-job and entrepreneurial skills. Plus, with a special focus on broadband internet in this budget, e-learning along with correct elements of classroom delivery will ensure that the quality and standard is not only maintained but that it also reaches every corner of the country, especially the rural population.”

T. Muralidharan, Chairman & Managing Director, TMI e2E Academy shared both sides of the coin on the budget. He said, “The big plusses are the clear plan to redesign the MGNREGA to create assets, especially in agriculture which is the first step in preventing the misuse. Unfortunately the demand of experts to include the Skill development training as a MGNREGA outcome has not been met. The second big plus of the budget is on the Apprentice scheme revamp promised by the FM and expansion of the scheme to MSME. However, the budget did not spell out in detail about the role and the budget of the new skill ministry. There were expectations of a big jump in the skills budget.

MSME and Entrepreneurship: In a far reaching move, the government provided impetus to start-ups to bring them from the fringes, to the centre of the national economic discourse. With focus on Medium, Small and Micro Enterprises (MSME) as the backbone of the economy, the government has proposed to set up a ₹10,000-crore venture capital fund which will provide equity, quasi-equity, soft loans and other risk capitals for start-up companies. It is a prudent approach to harness the 47 million surplus skilled work force that is likely to emerge by 2020. The move opens up possibilities for local financial institutions to participate in the surge of entrepreneurial activities across the country, where at least two start-ups are launched every day.

Ajit Menon, HR Head of Dalmia Bharat, said, “The Union Budget 2014-15 gives a message of stability and continuity. Setting up new vocational training centres, bringing it at par with the higher education system and allocating an Rs 14,389 crore for creation of jobs is a positive sign for the economy. It’s evident that the Finance Minister intends to boost youth employment by allocating Rs 100 crore to start village entrepreneurship training schemes to encourage rural youth to start their own ventures and help reduce the demographic divide."

Job Creation: Medium to long term job creation is expected in the insurance sector, whereas long-term job creation is forecasted in the infrastructure and manufacturing sectors as FDI for these sectors have been raised. Fundamental sectors like manufacturing, infrastructure and agriculture have been given a boost, which will lead to a multiplier effect on economic growth and job creation. With focus on the MSME sector, it has the potential to be a key job creator in the long term. Job creation and skill development will help the large percentage of unorganized workforce move to the organized sector.

Pankaj Bansal, CEO of PeopleStrong, said, “Two best things about this budget are the focus on Entrepreneurship and Skill development. Encouragement being given to Women empowerment is an important highlight of this Budget. There are about 160 million women in India – of which 80 per cent are in working age. If problems like women safety and gender discrimination are given special focus, more women can join the work force, providing some respite from job supply-demand mismatch of job market.”

With opening up of investment in the country, there are great hopes that jobs will increase and new avenues of employment open up. There is a huge barrage of skilled and unskilled workforce in India waiting for the time they will see the light of day with suitable employment. It remains to be seen how well these policies will be executed, but with an optimistic market there is hope.

One cannot judge how well the wishing wand performs right at the beginning of the budget. However, as a small part of the otherwise trillions of dollars’ worth of budget, the HRD sector has received its due.

Topics: #Updates, Strategic HR

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