Services or the "tertiary sector" of the economy covers a wide gamut of activities like trading, banking & finance, infotainment, real estate, transportation, security, management & technical consultancy among several others. It has seen a remarkable growth over the past couple of decades and today contributes more than 63% to India’s GDP. Yet, it contributes only 30% to the employment of the country. This issue brief is to understand the policy options that are needed to boost employment in the sector. In particular,

1.      Why skill improvement is required especially in construction and transport

2.      What is the role of the state given that the central government is planning massive investments

3.      What planning is required for transportation and logistics in areas where investments are targeting steel, power and mining industry

4.      What is the scope for absorption of local people in these operations

5.      Could there be other suggestions for long-term livelihood management

Requested by : BJP MP from Orissa (Lok Sabha)

Deadline: July 11, 2008; 5pm

Specifically in the IT services field and ITES(IT enabled services) India is not going to produce enough work to keep pace with its burgeoning population. We need to focus on more product based companies. It does not necessarily mean product based companies in the IT domain. No matter what we do with our service-focused IT-ITES sector, I believe, we will not scale dramatically to be able to become a true economic power. Nasscom’s projection that the Indian IT sector would make $70 B in 2009 with a workforce of 2.2 million corroborates my opinion. This projection translates to a per-employee earning of approximately $32,000. A comparison with Microsoft that makes $40 B with 60,000 employees or with Nokia that makes $40 B with 40,000 employees (per-employee revenue of $600,000 to $1M) clearly depicts the need for product companies in India. At a time, when the focus of existing IT companies and the industry as such is slated to shift to product conception and marketing, I see massive opportunities for entrepreneurs and early stage product companies in India and the government would provide a conducive environment for them. Moreover, we need to create opportunities in the BOP (Bottom of Pyramid) region.  

Things to do to increase employment:

1.       1. Need to create more social entrepreneurs. My definition of term “Social Entrepreneur” does not necessarily convey the traditional meaning. Everyone wants to make money, even the Social entrepreneur. There is no harm in that line of thought; however, if we can introduce the large Indian poor in the economy, it would be a win-win situation for all. In this regard, I would like to bring forth some noteworthy contributions done by Harish Hande and the company he co-founded, SELCO India. This organization is a social venture to promote sustainable technologies in rural India. Everyone realizes that’s there is latent potential and moolah in the rural sector. The central government and the state government should engender an environment, wherein Social entrepreneurs are welcome. This symbiosis would help the underprivileged, the entrepreneur and also the government.

      2. There are a plethora of examples where a company has grown to a multi-million dollar business just by serving the needs of the poor - Casas Bahia in Brazil, Cemex in Mexico and the quintessential Grameen Bank in Bangladesh. The metamorphosis did not happen overnight. Behind this success, there has been a lot pragmatic thinking, creativity and unrestrained toil of leaders with support from the local government. The company Jaipur Foot, the introduction of ITC chaupal, the concept of single serve shampoo sachet from HLL – all these are testaments that even Indian companies are making substantial profit by catering to the poor. We need the government to be more liberal towards the entrepreneur - provide him with cheap land and an easy access to finance from nationalized banks or other financial institutions. We should also convince private organizations to funnel some of their cash towards building innovative product, which when built, will not only  provide them with additional market but also help the downtrodden in augmenting their quality of life.

3.       3. The government should lay a special emphasis on building world class INFRASTRUCTURE; my cue is towards the roads connecting villages and urban cities. Once these remote villages get connected, new innovative businesses, which once can’t be thought of even in the wildest of our imaginations, will take the front-seat. These innovations will be done by the villagers themselves. Remember, every poor person is an entrepreneur and how adeptly they manage their paltry savings bolsters their innate talent of entrepreneurship. Instead of focusing on the services sector to create ways in order to increase employment, let the government streamline its resources in strengthening the building blocks of our nations – all means of transportation.