Need to address gap due to India's jobless growth, says Anand Mahindra

The re-alignment in the global supply chain and reduced dependence on China imply a huge opportunity for India as companies and countries will look for alternative supply sources, Anand G Mahindra, chairman of the Mahindra Group, said on Friday while addressing shareholders at the 76th Annual General Meeting of the company.

"Overall, the situation is full of opportunities for India. There are, however, some gaps we need to fill in to take full advantage of these opportunities,’’ Mahindra said. ‘’The most important of these (gaps) is jobless growth,” the Mumbai-based industrialist added.  

Mahindra also pointed at chances of social unrest if jobs don't grow. “With one of the largest youthful populations in the world, it's easy to imagine the potential for social unrest if jobs don't grow along with the youthful population,” he said. 

The business leader, who’s active on social media, stated that the government is trying to do its bit. ‘’It has announced plans to hire 1 million in government jobs by 2023. Given that we have a 900-million-strong workforce, there's a lot more to do,” he said.

The Indian unemployment rate is hovering around 7-8 per cent, he said citing data from the Centre for Monitoring Indian Economy (CMIE). “This is because job growth has not kept pace with GDP growth,” he said.

Mahindra raised the issue of employability too. Only 40 per cent of the labour force that is capable of working is actually working or looking for work, he said. In contrast, the labour participation rate is more than 60 per cent in the US, he added.

Job creation is happening mainly at the lower end of the gig economy - drivers for Uber, delivery for Zomato, that sort of thing in the private sector, he emphasised.  “This is not nearly enough,” said Mahindra, adding that the manufacturing needs to be boosted to create jobs on a mass scale and to take advantage of the global factors that are moving in India’s favour.

Like most of the manufacturing firms, M&M has been at the receiving end of the supply chain disruption. This has been one of the key reasons for the long waiting period for delivery of vehicles.  The availability of semiconductors had slowed down to a trickle, he said.

On Friday, M&M reported a revenue of Rs19,617 crore for its standalone business, up 67 per cent year-on-year for the June quarter. Its profit after tax was Rs1,430 crore, up 67 per cent year-on-year.

Elaborating on supply chain issues, he said, “those lamenting the demise of a global supply network are ignoring the fact that the disruption is in the China-dominated global supply network rather than in the true global supply chain.’’

“Unshackling ourselves from China is a good development for the rest of the world and long overdue. Nature abhors a vacuum, and other countries, including ours, will rush to fill it.”

Around 60 per cent of companies and 82 per cent of manufacturers now report their production slowed during the present outbreak due to lack of employees, inability to obtain supplies, or explicit factory halts resulting from the lockdowns, he said.

Companies have learnt the hard way that it is crucial to keep monitoring the supply chain situation, to keep a finger on the pulse and to get early warning signals of possible disruptions, Mahindra said. ‘’This points to the need for greater digitisation and reliable monitoring software, including perhaps blockchain.’’

The business leader expressed confidence that capital will flow from the West ‘’as global interest in supporting an economically strong India grows’’. This investment will be via foreign direct investment , thus directly putting money into Indian businesses and infrastructure. PE and VC capital, in particular, will see strong growth, he pointed out.

On inflation, he said that though it’s a concern from the business angle, it can nevertheless provide a minimum threshold of returns on productive assets. It enables a businessman to take more risks because inflation ensures that investing in the present is cheaper than that in the future. ‘’It further makes businesses more attractive versus passive investments, thus attracting capital. If it does not spin out of control, inflation can be the ally of growth.’’

“I believe the industry should have faith in the future and invest. The world is changing, and there are opportunities waiting to be seized.”

M&M as a company, he said, is “walking the talk.” We are well positioned in the businesses where opportunity beckons. The company’s strategically scaling up investment in the chosen areas of focus. ‘’Be it electric vehicles, tractor plants, solar, logistics or real estate,’’ Mahindra said while adding that the company is upping the game.