#1: The economy isn’t really that bad
An interview with Sanjeev Bikhchandani, Founder of naukri.com and investor in Zomato and PolicyBazaar
Hi friends 👋,
Welcome to the first edition of Rising India, my newsletter on Indian millennials. Before we start, some housekeeping notes:
🤔 Rising India is an issue-oriented newsletter on getting smarter about India’s 450 million millennials — the world’s single largest demographic group.
📅 Each of my editions will feature interviews with business leaders, entrepreneurs, policymakers, journalists, and anyone who might shed light on the lives and futures of Indian millennials. Instead of constraining myself to a set schedule, I will publish as I think about new ideas and discuss them with others (roughly once a month).
🤝 My hope is to not just create awareness about issues facing Indian millennials but collaborate with readers, entrepreneurs, and policymakers on projects to harness the potential of this generation.
➡️ Today’s newsletter features an interview with Sanjeev Bikhchandani, best known for founding naukri.com, India’s first online jobs portal. With a database of more than 50 million job seekers, and nearly 15,000 new resumes uploaded every day, naukri.com has access to data on India’s employment that few others do. Through his company InfoEdge, Bikhchandani also owns matrimonial website jeevansaathi.com, real estate website 99acres.com, and was an early investor in Zomato and PolicyBazaar. He is also on the founding team of Ashoka University, a leading liberal arts university in the national capital region.
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In the first quarter of FY 2021, India’s GDP contracted by nearly 24 percent as most of the country’s economy had been ordered to shut down by the Prime Minister on the 24th of March. S&P slashed the country’s growth prediction to negative 9 percent, from its earlier negative 5 percent estimate, stating that “one factor holding back private economic activity is the escalation of COVID-19.” And since March, despite one of the world’s strictest lockdowns, COVID-19 has spread all across India, with the country poised to hit 7 million cases soon.
We’ve all seen photos of the massive urban-rural migration that followed the Prime Minister’s 8 pm announcement, as millions of daily wage earners in India’s big cities packed their belongings and made their journeys back home. With most of the economy locked down, hiring activity in the formal salaried sector nosedived – down 35 percent year-on-year according to naukri.com’s August 2020 JobSpeak report.
Let’s be clear: India cannot afford any economic contraction or widespread employment loss. With a median age of 28 and a population of nearly 450 million millennials, the country needs to create stable and high paying jobs for its youth if it hopes to ever become a five, ten, or fifteen trillion dollar economy. Prime Minister Modi’s hope of an ‘Atmanirbhar Bharat’ (self-reliant India), will remain a pipe dream if young Indians are frying pakoras (as he has previously suggested qualifies as gainful employment) or earning three dollars a day working as manual labor on government projects. As economist Mihir Sharma tweeted recently, India has sixteen years, from now until 2036, if it hopes to capitalize on its youth and become a middle-income nation.
But according to Sanjeev Bikhchandani, things are better with the Indian economy than what top-line numbers may suggest. In an exclusive interview, he told me why he thinks that the Indian economy will likely grow more than eight to ten percent next year, that the government should print money to finance stimulus measures, and that India’s gig economy is moving towards sustainability.
Q: We are seeing numbers like 21 million salaried jobs have been lost (CMIE), and job losses in the informal sector are likely to be even higher. What are the short and long-term implications of this contraction in employment? Are these permanent job losses?
Impact will exist until coronavirus has been beaten, which could be a year or two, until a vaccine is global, ubiquitous, and affordable. Human nature does not change in a hurry so we shouldn’t be worried about long term elimination of employment because human beings are social and long-term work from home is not sustainable.
If you beat coronavirus, things will bounce back in two years, but you have to get to the nub of it and actually beat it.
24 percent contraction was for one quarter – the lockdown quarter. For the year you will probably end up at ten or twelve percent contraction, and next year, in all likelihood you will grow at eight or ten percent (from a smaller base).
In fact, the feedback we are getting from the market currently tells me that 8 to 10 percent growth next year may be conservative.
Bikhchandani made it clear that due to human nature and India’s huge population, the country’s economy will only suffer a momentary setback, but that the government should look at printing money in order to create a demand stimulus. He believes that the government should focus on fueling consumption by putting money in the hands of the people to speed along an economic rebound.
Because he’s been an early investor in numerous Indian startups and unicorns, I was curious to hear his view on the gig economy and the profitability of gig economy companies in general. In the fieldwork for my forthcoming book What Millennials Want, on the economic aspirations, social views, and political attitudes of Indian millennials, I met countless Uber drivers and delivery executives who were making wages above what they would in their villages but were still not economically comfortable or secure.
In my book, I profile Uber drivers who gave up more secure jobs working as clerks and store assistants, lured by the company’s generous sign-on bonuses, only to see their earnings halve. As my research progressed, my curiosity about India’s gig economy only increased — unlike other countries, India has full-time gig workers, leaving them particularly vulnerable to the economic cycle. How are these gig workers supposed to support their families, build savings, and invest in their futures, when they barely make a living wage?
Q: While opportunities in the gig economy are better than what contractors may have had in their villages, is this meant to be lifetime employment? How does it fit in with our urgent need to provide good-paying, stable employment to hundreds of millions of youth?
For the gig economy to actually thrive, you need a conducive environment and overall prosperity to create demand for their services.
Five years ago, these workers were making 35-40 thousand rupees a month, and investors then began to tighten their budgets to stem losses.
The good news in the covid contraction is that Zomato and Swiggy have used to more sensible unit economics, not giving crazy discounts to customers and are getting closer to becoming viable businesses.
However, moving forward, instead of employing 4 million, the gig economy may employ a smaller number of people, say 2 million.
This is better for gig workers in the long run, and the industry in becoming more sustainable, but to serve a smaller base of customers.
However, tomorrow, if you have a large-scale migration from restaurants to cloud kitchens and the market expands, keeping unit economics sensible, the customer base can increase once again.
Bikhchandani is perhaps in the minority of empowered leaders optimistic about the state of the Indian economy. But in his network, it is without a doubt, not a minority view. Every other week, we seem to wake up to news alerts of new capital raised by Mukesh Ambani from foreign companies and investment funds buying equity in Jio ($20 billion and counting). As India’s richest man seeks to build his e-commerce business and create a WeChat/GoJek style “super app,” foreign investors are clearly bullish on the prospects of India’s digital economy. These investors, from KKR to General Atlantic, are seasoned operators taking a long-term bet on India’s demographics: as millions more come online and consume goods and services, they want an invite to the party.
And not one to be left out, 82-year old Ratan Tata is planning to launch his own super-app as well. Reportedly in talks with Walmart to invest $25 billion, the Tata scion wants to build a “multipurpose online platform combining fashion, lifestyle and electronics retail, food and grocery, insurance and financial services, as well as digital content and education,” perhaps setting up an epic clash for market share in India’s digital economy. As Bloomberg columnist Andy Mukherjee writes, this battle could look like the Alibaba/Tencent fight in China, where Jio follows Tencent in building a super-app for everything from messaging to financial services, while Tata, which has a stronger pedigree in running consumer businesses, follows Alibaba to dominate e-commerce.
My own view, which I am going to cover in greater detail in the next edition of Rising India, is that Indian technology startups are well-positioned to capitalize on some of the changes in our behavior since the pandemic began. Although many companies have already begun calling employees back to work, video conferencing and online project management are here to stay. India’s e-commerce sector is taking off, and numerous local startups have been innovating in these sectors, from logistics solutions to web-push notifications for Shopify merchants. Not only are these companies hiring and innovating locally, but they’re also increasing the overall stock of talent within India, a necessary condition if the country wants to create its own Silicon Valley.
Further reading and other, not so good news:
Toyota Halts India Expansion, Blaming 'We Don't Want You' Taxes, Bloomberg
Last month, Toyota’s India unit announced that it is putting it’s expansion plans in India on halt, blaming the country’s high taxes and anti-business climate:
“The message we are getting, after we have come here and invested money, is that we don't want you,” Toyota Kirloskar Motor CEO Shekar Viswanathan said in an interview. In the absence of any reforms, “we won't exit India, but we won't scale up.”
In India, engineers and MBAs are turning to manual labor to survive the economic crash, Washington Post
India’s economic crash has left its college graduates and white-collar workers digging ditches and cleaning lakes. The Washington Post’s Niha Masih and Joanna Slater write about the tragedy of engineers and MBAs turning to the government’s manual labor guarantee program as their incomes have dried up:
On a recent muggy afternoon in southern India, Earappa Bawge hacked at the ground with a pickax, his white shirt pasted to his back. Each dull thud reminded him of how far his hopes had fallen.
Just months ago, the 27-year-old engineer was poring over project files in an air-conditioned room at a factory hundreds of miles away. The job was a ticket out of rural poverty for Bawge’s entire family, who had sacrificed for years so he could complete his studies.
Now he was back in the village where he was born, propelled by a wave of economic destruction rolling across India during the pandemic. To survive, Bawge began digging ditches under a public works program.Alongside him were a former bank employee, a veterinarian and three MBA students. At the end of the day, each received $3.70.
“If I don’t work, we don’t get to eat,” said Bawge, flicking beads of sweat from his brow. “Hunger trumps any aspiration.”
Consequences of Covid-19 on Indian economy are harsh, Sunday Guardian Live
In a piece for Sunday Guardian Live, BJP Member of Parliament Subramanian Swamy torches his own government for multiple “spins” on the state of the economy. Although his piece is not particularly well-written, it is interesting to read criticism of the government’s response from the inside. And unlike how the ruling party viciously attacks its critics, it does not have much ammunition to go after Swamy, a Harvard-trained economist and card-carrying member of India’s Hindu nationalist movement.
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