State of job market in India (post COVID-19)

There are 'feel good' things and then there are 'do good' things.

'Feel good' things make great headlines, but are mostly hollow. For example: many believe that immediately post COVID, India will beat China in terms of its economic growth. But if you ask them: 'how would India do that?', they would go silent.

'Do good' things, on the other hand, are fact based, require extensive planning and immaculate execution. This is very hard to achieve.

There is a lot of 'feel good' narrative around the Indian job market. This needs to be analysed with an objective lens. So without giving you my opinions on this subject, let me directly jump into facts:

Let me divide this article into 3 parts:

I. Pre-COVID job market: macroeconomic scenario

Overall jobs: Without belabouring, I would point you to the leaked NSSO report, which stressed the fact that India had a joblessness rate of 6.1 per cent in 2017-18, a huge jump over the 2.2 per cent registered in 2011-12. This report has been kept under wrap by the Government. (Link: NSSO)

Post this report, Demonetisation and GST implementation have been two major steps taken by the government- we all know how these have transpired.

In conclusion, people who are of the view that the job market WAS GREAT in India pre COVID-19 can reach their own conclusions now.

Now let's talk jobs market for college graduates (pre-COVID):

Let's look at the makeup of the job market in India: most college graduates in India work in Service Sector. The % contribution of Service Sector to the GDP in India is ~55% (for comparison, in the US, it is 77%). The size of the US GDP is 10x that of India. A simple google search would validate these figures.

Therefore, the implication of these facts is that there are far more 'college level' jobs in the US compared to that in India to begin with.

Now, something very interesting happened in 2017: Moody's, which is one of the foremost rating agencies, upgraded India's rating. Here was their rationale of making this move:

To be very clear what has happened since we had upgraded the credit rating from Baa3 to Baa2 in 2017, that upgrade was based on expectations from the series of reforms that the government had put forward. For example, GST, insolvency and bankruptcy code, the FRBM (fiscal responsibility and budget management) Act. All of these things along with the measures to improve the overall environment for doing business should have resulted in stronger growth.

Unfortunately, their view changed:

Unfortunately, what we have seen since then is despite many of these reforms and announcements being pushed forward, it had very little impact on the economy. It had very little impact on growth. Actually fiscal deficit targets continued to slip. In fact, the debt burden has gone up. It has risen instead of falling.

Source: Moody's

Please note that the job market in India was already bad even before COVID-19 hit India.

II. Now let's analyse the disruption due to COVID and its impact on India

This is an evolving situation. No amount of economic analysis can help us demystify the economic impact, fully.

However, we can make the following fact-based educated guesses:

1. India had a high rate of growth in the past; something that goes up, has to come down:

The last decade of growth in India was defined by high growth. India was cruising at 100MPH on the imaginary economy car. People were investing in India's "growth story" and paying a premium to participate in this growth.

It was akin to the fact that if you have a fast growth company, investors would pay a premium to invest. Nothing wrong with the story so far.

COVID-19 has put a brake on this acceleration. Now if a car decelerates from 100MPH to 20MPH, there will be pain.

This is precisely the difference between India and US/European economy, their economy was not fuelled by the promise of potential return for investors. In other words, due to COVID-19, the deceleration of the economy in the US/Europe would not be as much there as it would be here.

Plain common sense can help you reach this conclusion.

2. India's rating downgrade and interest rate risk:

Please ask yourself a simple question: why can the US Fed print insane amount of money, but India can't?

India recently announced 20L crore (265Bn USD). That too was not a pure liquidity infusion, but was disguised in numerous ways.

Do you know how much it has been for the US? It is USD2-Trillion so far.

Now, you might say that: great! if we can't print money, probably borrow more, right? Wrong. Due to macroeconomics risks, our government is having a hard time raising money or is paying a higher interest rate to do the same. Link: Kerala Bond Issue

So, if a country can't print money (create money), borrow less, what is the alternate? It is either to earn more (improve GDP, covered earlier) or get Investors to invest. So let's talk about investor confidence.

3. Investor confidence:

Here is the FPI/FII data for 2020:

Here is the FPI/FII data for 2019:

The data clearly shows that the money has flown out of India (in a VERY LARGE quantity). This money is going somewhere right?

Please tell me whether this money outflow is good/bad for India?

III. Likely Outcomes for college graduates in India: (taken from my last Linkedin post)

The job Market in India is likely to bottom out over the next 3 years.

From an MBA/College job perspective - Consulting, Technology, Start-up and Finance industries would be severely impacted. These are the major recruiters for MBA programs.

If you are tracking the stock markets, you would easily see that the money is flowing out of India. This money is now being invested in stable economies like the US/Europe, where FIIs are buying businesses at value prices.

Firms in India (say Zomato, Swiggy, PayTm, Flipkart etc) which are in fact major employers for Indian MBA programs are going to bear the brunt more than their US/European counterparts.

Therefore, if you want to work with McK/Bain/BCG/Apple/ Google/Amazon etc, you would have MUCH BETTER odds if you attend a top US/European program.

Therefore, don’t just simply look at past placements, but also look at future prospects, while deciding to apply. Understand how the future is shaping up and make smart decisions about your career.

Disclaimer: (to trolls, who send me personal hate messages) I help candidates study abroad. Why? because, I liked studying abroad. I benefitted immensely by studying abroad. Therefore, I support others to do the same. Just me presenting facts about the Indian economy does not make my viewpoint biased.