Dr. Ranjeet Mehta,
PHD Chamber of Commerce.
of the Indira Gandhi Institute of Development Research,
Minister of Housing, Mining and Labour,
Government of Maharashtra.
Arvind Vithalbhai Patel,
National Institute of Construction Management and Research (NICMAR)
Head, Strategy and Planning,
In construction and within the broader infrastructure segment, the jobs growth has been exponential over the past decade.However, big challenges lie ahead.
The real estate and construction sectors will create over 15 million jobs over the next five years despite signs of stress in the segment in the last few quarters, according to the Economic Survey (ES) 2017-18 tabled earlier this year. Real estate and construction together is the second largest employment provider in the country, next only to agriculture. The sector employed over 40 million work force in 2013, which rose to 52 million work force by 2017, and as per the projections, will rise further to a 67 million strong workforce by 2022.
“This implies that it will generate over 15 million jobs over the next five years, which will translate to about three million jobs annually,” the survey report said.
In fact, since 1999-2000, employment in construction boomed in India at an annual rate of over 9 per cent. Its share in the total workforce more than doubled from 4.4 per cent in1999-2000, to 10.5 per cent in 2011-12. In the last eight years, this has accelerated even further. The boom is stark when compared to manufacturing, over a longer period. In 1980-81, manufacturing sector employed about 11 per cent of the workforce; construction was a mere 1.6 per cent. Three decades later, construction sector’s share rose to 9.4 per cent, while manufacturing sector’s share has practically stagnated. In fact, the rise in industrial employment (mining, manufacturing, electricity, gas and water) share is almost entirely on account of construction.
In fact, in construction and in the broader infrastructure segment, India’s growth has been exponential over the past decade. Today, we are the fourth largest and probably the second-fastest growing economy, with infrastructure being one of the cornerstones. The infrastructure industry in India is highly fragmented and hence, it is difficult to gauge its exact size and the jobs it generates each year in absolute terms. However, be it roads and highways, railways, aviation, ports and shipping, energy, power or oil and gas, the Indian government and the various state governments seem to be making rapid progress. This has led to significant employment generation, though a majority of it is still in the unorganised sector. Over the next decade, the infrastructure sector in India will need to continue its growth momentum and is likely to maintain a growth rate anywhere between 7-10 per cent, a very healthy sign. Construction, manufacturing, retail trade, transportation and communication have not only been among the largest employers, but also have contributed more than two-thirds of all new employment generated after 2004-05. Contributing about 8 per cent to the nation’s gross domestic product (GDP), the sector is the largest, after agriculture, with respect to its contribution to the GDP .
What accounts for this boom?
A white paper published in December 2016 by R Nagaraj of the Indira Gandhi Institute of Development Research in Mumbai found, apparently, the starting point of the construction boom was the previous NDA government’s two major road construction initiatives in 2000, namely, the Golden Quadrilateral programme connecting metro cities; and the rural road connectivity programme to build motorable roads to all villages with a certain minimum population, also called the Pradhan Mantri Gram Sadak Yojana (PMGSY), which continues today. For instance, Bihar is said to have made substantial progress in public works (roads and bridges) in the last decade, thus contributing to the regional growth. As a result, the number of workers in construction rose from 17 million in 1999-2000 to 26 million in 2004-05. Investment in infrastructure rose strongly thereafter, and during the 11th five-year plan (2007-12), infrastructure investment in the public and private sector together grew by $475 billion or nearly $100 billion yearly. The result was that employment in construction jumped from 26 to 52 million, and tripling compared to the turn of the century.
Third, the information technology (IT) outsourcing boom and modern retailing (malls) also created a large-scale demand for high quality commercial real estate, met by the private sector, mostly in big cities.
The ES also reviewed the sector and found nearly 90 per cent of the workforce employed in the real estate and construction segments are engaged in construction of buildings, while the rest 10 per cent workforce is involved in building completion, finishing, electrical, plumbing, other installation services, demolition and site preparation. Over 80 per cent of the employment constitutes minimally skilled workforce, while skilled workforce account for over 9 per cent share. The remaining are spread across work classes such as clerical, technicians and engineers.
A challenging scenario
Nonetheless, when the BJP government’s performance is reviewed after four years of being in power, with respect to creation of jobs, the data is not very encouraging. While creation of jobs has been challenging, even retaining existing jobs has been a problem. In fact, in the first two years of the government, employment has shrunk.
In the first year of the government’s tenure (2014-15), the employment shrunk by up to 0.2 per cent while in the second year (2015-16), it dipped by 0.1 per cent. This is based on KLEMS India database – a research project supported by Reserve Bank of India (RBI). The project analyses the productivity of the Indian economy.
India has witnessed shrinking of employment thrice in the 21st century. On the first occasion, it happened in 2012-13, at the time of the previous government, the United Progressive Alliance (UPA). The second occasion was when the crisis continued into the first two years of the current government.
So far, the KLEMS data provides a record of employment only till 2015-16. It shows that major sectors, where jobs were slashed, include agriculture, hunting, forestry, fishing, mining, quarrying, textile, leather, footwear, paper products, printing and publishing, and petroleum.
Interestingly, those were the years when the Indian economy was registering growth – 7.4 per cent in 2014-15 and 8.2 per cent in 2015-16. However, the growth was not reflected in jobs creation. Rather, existing jobs were also not sustained.
Experts say the challenge will only get tougher. Dr. Ranjeet Mehta, Principal Director, PHD Chamber of Commerce believes what is needed is a focus on the micro, medium and small enterprises (MSME). Indeed, with over 60 million MSMEs, an average of just one job per company translates to over 60 million jobs! The world over, very less numbers of jobs are being created by big companies, Dr. Mehta points out. According to him, “In the next four years, the job market is going to change completely because of the intervention of artificial intelligence (AI). Robotics will come in to play. Not only this, but lesser numbers of jobs will be available. Moreover, the skill sets today will be redundant in future. One will have to learn new skill sets. People have to be prepared with the way the world is changing with the kind of technological intervention happening worldwide.”
In fact, such a scenario has already begun playing out. The industry clearly needs skilled people at a faster pace than ever before to meet the growing need for construction and infrastructure creation. Take, for instance, in the roads and highways sector, a company like Patel Infrastructure. The Ahmedabad-based roads developer is in the midst of an initial public offering (IPO), aiming to raise Rs 400 crore from the stock markets, which it plans to use to expand its operations, giventhe huge five-year plan outlined for the construction of roads under the Bharatmala Pariyojana. However, this is easier said than done. While the company will continue to add to its 3000-strong work force as well as spend about Rs 45 crore to buy roads construction equipment in the coming months, what is crucial is it will need skilled operators to use this equipment efficiently. Arvind Vithalbhai Patel, MD, Patel Infrastructure, reveals the company is also setting up a training centre in order to impart the necessary skill sets for drivers and various equipment operators. He points out, “It may sound like a low-end function, but increasingly, the equipment, too, is becoming more technologically advanced as equipment manufacturers innovate and improve upon their past products. There is increasing automation. While you may need lesser numbers of people, but you still need the right kind of people.” Nonetheless, the Bharatmala programme, with its target of over 80,000 km in the next four-five years, will create job opportunities, but this would still need a continuous upgrade of one’s skill sets, Patel adds.
As per the Anderson Economic Group Report 2012, India requires about 400,000 project management professionals every year up to 2020 across industries. In comparison, there are less than 10 institutions that offer full-time programmes in project management. One can imagine the shortfall in manpower. The
need for skills is heightened when one considers the fact that organisations in India waste an average of $71 million for every $1 billion spent, as per a report titled Pulse of the Profession 2015, by Project Management
Dr. Mangesh Korgaonker, Director General, National Institute of Construction Management and Research (NICMAR), says, the move by the industry to create training centres and establish dedicated training programmes is of the utmost importance. He explains, “A close academia-industry linkage will enable academics to learn what is happening on the field and develop a useful knowledge base. There is a lot happening on the field that we in the academic world aren´t even exposed to.” He adds, “Therefore, the potential to create the knowledge of the future rests much more with the industry and people directly associated with projects.”
Especially important for jobs in rural areas is the budgetary increase in investment in the rural roads construction plan, PMGSY. Compared to the allocation of Rs 7,000-8,000 crore to PMGSY in 2012-13 and Rs 9,000 crore in 2013-14, the allocation increased to Rs 19,000 crore in 2015-16 by the government. However, equally importantly, this is only 60 per cent, since the remaining 40 per cent is to come from the state governments. Consequently, the annual allocations will be Rs 27,000 crore total, taking into account both central and state expenditures. This same sum will be available for each of the next three years, until 2018-19; this has been assured to the Ministry of Rural Development by the finance ministry.
Such an increase in allocations automatically means rural roads will be constructed much faster than they were being done over 2011-14, the last three years of the UPA regime. The average construction of rural roads under PMGSY was 73 km per day over 2011-14; over 2014-16, this number had reached over 100 km a day. With the increased allocation in the current financial year, it is expected to rise to 130 km a day, according to reliable senior sources in the Ministry of Rural Development. In 2018-19, it is targeted to touch even higher. This is not unthinkable, as in earlier years, at its peak in 2009-10, construction of rural roads under PMGSY had reached 145 km a day.
With respect to national highways and expressways, robust inflows have ensured most of the engineering, procurement and construction (EPC) players have exceededtheir order inflow guidance. Dilip Buildcon, Sadbhav, Ashoka Buildcon and KNR Constructions are already sitting on a comfortable order backlog.
Rohan Suryavanshi, Head, Strategy and Planning, DilipBuildcon, believes the investment in infrastructure will continue to create jobs, as well as making the country more investor-friendly, such as the focus on ease of doing business, which will attract both domestic and foreign investments and help generate jobs. “One of the positive signs,” he points out, “is that leaders at the state level are competing with each other and trying to show people how they are able to attract jobs. Many of them are thinking big and showing a lot of vision for their states.I think this is one of the real bright spots. There are several chief ministers who are doing a lot on economic development. I really see tangible benefits due to their efforts. I see decisiveness and I see more forward-thinking. If all states in the country follow suit, it will make a huge difference.”
Prakash Mehta, Minister of Housing, Mining and Labour, Government of Maharashtra, talks to Construction Times immediately after the state government revealed a new blueprint for Mumbai till 2034. In a short chat, he tells CT the government will also take on constrution responsibility.
Tell us a little about the new DP.
The new policy has been announced after much deliberation. There is 500 to 1000 acres of land available in MMR region but the owners do not have sufficient funds to develop them. At present, they get 1 FSI and the maximum they can get is up to 2.5 FSI. Beyond this, they have to pay the premium. Now, we are proposing to acquire land through the Maharashtra Housing and Area Development Authority (MHADA), construct budget-friendly homes and compensate the land owners. The compensation packages are yet to be decided and it is expected to be finalised soon. At leaset 100,000 homes can be built in the coming three-four months after we finalise everything. We are working on it so as to achieve our set targets for Housing for All by 2022. The commitment we have for Affordable housing for 2018 is to create 20 lakh across Maharashtra.
The Dharavi redevelopmebt plan has been hanging fire for a while. Any updates?
We will issue a global tender for the entire Dharavi redevelopment plan. The government is working on this initiaitve. 49/59 per cent investor will be there. Dharavi is divided into five sectors. Since these were five large sectors, developers were not coming forward. Hence, we have divided it in to 12 sectors now. Still, we have not got bidders for this tender. We’ve recalibrated and are now taking it one sector at a time. In this first sector, the commercial development will in one demarcated zone while the other area will have only residential development. Our priority is that wherever there are open spaces available, we will create housing for 10,000 project affected persons (PAP) in that area and after this we will start working on the tenders within two months.
What about the issue of the Mahim Nature Park? Will it come under the redevelopment?
It is a part of Dharavi Nature Park and nothing will be changed in this regard. There will be no construction permitted in this area and no construction will be done within it.
How are you addressing the issue of high land costs for the affordable housing segment?
The central government has declared what should be done for public, private, partnership (PPP). The developers can surely build homes and if the buyer wants to buy these home, we will give them a subsidy. We are trying to bring in this new PPP in that we will acquire the entire land and we will also develop it at our own cost. We will decide in a month or so what this ratio will be regarding the government’s participation, whether it will be 65:35, 70:30 or 75:25 ratio.