Friday, 25 November 2016

Conflict between Technology and Improvement of Skills

We often hear people boasting about India's demographic advantage and a hefty population in the working age group. Often, we hear economists brag that over 60% of our population is in the working age group contributing to our economy and thus, we have a domestic consumption driven growth. These figures are apparently fascinating and potentially game-changing. I remember reading the below statement in a newspaper:-  
“When countries have a greater share of people who can work, save and pay taxes, they have the potential to transform their economies and power investments in healthcare, education and other building blocks of future prosperity,” said UNDP’s chief economist Thangavel Palanivel.

However, does this bring out the right picture? Will these huge numbers indeed translate into economic prosperity. Lets look at a few interesting facts:

The Organisation for Economic Co-operation and Development puts the skills shortage in India—measured as a percentage of firms with ten or more employees that have difficulty finding qualified employees—at 61%. Another estimate points out that barely 40% of Indian graduates are employable. These statistics reveal a rather dismal picture.

This points out to an obvious gap between the desired skill set and the availability which needs to be addressed to harness the economic benefits before the demographics turn unfavourable, as the population ages. The Government is taking several steps to counter the gap with national skill development programmes but whether they really translate into better statistics, only time will tell.

Lets take a situation I encounter everyday which I feel should be addressed by the education system today. With tectonic and dramatic changes in technology, industry and businesses collect a lot of data. Even the skilled students taking up jobs feel a overflow of data through emails or other internet sources and face difficulties in managing this superfluous flow of data in everyday life. We find a lot of solutions on the internet to avoid data overflow and most of them point out to cutting the data source for a while to prevent data overflow, which is really not the solution. The education system is the primary incubator for students—and education models in our country have few options or weightage given to skills and knowledge relevant in today’s market. 

The education system should be equipped to guide the students on managing data and making useful sense out of it rather than dumping more data on the students in the form of textbooks. The internet already contains the information given in the textbook. 

Another important initiative that can be considered is introduction of research in secondary school itself with setup of necessary I.T. infrastructure to facilitate and encourage the same. This will prompt   the students to read, think critically and write, these skills being of paramount importance in the 21st century. There should be interaction between educational institutions and industry to facilitate internships, mentoring initiatives or project assignments.

We need to act fast. Probably faster than the growth rate of technological advances. Here's an interesting observation on the impact that AI and ML might have on the law students:

"All this will change once software systems become intelligent enough to do the tasks that we have so far relied on human trainees to perform. As artificial intelligence techniques make due diligence reviews and document automation more reliable and practical, there will be no need to deploy first-year associates for these jobs. Which means that very soon, the on-the-job training model that has stood the legal industry in good stead for all these centuries will eventually be a thing of the past."


A World Economic Forum report posits that up to a third of the skills considered important today will have changed as soon as 2020. Thus, skill development has to be a perpetual exercise inculcated through primary/secondary education. With advancement of Artificial Intelligence and Machine Learning technologies, a lot more blood will be split as they start taking up monotonous jobs, thus requiring upgraded skills for being employable. Importance of technical expertise will rise and people with the twin skills of : Proficiency of their traditional jobs and technical prowess will become valuable and difficult to find. 

Sunday, 20 November 2016

Demonetisation and Impact on Banking Sector

The Prime Minister's recent announcement on demonetisation has wrecked havoc across the country, rendering 86% of the currency worthless outside of a bank branch. There have been several opinions on the pros and cons of this move, with some citing it as a major risk taken by Mr. Modi halfway through his term and others believing it to be transformational, if we can pull this off. Nonetheless, banks have ended up collecting about Rs 4 trillion and are currently flush with cash. Though a certain amount of these deposits have been withdrawn, a large chunk still remains stacked in the coffers of the banks.

With a drastic reduction of cash in circulation in the economy, it would indeed impact economic growth if this money is not put back again into the system by the banks. Since the Current Account/Savings Account deposits have increased with the banks in last few weeks, money is available with the banks at a cheaper cost, thus creating an opportunity for them to pounce upon. However, the ability of the banks to create credit has been hampered with rising NPAs in the banking sector, now touching about Rs 6 trillion. The industrial credit growth which continued to grow at an elevated rate of 20% over four years ago, has contracted by 0.2% in August 2016 although gross bank credit expanded by 7.6%. This deceleration is attributable to lack of investment activity and low capacity utilisations in the industry. In fact, the Indian economy is going through the biggest deleveraging of the past quarter century with highest asset sales since liberalisation. Indian companies have sold assets in 2016 more than in any year since liberalisation. Asset sale deals announced, pending or completed are worth $40.85 billion largely with respect to distressed indebted corporations.

With these facts, the point to ponder upon, is what are banks doing with the cash? 

The net injection (The difference between the amount of money lent by RBI to banks and the amount of overnight deposits into RBI by banks) declined sharply as banks kept their newly acquired deposits with RBI.

(Views are personal)