CHINA DIARY - INDIA CHINA AND THE WORLD ECONOMY 2009

I am sharing the views from a good Indian  friend who works for a large MNC in Being. He is in the automotive industry there and earlier worked in the same sector in India. My friend travels a lot across China and his views reflect his observations 

The theories of decoupling of Asia from the western world which were doing the rounds have come to a naught. The impact has been across varying in degree. Korean and Taiwanese economies besides HK took a huge beating owing to huge dependence of the overall economy on exports. Indonesia got affected with oil prices going down and the ensuing bust in commodity prices owing to perceived drop in demand for coal and thereby mining industry. Thailand has had a political imbroglio compounding the overall economic investment climate besides the export dependence contributing to the slowdown. Malaysia which seemed to be standing up and not slowing has started shaking now. So it is all over.

 

China which is supposed to emerge as a saviour … is showing strong policy drive by huge internal consumption stimulus in spite of the huge challenge of loss of jobs and contraction in the export sector. The scale and size of the stimulus package is stupendous. The confidence and sure footedness resolve of the government is likely to sail them through. When the President or the Premier here says that they would achieve 8% then they would!!

 

Another interesting trend that I see in China is that the runaway labor cost increases which one witnessed in the last 5 year are correcting which means that the labor rates are dropping with the workforce getting redeployed and absorbed after taking salary and wage cuts è all this would lead to another wave of cost efficiency making China weather this and become even more competitive. This holds good for india too but not to the same scale.

 

In India I have heard that there are new startup which owing to downsizing in the IT sector are able to hire talent easily now. Do we see an emergence of a new entrepreneurial wave in the near future?

 

I feel at the end of all this China would surge ahead further and even India would emerge stronger. Though it would be more painful for China (over 50% dependence on exports as compared to 20% of India).

H1B VISAS - THE NEW RULES - ONLY 1000 JOBS AT STAKE

The H1B amendment that passed isn’t as tough as the one Grassley proposed on Feb. 5, which would have prohibited firms from hiring H-1Bs altogether. The modified amendment instead makes TARP recipients like Citibank, Bank of America , GM etc  jump through extra hoops before they can hire those foreign workers. Specifically, it subjects recipients of TARP funds to the same rules so-called H-1B dependent employers must follow. (An H-1B dependent employer is one whose workers brought in with that visa comprise 15% or more of the employer's total workforce.) 

The new additions in the H1B rules include:

1. The employer can’t displace any similarly employed U.S. worker with an H-1B hire within 90 days before or after applying for H-1B status or an extension of status.

2. The employer can’t place any H-1B worker at the worksite of another employer – meaning it can’t outsource a worker for a client – unless that employer first makes a “bona fide” inquiry as to whether the other employer has displaced or will displace a U.S. worker within 90 days before or after the placement of the H-1B worker.

3. The employer has to take good-faith steps to recruit U.S. workers for the job opening, at wages at least equal to those offered to the H-1B worker. The employer must offer the job to any U.S. worker who applies and is equally or better qualified than the H-1B worker.

“These are hardly onerous expectations,” notes Ron Hira, professor of public policy at the Rochester Institute of Technology and an expert on H-1B visas. Hira says the provision would affect about 1,000 jobs.

Indian Industry is relaxing all norms while recruiting ...

The other day I came across in Hyderabad an advertisement in the local newspapers regarding a BPO JOB FAIR from 10 AM to midnight. Age / Sex no bar. Walk-in and Walk-out with your offer. Imagine you are a retired (voluntary retirement) banker and I know many of these species. Here is an opportunity to earn a few thousands ( Rs 10,000 +), work in a 100 % air-conditioned environment, interact with young people. I would jump at it.

Software companies have relaxed the educational qualifications while hiring. For instance, a top 10 Indian software company, used to only hire engineers with over 60 %. Today, the same company hires laterally software engineers who have a 50 % pass mark. Forget engineers, they are willing to hire Diploma holders. The reason, an acute shortage of people, the right type of people.

Whether it is software or BPO or retail or restaurants, there is an acute shortage. Forget, white-collared workers, look at the construction industry. The kind of revolution which we are seeing across India demands – Blue-collared workers to build, paint etc etc. Here again there is an acute shortage. Witness the advertisements in the local vernacular press.

In any party or seminar or meeting, I am asked about this talent shortage across industrial sectors. My reply dear Reader – “ SUPPLY catches up with DEMAND “.

Remember, we are a nation of over a Billion in terms of population. Every year, millions are joining the work-force. The rules of ECONOMICS will get applied automatically. You will see that the new workforce will learn new skills. Potential employers will train / retrain their existing / potential workforce so that the industry needs are met.

What should the Indian government do ? I personally am of the opinion that the government should help the private sector by subsidizing the skills training etc etc.