Indian IT beats manufacturing in job creation

The information technology sector led by the top three listed companies, TCS, Infosys and Wipro, created the most jobs in the five years to FY11 compared with other sectors, boosted by an over two-fold jump in aggregate revenue.

The analysis by ET Intelligence Group of the trend in job creation by the organised sector reflects the rising clout of services companies. Of the 14.3 lakh jobs created between FY06 and FY11, over 8 lakh (56%) were added by companies in the services sectors, which includes banking and finance, healthcare, hospitality, technology, telecom, trading and retail. These companies created four out of seven jobs in the country over the past five years, far outpacing the manufacturing sector.

IT sector players led the pack, adding as many as 4.5 lakh employees. TCS, Infosys and Wipro together added 2.4 lakh people, or more than half the total additions for the sector. These companies were also the top three job creators in the country, in that order, during the period.

The data is based on the hiring trend of a sample of 600 listed companies that reported annual financials along with headcount information since 2006.

Changing trend in GDP

"The findings are a reflection of the changing trend in India's GDP composition. As in other economies, we have gradually shifted from the agrarian phase to the services phase. But, in the process, we sort of skipped the manufacturing phase," says Ma Foi Randstad's MD and CEO E Balaji. Ma Foi is a Chennai-based staffing and HR services firm.

Manufacturing takes backseat

The data reveals the proportion of services sector jobs in the total headcount of the sample rose to 46.5% in FY11 from 41.8% in FY06. The sample companies expanded the aggregate headcount by 48% to 43.8 lakh employees between FY06 and FY11.

Manufacturing jobs did increase by 35% to 23.3 lakh during the period, but at a much slower pace compared to the 66% growth in services sector employment.

Manish Sabharwal, who heads temporary staffing company TeamLease Services, believes the increasingly capital-intensive nature of India's manufacturing businesses is a major reason for lower job creation in the sector. Besides, the rising trend of shifting production and employees off the balance sheet through sub-contracting and temporary workers has also reduced the payroll of manufacturing players, he adds.

Sabharwal says just 12% of the total jobs in the country are now created by the manufacturing sector. "Bigger manufacturing companies have replaced people with machines, thereby escalating capital intensity. It is a mistake that needs immediate improvement. The country needs low-skill and high-productivity manufacturing," he adds.

The falling share of manufacturing in new jobs creation is also worrisome since this would curtail low-skill employment. Given its requirement for high-skilled people, the services sector alone will not be able to cater to the rising workforce in the country, experts say.

Ratings firm CRISIL's Chief Economist DK Joshi believes manufacturing has to emerge as the critical employment generator in future.

"In the next 10 years, 120 million people will join the workforce (in India). Where are we going to employ them if not in manufacturing?" Joshi says the new manufacturing policy, approved in October, will play an important role in job creation.