True value of labour
When the drumbeats of a $5 trillion and $10 trillion economy don't stir me, business leaders ask me, don't I want India to grow? I say, of course I do. I stand and sing the Indian national anthem more lustily than the young people around me. I want economic growth very much. But I don't want Indians hating each other and killing each other for the sake of cows and to restore some past glory. I don't want the mountains and rivers we sing about in our anthem destroyed for the sake of building infrastructure for growth. I don't want a false growth that does not lift the incomes of all Indians much faster. Because, if their incomes do not grow, and they do not earn with dignity, there cannot be real growth of the economy.
A sustainable competition strategy must be based on the resource that a corporation or a country has more of than its competitors
I want growth. But, I want a different, more inclusive, and environmentally sustainable pattern of growth for the Indian economy.
The Madras Management Association (which for many years has been rated as the best management association in the country) invited me to speak at their annual convention on the theme, "The Indian Century: How to Drive Sustainable, Inclusive Growth?" I candidly said that unless we change how we are producing and measuring the country's growth, this will not be India's Century. I recommended that business managers and policymakers reconsider concepts of competition and productivity.
India’s growth strategy must be founded on the employment of larger numbers of human beings in its economic enterprises
A sustainable competition strategy must be based on the resource that a corporation or a country has more of than its competitors. If a country sits on large hydro-carbon resources, its national strategy must be founded on the use of hydro-carbon resources for growth. Indeed, this is how Saudi Arabia has become very wealthy. It has world-scale, and world-class, petroleum refining and petrochemical industries. A country with more mineral resources than other countries can build its economy on the strengths of its mineral extraction and process industries, as Chile has.
What is the resource India has more of than any other country in the world? It is young people. India’s growth strategy must be founded on the employment of larger numbers of human beings in its economic enterprises. They are abundant, willing to work, and willing to learn. Our large population of people seeking employment can be India’s assets: they can provide Indian enterprises a competitive advantage.
However, in conventional corporate accounting, human beings do not even appear on the asset side of the register, along with other assets, like buildings and machinery. Human beings are accounted for on the cost and income side,to be used only when required for production.
Companies too should reexamine their strategies for global competitiveness. Value the potential of Indian people. Engage them, nurture them, care for them. They will be your competitive advantage
The values of all assets on the balance sheet depreciate over time. Accounting law requires that companies report depreciation of their assets’ values. Human beings are unusual assets. They are the only assets whose value can increase over time. Human beings have an ability to learn and to improve their own capabilities. Provided of course they are enabled to. Not only can human beings improve their own capabilities; they can also improve the performance of the company’s machines, and efficiency in the use of other materials if they are motivated to. Thus, human beings are the only “appreciating assets” a company has, and a country has. Japan does not have petroleum, mineral, or chemical resources. Despite this, Japanese companies in many industries became world-beaters because they made Japanese workers their competitive advantage.
A dictum of management is that you manage what you measure. “Productivity” is a central concept in national and company economics. Productivity is a ratio of input and output: a measure of how much input is required to produce the desired output. There are two ways to improve any productivity ratio. One way is to reduce the quantity of input. The other is to keep the input constant, and yet produce more output.
Policymakers must measure the productivity of the Indian economy by how many citizens’ incomes are lifted with every unit of GDP growth
The most important productivity ratio any manager should be concerned with is how to get the most output from the scarcest or most expensive resource the enterprise has. A universal practice, in corporate, as well as national accounting, is to measure productivity as output per unit of labour. This presumes that human labour is the scarcest resource and that it should be substituted by other resources, such as capital.
However, labour is the most abundant resource India has, and the least utilised unfortunately. Whereas financial capital is relatively scarce. Therefore, the productivity of the Indian economy should be measured by how many good jobs each unit of financial capital produces. Companies too should reexamine their strategies for global competitiveness. Value the potential of Indian people. Engage them, nurture them, care for them. They will be your competitive advantage. Nurturing Indian citizens as appreciating assets, not as burdens, will make India’s growth more inclusive and faster too.
In 2013, the Planning Commission asked Bain and Company to look at the HR strategies of Indian companies spread across several industries and several regions of the country. Companies were separated roughly into two categories. Category A were those who considered their employees as assets and invested in them. For Category B companies employees were costs. Category B companies demanded more flexibility in labour laws. They employed large numbers of workers through contractors to reduce their own costs. They spent less on training too.
Bain compared the financial performances of companies in the same industry and in the same region so that no external factors would vitiate the comparison. They found that Category A companies had more sustained, and stronger, growth in revenues and profits than category B companies.
India needs more business enterprises that employ more humans in dignified work with less capital. Therefore, more MSMEs, and more enlightened large companies: enterprises who consider their people as their sources of competitive advantage.
Policymakers must measure the productivity of the Indian economy by how many citizens’ incomes are lifted with every unit of GDP growth. Achievement of a $10 trillion dollar GDP will not be possible if a billion Indian citizens cannot earn, spend, and save enough to boost GDP.
(Arun Maira is a former member of the Planning Commission and Author of Remaking India: One Country, One Destiny)