On The Job Training

Services firms to hire at least 2.5% of their workforce as apprentices

Now, industry has told the government it could do more to train India’s youth on-the-job if the legal regime that includes penal provisions such as imprisonment up to six months for violations, was eased. Firms outside the services sectors are ready to offer apprenticeships to train youth of at least 5% of their total workforce and have proposed a cap of 10% so that the option is not abused. The 10% cap would discourage companies from recruiting abnormally high number of apprentices instead of regular workers with a possibility of using them as cheap labour.

The industry’s proposals steered by the Confederation of Indian Industry (CII) have got the backing of Prime Minister Manmohan Singh’s advisor on Skills S Ramadorai.

These expansions in apprenticeship capacity would need a change in the rules that allow the government to set the number of training seats for each trade in each firm.

Amendments to the law, proposed since 2009, have been held up in inter-ministerial conflicts. In December 2012, it was decided that the Ramadorai may attempt to rewrite the law from scratch, but the idea now seems to have been shelved and the labour ministry has been asked to try and move forward on issues where a consensus is feasible.

Industry has sought that clauses that make promoters and managers liable for imprisonment for non-compliance with the rules be dropped and sweeping inspection powers be moderated. This creates unnecessary apprehension and bitterness, forcing companies to stay away from apprenticeships altogether and inspections could be done on a limited ‘sample basis.’

The labour ministry has also been urged to drop the restrictions that prevent firms from deploying apprentices from outside their state limits and the mandated in-house training infrastructure. If a company outsources training of its own employees, it should be allowed to train apprentices outside too, industry has pointed out.

On the low stipends paid to apprentices, India Inc has said that they must be linked to the minimum wages for each trade at the state level, with the stipend starting at 60% of such wages in the first year of training going up to 90% in the fourth year.

Click to download the Apprentice Act of 1961

Source: The Economic Times

CII Business Outlook Survey (Jan-Mar 2013)

An Unchanged CII Business Confidence Index in 1QFY14 Belies Hopes of an Early Turn-around

CII Business Confidence Index (CII-BCI) remained almost unchanged at 51.2 for April-June 2013 quarter as compared to the previous one. The reading for the January-March 2013 quarter had risen above the psychological 50-level mark to 51.3, after dipping to 49.9 in the October-December 2012 quarter. This ‘status-quo’ in the index value mirrors the air of uncertainty that is still lingering among industry regarding the present business prospects and also throws into question the hopes of an early turn-around.

In the survey, domestic economic/political instability, high levels of corruption and infrastructure & institutional shortages emerged as the top three concerns of most firms, while risk from exchange rate volatility was ranked as the lowest concern for businesses at this moment.

The survey indicates that most of the respondents (47.8 per cent) expect GDP growth to improve and come in a range of 6.0-6.5 per cent for the current fiscal as compared to 5.0 per cent in 2012-13. This is in line with CII’s expectations for GDP to lie between 6.0-6.4 per cent for the current year. However, in an indication that the downside risks to growth have not abated yet, 36 per cent of the respondents expect GDP to grow below 6 per cent in the current year.

Worryingly, as far as WPI inflation is concerned, most of the respondent firms (40 per cent) expect it to lie above 7 per cent for the current fiscal which is way higher than CII’s forecast of 5.5-6.0 per cent for the year. This is however in line with another result of the survey, which showed that most of the respondents (43 per cent) expect crude oil prices to increase in the current year as compared to last fiscal.  Additionally, 33 per cent of firms also expect WPI inflation to lie in a range of 6.5-7.0 per cent for the current year.

The rise in WPI inflation forecast for the current fiscal is certainly not good news for the economy as moderating trend in inflation would have given RBI the legroom to ease interest rates in order to spur growth

The twin deficits- fiscal and current account have emerged as key policy concerns lately. The survey reveals that almost 60 per cent of the respondents expect fiscal deficit to lie in a range of 4.5-5.5 per cent of GDP in 2013-14 as against budgeted 4.8 per cent of GDP for the year. However, 23.3 per cent of respondents also see the fiscal deficit breaching the 5.5 per cent mark in the current fiscal. On the current account deficit front, the survey does not paint a very rosy picture, with majority of the respondent firms (51 per cent) expecting it to lie in a range of 4.0-5.0 per cent of GDP, while 33.3 per cent expect it to exceed 5 per cent. This is way higher than the 2.5-3.0 per cent range deemed sustainable by RBI.

In an encouraging sign, majority of the respondents in the survey expect improvement in their sales, new orders, exports and value of production in the first quarter of 2013-14 from the levels of previous quarter. Further, nearly half (48.3 per cent) of the respondents also expect their capacity utilization to reach as high as 75 -100 per cent in the first quarter of the current fiscal. All these indicators point towards the likelihood of revival in economic prospects of firms in the current quarter, however these could be too early to predict as other indicators don’t look so propitious.

Another disquieting factor, however, is the continued upward pressure on the cost of production from likely rise in electricity & fuel, wages & salaries, raw material cost and low value of rupee in the April-June 2013 quarter. An exception to this is the cost of credit, which relatively a larger proportion of respondents (18.7 per cent) expect to decline as compared to the previous quarter, mainly due to monetary easing being pursued by RBI currently including a 25 basis points (bps) cut in repo rate in early May 2013.  As per the survey, most of the respondents expect both repo rate and CRR to be cut by 50 bps during the current fiscal.

The 83^rd Business Outlook Survey is based on the responses from 180 members. Majority of the respondents (57.1 per cent) belonged to large-scale firms, while the rest were from the MSME sector. Further, 60.9 per cent of the respondents were from manufacturing sector while 36.6 per cent and 2.5 per cent were from.