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China's e-commerce boom a lesson for creating jobs in India

Wednesday, August 3, 2016 - 07:47
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India needs to add about 80 million jobs by 2025 to ensure enough jobs for its bulging youth population, so its demographic dividend doesn't become a liability.

[MUMBAI] India needs to add about 80 million jobs by 2025 to ensure enough jobs for its bulging youth population, so its demographic dividend doesn't become a liability.

Yet, even with the government's push to boost manufacturing, it will be short by 24 million jobs as the large services sector doesn't generate enough employment, HSBC Holdings Plc estimates.

E-commerce could fill half of that gap if India were able to replicate the explosion in Chinese online shopping, according to economists Pranjul Bhandari and Prithviraj Srinivas at HSBC.

Internet penetration and online purchases in the world's world's second-most-populous country are today where China's were about seven years ago. That's also when Chinese e-commerce started booming, the economists wrote.

India, like China at that time, doesn't have an organised network of brick-and-mortar retailers, making e-commerce a potentially powerful force for change. As many as 5 million villagers could set up shops online by 2025, reenacting rural China's embrace of e-commerce on Alibaba Group Holding Ltd's Taobao platform, according to the report.

While India is still a cash-based economy, a push to give poor people access to banking has resulted in 220 million new accounts over the past two years. A rising young population is embracing new technologies, and mobile wallets are on the rise.

HSBC sees online sales-including services such as travel - jumping from US$21 billion now to US$420 billion in 2025. But that will depend on the success of government plans that include a push to modernise roads and expand broad bank connectivity, training programs for workers, and incentives to create startup companies. The boom could create about 20 million new jobs. Taking into account the offline employment that could be lost in the process, Ms Bhandari and Mr Srinivas estimated the potential gain at a net 12 million jobs.

What about the additional 12 million jobs that would still be needed? Look at the potential in health and education services, they said. Since a lack of providers has also been a relentless source of inflation, this could solve two problems at once.

BLOOMBERG