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India was a closed economy before it opened its doors in 1991. 1950-80 is known as the inward looking era of Indian history and 1980-91 is the mild liberalization era, where Indian had started opening its economy to an extent. Indian economic policy after independence was influenced by the colonial experience, which was seen by Indian leaders as exploitative, and by those leaders' exposure to democratic socialism as well as the progress achieved by the economy of the Soviet Union. Domestic policy tended towards protectionism, with a strong emphasis on import substitution industrialization, state intervention, a large public sector, protection of domestic markets, control of private industries and central planning. Most of the people were employed in the agricultural sector, and the job opportunities elsewhere were very less. The role of a human resource recruiter was hence, not very challenging, as India was a conservative society, and the job opportunities for the Indians, outside of the agricultural sector, were very less.
In 1991, the Indian economy opened up with the then Prime Minister Narasimha Rao, along with his finance minister Manmohan Singh, initiating the economic liberalization of 1991. The reforms did away with the License Raj (investment, industrial and import licensing) and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors. By the turn of the century, India had progressed towards a free-market economy, with a substantial reduction in state control of the economy and increased financial liberalization. This has been accompanied by increased job opportunities in the industrial and services sector.
Changes in the economy post liberalization
Industry accounts for 28% of the GDP and employ 14% of the total workforce. In absolute terms, India is 16th in the world in terms of nominal factory output. Economic reforms in 1991 brought in foreign competition, led to privatization of certain public sector industries, opened up sectors hitherto reserved for the public sector and led to an expansion in the production of fast moving consumer goods. Post-liberalization, the Indian private sector was faced with increasing domestic as well as foreign competition, including the threat of cheaper Chinese imports. It has since handled the change by squeezing costs, revamping management, and relying on cheap labour and new technology.
India is fifteenth in services output. The services sector provides employment to 23% of the work force and is growing quickly, with a growth rate of 7.5% in 1991-2000, up from 4.5% in 1951-80. It has the largest share in the GDP, accounting for 55% in 2007, up from 15% in 1950. Information technology and business process outsourcing are among the fastest growing sectors, having a cumulative growth rate of revenue 33.6% between 1997-98 and 2002-03 and contributing to 25% of the country's total exports in 2007-08. The growth in the IT sector is attributed to increased specialization, and an availability of a large pool of low cost, but highly skilled, educated and fluent English-speaking workers, on the supply side. This is matched on the demand side by an increased demand from foreign consumers interested in India's service exports, or those looking to outsource their operations. The share of India's IT industry in the country's GDP increased from 4.8Â % in 2005-06 to 7% in 2008. In 2009, seven Indian firms were listed among the top 15 technology outsourcing companies in the world. Tourism in India is relatively undeveloped, but growing at double digits. Some hospitals woo medical tourism.
Fig 1. GDP contribution of different sectors
Fig 2. Employment contribution of different sectors
Major Challenges for recruiters
Some of the major challenges with respect to HR function can be broadly categorized as:
Post liberalization, India has opened its doors to the outside world. Since, every person is well connected with others in the world; this poses a major challenge to the recruiters. Today, applicants know what is happening in the same field all over the world. Applicants know what all opportunities they have in the market, hence an offer from the recruiters that is not up to the mark, is deemed to be rejected. The applicants cannot be fooled easily in terms of the offer. The information availability is also such that the exact work culture of an organization can be found out, hence a recruiter at the time of recruitment, cannot paint a false picture in the eyes of the applicant. Applicants today want a good joining package and a good work culture in the organization even more than the earlier times. All these things have to be kept in mind while recruiting. The offered package has to be carefully designed.
Increased Job Opportunities:
Earlier, we more or less had just the public sector. But, today we have a growing and highly competitive private sector too. People have more options to choose from, than the earlier times. This gives the applicants a higher bargaining power. A recruiter hence must be able to carefully negotiate the increasing demands of the applicants, keeping in mind the organization's budget. The starting package has to be attractive enough to draw the talented people towards the organization. Also, at times the cost of retaining an excellent employee becomes more than expected. For this, the offered package and the subsequent package have to be gauged well.
Increased Educated Work Force:
Middle and upper class today, produces more doctors and engineers than ever before. There is no dearth of engineering colleges today, and even B-schools are mushrooming like anything. But just having a degree does not assure a good employee. The recruiters have to do a proper personality-job fit before selecting an applicant. This becomes even more difficult when the pool of applicants is very large, like in the present times. Even though the number of jobs are increasing, but the number of people eligible for applying to the various jobs is increasing at even faster pace.
Work force diversity:
Women have proved their mettle in all possible varieties of profession. Today, women walk shoulder to shoulder with men. With the changing perception, the recruiters have to make sure that they give equal opportunities to women, without any bias. Hence, most of the recruiters are under pressure today to achieve a certain percentage of women in their workforce. On one hand they want to achieve a set target for the percentage of women in the workforce to bring diversity, but on the other hand they cannot compromise on the quality and skills that they really want for the job. Hence, the selection procedure has to be designed keeping this in mind.
Increased Unethical Practices:
In today's digital age, it is very easy to commit unethical practices. A thorough background check is all the more important as well as tough to do today. Gauging an applicant's personality in the digital era is tough. Profiles can be faked; social networking sites cannot be trusted for authenticity anymore. It is hence a challenge for the recruiters, to judge the personality of the applicants correctly, today.
Frequent Job Switch:
Due to increased job opportunities as well as the mindset of youngsters to make quick money, the frequency of job switch is increasing. Most of the employees in BPOs are fresh out of college, looking for a quick buck. Long term stay at the company is not on their mind. Hence, a recruiter must be able to carefully understand the intention of the applicant joining their company. The selection or the interview process should be such that their real intention gets uncovered. The recruiter should also be able to clearly communicate to the applicants, the kind of employees that they are actually looking for.
Mergers & Acquisitions
A lot of organizations are going through mergers & acquisitions, which involves the bringing together of 2 companies which would have their own respective culture, policies etc. Recruiting as well as laying off the right set of set of people, who would fit in this changed environment, is indeed a challenge for the recruiters.
Research/Education in the field of HR
Changes in the market, in terms of technology are happening at a very fast pace. But there is no dedicated research in the field of HR, to help train the recruiters for this changing environment. Also as more and more MNC's are entering India, the job requirements are also changing. There are very few education institutes in the field of HR, who teach future recruiters about the future trends, challenges in the HR domain.
Working vs. Higher Education:
Today, many people work for 2-3 years before going for higher education. Such aspirations of the applicants should be found out by the recruiters in the selection process itself, so that if the employee is good, then the possibility of designing a retention package in the near future is kept open. Many employers even support the higher education of their employees. Hence if such employees are supported from the very beginning, they would not quit the organization, thereby fulfilling the employee's career goals as well the organization's goals.
Reaching Out To The Right Set Of People:
Earlier, the job opportunities were less, as well as the number of applicants was less. Hence, reaching out to the people was easier. Word of mouth was more or less sufficient. Today, being able to communicate the job opening to the large pool of job-seekers is not an easy task. Media plays a more visible and critical role today in the recruitment process. The recruiters have to make sure that they approach the right media-houses at the right time.
Skills vs. Family Name
Earlier, being in the public sector, the name mattered more than the skills. The jobs were passed on from one family member to another. The trade unions also played a major role in deciding who is to get the vacancy. Today, there is a policy of referrals, but even the referred applicants have to undergo an interview process. The performance of an organization is of paramount importance in this highly competitive market. Hence the recruiters have to focus more on the skills of the applicants today.