Arbitrage Magazine - January 2020 - Finance & Investment Club | IIM Rohtak

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January 2020 Vol 3 Issue 11

Article Of The Month:

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INDEX

S.No.

Article

Page No.

1

Excessive debt build-up and risk of a Global Debt Crisis

3

2

Why is the Indian Stock Market at an all-high despite a slowing economy

9

3

Can Financial Literacy solve Financial Strength?

13

4

A Year of Economic Slowdown

16

5

India $ 5 Trillion Economy

18

6

Declining Female Labour Participation in India

21

7

Contemporary Topics in Finance and Economics

24

8

Real Estate 2020: Waking a sleeping Giant

27

9

Role of AI and Predictive analytics for HR processes in the technology-

30

driven world

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EXCESSIVE DEBT BUILD-UP AND RISK OF A GLOBAL DEBT CRISIS By: Mayukh Mukhopadhyay (IIM Trichy)

Debt is an amount borrowed by one party from another. Debt is used by many corporations, sovereign entity and individuals. A debt arrangement gives the borrowing party the legal power to borrow capital under the condition that it is to be paid back at a later date, usually with interest. Hence, rising debts can be an indicator of more spending, thus pushing the GDP up. But excessive debts can be a cause of worry. Global debt has reached an all-time high of $184 trillion in nominal terms, the equivalent of 225 percent of GDP in 2017. On average, the world’s debt now exceeds $86,000 in per capita terms, which is more than 2½ times the average income percapita. The private sector’s debt has tripled since 1950, making it the driving force behind global debt.

Fig 1: Total debt as % of GDP (2017)

The above figure shows the total debts of the countries as a percentage of their GDP in 2017.

Developed nations have a higher proportional of relative debts as compared to the developing nations and the frontier nations. According to the IMF data, advanced economies have an accumulated debt of 266% of their GDP. These numbers are at 168% and 77% in emerging economies and low-income countries. Since 1950, the global debts have risen, with a greater magnitude in advanced economies as compared to the rest of the world.

Fig 2: Time series data of global debts (source: IMF Blog)

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The data further reveals that the share of private debt as a percentage of total debt is higher in advanced economies with Russia and China having a private dept of 81.5% of the total national debt. USA has a private debt share of 58.9% of the total GDP as on 2017. The number slumps in frontier economies.

Fig 3: Share of Private Debt as % of Total Debt

What may be the reason for global debts building up?

There may be many reasons for piling up of global debts. First, the sovereign debts may rise in order to finance the budget deficit. The below chart gives the pictorial view of the global budget deficit as on 2018.

Fig 4: Global Fiscal Deficit (2018) (Source: countryeconomy.com)

The correlation of government debts and budget deficit gives us a value of -0.35. This is as per our expectation, that as the budget surplus decreases, the sovereign debt of the country increases.

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Fig 5: Correlation between budget deficit and sovereign debts (2018)

Secondly, private debts may increase due to increased private investments in industries. This in turn will lead to a growth in the GDP. But the correlation between Industrial Production Index and the share of private debt in GDP is showing a negative correlation.

Fig 6: Correlation between Industrial Production vs Private debts share

Industrial production refers to the output of industrial establishments and covers sectors such as mining, manufacturing, electricity, gas and steam and air-conditioning.

This is counterintuitive to our general believe that as the private debts increases, the industrial production will increase as well. These anomalous results may be due to the fact that industrial production is a lagging indicator of private debts. It may so happen that the private debts are invested in foreign nations, with the easing of the FDI norms across the globe in general. This can be inferred from the fact that overall, there has been in increase in Industrial Production Index over the years.

The chart below shows the Industrial Production Index data of 2018, calibrated with the base data of 2015 to 100. Other than Brazil, Ireland, Norway and Iceland, all other nations have shown an improvement in the index numbers.

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Fig 7: Industrial Production Index of Countries in 2018 wrt. 2015 (source: OECD Data)

Thirdly, debts may build up due to the outbreak of zombie companies. A Zombie Company, also known as zombie firm or living dead, is a term used for a firm that is unable to stand on its own feet – it either needs one or a series of bailouts, or is kept afloat by lenient creditors and below-market interest rates. Since 1980s, the zombie companies have gained popularity, mainly due to lowered global nominal interest rate and reduced financial pressure. A zombie company can be identified based on Interest Coverage Ratio (ICR). ICR reflects the ease of a company to repay its interest from the Earnings before Interest & Tax (EBIT). With the data from Australia, Belgium, Canada, Denmark, Germany, France, Italy, Japan, Netherland, Spain, Sweden, Switzerland, UK and US; we see that the share of zombie companies in terms of volume and the probability to remain zombie increased over the years.

Fig 8: Growth of zombie companies (source: ‘The Rise of Zombie Firms: causes and consequencesBanerjee & Hoffman)

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What are the consequences of the rising global debts?

First, rise in debts may be a boon in boosting the economy, but too much debts put a pressure on the probability of default.

The International Monetary Fund (IMF) a month ago raised its alerts about significant levels of risky corporate debt, which have been exacerbated by determined low interests from national banks. The IMF cautioned that practically 40%, or around $19 trillion, of the corporate debts in significant economies, for example, the U.S., China, Japan, Germany, Britain, France, Italy and Spain was in danger of default in case of another worldwide monetary downturn.

Secondly, debts accumulation can lead to a slump in the domestic consumption. Domestic debt holders may reduce consumption in order to meet the debt obligation. This in turn can lead to a cut in the marginal propensity to consume (MPC) globally.

Thirdly, growing Sovereign debts gives rise to increased probability of sovereign default, which in turn will lead to a slump in the Foreign Direct Investments (FDI) is the country. The World Bank report shows a dip in the net FDI inflow globally since 2007. The numbers improved at the aftermath of the global financial crisis, the but could not last long.

Will it lead to a crisis?

The major credit rating agencies are skeptical of some of the sovereign issues in the recent past. Countries like Hongkong, United Kingdom, India, Italy, Mexico and South Africa have been downgraded in recent times.

The debt to default proportion has diminished year-on-year as per a report from Global Credit Data, a not for profit data collection entity.

Fig 9: Global net FDI Inflow (World Bank)

Since 2016, the proportion of defaults to corporate debt has dropped from 1.12% to 0.73%. The information was gathered utilizing portfolios from 26 driving monetary foundations over a time of 15 years.

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History has witnessed some of the most devastating financial crisis due to credit default. The Credit Crisis of 1772, the Great Depression of 1929 and the Global Financial Crisis of 2007-08 were all the perils of debt default. Sovereign debts of countries like North Korea (1987), Russia (1998), Argentina (2002) has defaulted in the past as well. Growing global debt, coupled with yield curve inversion across the globe, thus enhances the risk of global financial crisis. For the future, there are two imperative exercises: Countries need to handle their structural issues early, and debts must be utilized for productive investment and not just to fund budget deficit.

References https://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD?end=2018&start=1970&view=chart https://www.bis.org/publ/qtrpdf/r_qt1809g.pdf https://tradingeconomics.com/united-kingdom/rating https://countryeconomy.com/deficit https://data.oecd.org/industry/industrial-production.htm https://www.imf.org/external/datamapper https://blogs.imf.org/2019/01/02/new-data-on-global-debt/

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Why is the Indian stock market at an all-time high despite a Slowing Economy?

By: Nishant Kumar Satyam (IIM Indore)

“The stock market and the economy are two different things�

- Milton Friedman.

As the legendary economics Nobel laureate puts it, a broad metric of an even broader concept cannot be mistaken to be the same. The stock markets act as a mere aggregator of commercial data points, where speculation is rife, and sophisticated algorithms are leveraged at unbelievable scales for just one motive: Profit.

Whereas the economy, in a broad sense, refers to all the goods and services produced within the country. True, a significant proportion of these goods and services are produced by companies, which are, in turn, listed on the stock exchanges. It is only logical to assume that growth in the economy (which means an increase in goods and services output) translates to growth in the companies that produce them.

But is every logic, a sound logic?

Is correlation enough to establish causation in such complex globalized markets?

Are we jumping the gun when we mistake growth in one to be the growth of the other?

What has been happening?

When it comes to a market as intricate, layered, closely-watched, and wide-reaching as the Indian stock markets, it is easy to mistake it as an indicator for the overall economy. As data would point out, the Indian economy has been stuttering and stuttering at a global scale. IMF chief economist Gita Gopinath claims that India is responsible for 80% of slashed global growth estimates. The country grew at a 26-quarter low of 4.5% in the July-September quarter of 2019-20. Several rating agencies and investment banks have cut the country’s growth estimates to below 5%, yet the government seems to be bullish about being a $5-trillion economy by 2025.

On the other hand, the Indian stock markets continue to fly-high, despite the surrounding economic gloom.

Both the BSE Sensex and the NSE Nifty are at record highs and have generated spectacular returns of around 15% the past year, adding lakhs of crores to investor wealth. This presents quite a contradictory yet interesting scenario. If the Indian economy is slowing down, then why is the Indian stock market flying high?

Why has this been happening?

The answer lies in the complex factors that drive the two different entities: The stock market and the economy.

Government policies, economic conditions, sectoral outlook, customer demand, growth momentum and easy availability of cheap credit often affect both economic growth and the stock market. But financial markets and investors are also often affected by global developments such as central bank balance sheet expansion, falling

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rates, easy money availability and foreign fund flows. The exceptionally bullish mood of the Indian bourses despite the sluggish macro and micro factors, could be explained by considering the following arguments: What’s the alternative?

One way to explain why the GDP numbers diverging from the SENSEX trend is to argue the sheer lack of options that our country, and therefore the investors face. Under the current government, the alternatives to investing in the equity markets no longer exist. Demonetization, intentionally or unintentionally, eliminated real-estate as a lucrative asset to possess; Continuous interest rate cuts have made debt an unattractive maid; And, the number of Indians willing to go higher than the rates of INR 40,000 to purchase a mere 10 gm of gold, is just not enough. Not just within the country, there’s lack of options globally as well, as we confront negative rates plaguing the international debt-markets. Currently, bonds with an estimated worth of 15 trillion dollars are marked by negative yields. Under such scenarios, fund & pension account managers, alike, resort to equities to make up for this shortfall in returns.

The Foreign Quotient GDP growth doesn’t govern the stock markets. These wild ‘bulls’ are, however, influenced hugely by foreign & home market sentiments and outside & inside investors.

Unaffected by the US-China trade war in 2019; unhinged by the possibility of the third-world-war happening after the US-Iran fiasco, most of the global indices - S&P 500, Dow Jones, CAX- 40, FTSE 250, Nikkei, CAC 40 and Bovespa, from the major global economies of the world like, US, Germany, Japan, France & Brazil have shown double-digit annual increases in the last year. Our markets 13-15% increase just seem to be going along with the flow.

Technological boons have allowed investors to invest with ease and with virtually no information asymmetry in any part of the world. Influenced by each other’s decisions & moods, display of herd mentality is not quite uncommon amongst global investors as well. India’s developing economy, offering higher rates amidst the developed economies of the world, has become an investing heaven for global investors, especially FIIs, looking for a place to park their bonus earnings midst the emerging markets.

Only a few big ones are driving the rally The benchmark indices and their returns are largely skewed, by the sheer outperformance of a few heavy players in the economy. Players, who were least hit by the economic slowdown; whose market gains were least affected by the decrease in consumer spending; who still managed to post huge profits despite the adverse conditions. Under such conditions, investors choose to go with the safer bet of large companies offering secure returns, driving up their prices.

With globalization & the role of MNCs, companies derive profits from off-shore markets as well. Therefore, an increase in share prices of these companies is not necessarily correlated with just their local economies.

Indeed, the broader market, comprising of many other mid & small-cap companies have faced the brunt of

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sluggish global demand growth, which has subsequently been reflected in their share prices, but strangely, not in the indices.

What to Do Next?

Given the extremely volatile nature and the multitude of diverse factors affecting the stock markets, it will be extremely unwise to take its growth as a reflection for the overall health of the economy at large.

Firstly, be cautious about what type of assets we are holding our money in. Equity products, which might have given spectacular returns based on the irrational exuberance shown by the markets, will be the first to tank as soon as better sense prevails. Since the bullish run is driven by only a few select large-caps on the basis of exogenous/exceptional factors, but their intrinsic value and macros remain unchanged. Sooner or later, value will catch up with price. But since the economy appears to be in doldrums, its highly unlikely that stocks will increase in their intrinsic value. The only other eventuality then, is a price correction, so that price reflects the true value of the shares. Thus, investors would be better off parking money in less riskier assets (debt/liquid instruments), given the direction of the economy as well as global political disturbances.

From the government’s perspective, its high time that a massive overhaul in terms of economic public-policy, taxation, corporate laws, resolution and liquidity, and public investment, is implemented. We can no longer rely solely on FIIs/FDIs to fuel our economy. The economy faces fundamental problems: shrinking manufacturing, falling private investment, stringent corporate financing, automobile crisis, rampant unemployment and a slowly but steadily increasing inflation rate. The government’s ambitious economic targets seem a far-fetched idea in reality, even more so given the global headwinds and geo-political tensions flaring up yet again.

Issues ranging from the NBFC-crisis to the housing-sector need to be addressed through rational policymaking. A restructuring of GST slabs as well as the filing mechanism needs to be considered by the council.

Even fundamental changes in the taxation system cannot be ruled-out (say, the adoption of the Direct Tax Code) with reduction in tax rates for the bottom slab definitely on the cards for the upcoming budget on February 1. Even the ongoing internal socio-political issues need to be swept under the rug, if the government seriously wants to prevent another massive economic slowdown.

The arguments presented above shed some much-needed light explaining the meteoric rise of the stock markets, despite “The Great Indian Slowdown”, as the former chief economic advisor of India, Mr Arvind Subramanian puts it. The multitude of factors and their extremely volatile nature must caution anyone who mistakes this rally to be a symbol of the health of the economy. Lastly, both individuals and the government need to be proactive and take smart decisions to steer the country to safer shores in such sticky times. The economy and the stock markets remain two closely related, yet entirely different concepts. As a rational observer of issues, caution must be exercised while assessing the two.

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REFERENCES

[1]

https://www.indiainfoline.com/article/general-blog/if-there-is-economic-slowdown-why-are-

markets-scaling-new-highs-119110700317_1.html [2]

https://economictimes.indiatimes.com/markets/stocks/news/indias-economy-is-sputtering-but-

its-stock-market-powers-ahead/articleshow/72394742.cms?from=mdr [3]

https://qz.com/india/1174189/despite-slowing-gdp-growth-whys-the-indian-stock-market-on-

an-all-time-high/ [4]

https://economictimes.indiatimes.com/markets/stocks/news/whats-driving-stock-market-to-

record-high-despite-multi-quarter-low-growth/articleshow/72153678.cms [5]

https://www.livemint.com/market/stock-market-news/why-markets-are-rising-in-times-of-

slowdown-11574872092196.html [6]

https://www.quora.com/Why-is-the-Indian-stock-market-going-up-even-though-the-economy-

has-not-picked-up-yet [7]

https://tavaga.com/blog/personal-finance/why-are-stocks-up-in-a-slowdown/

[8]

https://mediaindia.eu/business/taking-stock-disconnect-between-indian-bourses-economy/

[9]

https://swarajyamag.com/economy/why-is-the-sensex-rising-when-the-economy-is-in-a-

slowdown [10]

https://www.financialexpress.com/market/cafeinvest/explained-why-sensex-nifty-are-soaring-

when-economy-is-seeing-slowdown/1757293/

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Can Financial Literacy solve financial fragility?

By: Divya s (Ethiraj College for Women) "Money is better than poverty if only for financial reasons - Woody Allen. Financial Literacy amongst people is necessary for better financial planning and financial management at the grassroot levels so that the economy as a whole becomes financially strong and robust.

Financial Literacy is a continuous learning cum updating process of following economic and financial trends and parameters, exploring and experimenting investment avenues which builds with experience. This is the viable phenomenon that can help translating what is learnt to what is to be done with funds.

But, is Financial Literacy only restricted to ensuring safety of funds, have a better tax planning and making investments for steady returns in the short and long run? This is a thought-provoking question since in case of India, a booming economy, people prefer investing in gold, real estate, fixed deposits, provident funds over share markets though there is significant shift in portfolios than earlier decades. With bank runs die to their commitment device and wait for government bailout, defaulters being established companies leading to spiral of economic implications notably inflation, it raises concern and the need for people to begin investing in share markets for which financial literacy must be imparted amongst in the coming generations, so that the economy crawls to strike a balance with different types of investments with burden reduced to government and banks alone and increase of risk takers for returns to subsequently follow in the years ahead.

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In case of Japan, a deflationary economy, people invest in securities more since, bank deposit interests are lesser with no guarantee of prospective returns to anticipate in terms of capital appreciation. Developed nations like U.K and U.S.A are supposed to be the highly financially literate nations with their currencies being highly correlated against its global contemporaries.

But, the Depression in 2008,a classic example of financial fragility and systemic risk, which occurred in United States of America, with the domino effect of home loan sanctions and investment banker's anticipation towards more returns and profits with crash of share markets, real estate prices, currency value, implications on global markets raises the question about whether financial literacy can be the solution to financial fragility, United States of America being strong in financial literacy for decades and till date, a service economy being the foreign exchange management hub and hotspot for trading, a rarer sense indeed a delusion.

So, does that mean even financially strong economy can collapse? And, does financial literacy ensure scale up of developing economies? Financial literacy can help in uplifting from crisis faster catalyzing resiliency which is why, it is always a requisite for economies in large. Whether it is a Trillion grossing GDP economy, Millions grossing GDP - growing economy, literacy is required whether economies are fragile or not to strengthen the economy with application of the financial knowledge, with one to many contributing to better financial robustness of the nation and also to bolster financial resiliency to drive out from financial crisis at the earliest paving way to enhanced financial management.

Literacy about channeling Investments at the right avenues and Choosing appropriate sources of Finance go in tandem when Financial Literacy grows and slowly permeates into the related frontiers with adept solutions to financial problems stretching wings to better banking and financial services.

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Several economies notably, Singapore and Italy have shown tremendous and consistent economic development from their history of far - fetched conditions to achieve the same which on giving emphasis to financial literacy and management which drove them out of what they were to what they are now.

There are also on the other hand, stories of economies that are still struggling namely Venezuela, Brazil which has not tried in focusing on Financial Literacy tool to cope with the crisis.

But there is a warning issued by the United Nations that there is a long list of struggling economies with respect to the current status more precisely 2019 which includes U.S.A, U.K, China, Germany, Italy, Japan, Singapore, Mexico that a depression can be anticipated in 2020.

So, it's precarious that any preposterous delusion is embraced rather than facing the occasional bleak truth. So still hangs the question whether Financial Literacy can drive out Financial Fragility?

Moving into the case closer for more clear picture, misuse of financial literacy and globalization have become the reasons for mismanagement of finance, erratic financial decisions and trade and commerce downswings that it rings the wake up alarm across the globe of what would happen if a Great Depression engulfs any financial strength all of a sudden in one day?

Will there be a blame game amongst countries, governments and their people for such an irking situation and involve intervention of International organizations to solve it and ensure worldly peace?

There could be no trace of a particular reason or anticipated solution even if it occurs that the bottom line is economies have to work together towards any global financial crisis hand in hand so that there is an early bird relieve with trade, finance, commerce and investments enjoyed in the right way across the globe.

Sources: Image 1 - https://www.istockphoto.com/in/illustrations/financialwellbeing?sort=mostpopular&mediatype=illustration&phrase=financial%20wellbeing Image 2 - https://www.aier.org/article/the-next-financial-crises/

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A year of economic slowdown By: Sarmistha Mohanty (Ravenshaw University, Cuttack) For not even more than a year, we could celebrate the feat of 5th largest economy in the world, we have come down to 7th largest economy. Last year, our economic size stood at $2.65 Trillion where the UK stood at 2.64, and France 2.59. But now the maths has changed.

One major reason is fall of rupee. With the growing Trade war between China and the US, the tension in Iranian peninsula, ILFS crisis and more, has badly affected the value of Indian Rupee in the global market.

Some of the major other reasons for the economic pushback are ILFS Crisis, growing NPAs, fall in the automobile industry, Foreign Portfolio Investors pulling out their money.

Recently, India resolved that it would be a $5-trillion economy in 2024. However, GDP growth slowed to a six-year low of 5 % during the first quarter of 2019. According to NITI Aayog, the present economic crisis is the worst crisis India is facing since independence. Reduction in growth automatically leads to hampering of development goals and poor development indices contributes to slow economic development.

The $100 billion automobile industry that employs 370 lakh people and contributes 12% to the national GDP, is suffering from huge slow down. Around 3 lakhs jobs are lost, Sales have gone down and the automobile industry appears to be going in reverse gear.

The official data released by the National Statistics Office (NSO) confirm that. Weaker consumer demand and slowing private investments are the two key factors behind the Indian Economy Slow Down.

Eight core sectors have registered negative growth of just 2.1% in July, compared to 7.3% in the corresponding month last year. According to the Centre for Monitoring Indian Economy (CMIE), the overall unemployment in India has now touched 8.2%, with a high urban figure of 9.4%.

FPIs have pulled out a net amount of Rs 5,920 crore even after the government announced a rollback of enhanced surcharge on FPIs. All the sectors need huge investments and remedial measures to increase the demand to improve and take India out of the state of economic slowdown.

Indian Economy, no doubt is passing through a sluggish economic growth since 2016 post demonetization as compared to earlier years, although efforts are being made to improve the Indian Economy’s growth to achieve the rate which may not be considered as very slow.

Government however, is of the opinion that India’s economy has a better growth rate amidst global economic slowdown, if we go by the global economic growth standards.

India’s Economic growth has slowed for 5 consecutive quarters beginning from late 2015-16 onwards. Now growth is slower than it was in the quarter in which The Modi Government assumed office. It could be a serious blow for a government that had promised to turn around the economy through decisive governance.

All four contributors to economic growth – domestic consumption, foreign consumption or exports, private investment and government spending – are hit by the slowdown. In the first quarter of this fiscal year, domestic consumption fell to 6.66% as against 8.41% in the same period last fiscal, exports as a share of the Gross

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Domestic Product was down to 19% from 20%; and fixed capital formation decreased from about 31% of the GDP to 29.8%, signalling a slowdown in the industry as well. (Source: The Hindu) Besides, three important contributors to this problem include demonetisation & stressed banking sector, GST Implementation and problems in Agriculture sector. Then there is employment. A demand for labour exists only when there is a demand for goods. So, growth is necessary if employment is to be assured.

There is not only a pool of unemployed persons in India to absorb but the country also needs to provide employment to youth continuously entering the labour force. The slowing of the economy is a source of concern as an economy that has been slowing for five quarters is unlikely to turn around quickly. Besides, it may not be able to revive on its own.

Structural reforms are being taken by almost all the governments or they have been claiming to be doing for more or less a quarter of a century now. Since 2014, in particular, “the ease of doing business” has received great attention from this government. But the economy today is still less regulated than it was in 1991. Labour market reforms have not been taken up yet in Parliament.

A few of the experts see it as a temporary or technical issue and think that its effects would soon fade out while others view this as a more serious crisis. However, the crisis is seen as a deep structural issue rather than merely a short-run one.

The recently announced monetary policy of RBI has not given any relief to boost Indian economy. The Reserve Bank needs to cut interest rates for banks, thereby making borrowing cheaper for the industry and spurring investment. After demonetisation shock, there is an environment of uncertainty in the economy. This stops the Private sector short of announcing the new projects. There should be an environment of certainty that no such disruptive moves would rock the economy in the near term. Also, increasing rural people’s incomes can drive up the consumption demand, which in turn will boost the industry. To create more demand the Government needs to spend more in rural areas, construction sector and the unorganised sector.

Any beneficial impact from these measures will, however, take time to feed into the economy and time is a luxury that the faltering economy can ill afford, especially given the global headwinds. With the farm sector still stuck in a low-income trap and this year’s mercurial monsoon rains, leaving some parts flooded and others still facing deficits and engendering a shortfall in kharif sowing, rural demand is unlikely to return any time soon. Big, bold structural reforms may be the only way out.

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India $5 Trillion Economy By: Amit Pandya (Akruti Financial Technologies) Nature has bestowed all the required assets to every country according to their geography and needs. And the humans have come too far in the phase of development which now has raised the question of the existence of the World itself. We are seeing the expansion of population due to rapid development in the medical field and at the same time, I won’t say that we don’t have required resources to feed 7 billion population but the corporate greed has created an artificial scarcity of everything. When we see lakhs of people homeless, we have crores of homes empty. We are seeing a race among countries at any cost even if it would question the integrity or humanity! By taking money on credit which is itself only on the computer we are building unnecessary infrastructure which needs more money to maintain that only our GDP numbers grow more and more.

Whenever we question individual prosperity the answer is very much gullible. We can talk about the 12 Trillion $ Economy of China but the way they have achieved the development was only because of the companies which shifted their production from Europe and USA, we are not questioning the talent of Chinese they have grown immensely but the same money which they have earned now will have to be invested in regaining the environmental damage they have done to their land. The billionaires from China are fleeing to Canada because they don’t feel its livable in China, so what is the meaning of earning such wealth when we aren’t able to create a sustainable living for all. The race to fly Mars is only because the Corporate knows that soon it won’t be inhabitable in Earth so they won’t to target another planet. But I do believe that Earth has powers to recreate when we say that plastic has is the biggest culprit in Environmental damage, scientists have also found enzymes which can decompose even the plastic so this is only enough to justify my belief that Earth has all the powers and humans have only discovered them, nature is the biggest balancer, controller and manager. India had all the sustainable technology but the numerous invasions have led Indians to believe that they are fools and all others are super-geniuses. But China and India both had their own in-home technology which led them to be in the limelight of the World. We have all the resources still we fail just because of the greed which we have, we only get united when there is a cricket match between India and Pakistan, and the same follows to Pakistani people, I don’t understand that we had got the Independence from British Raj or from Pakistan. The way we are being driven for the future we will lose the opportunity to cash in the huge amount of Youth we have. The other old is getting older, and I think that Government have no vision to take the opportunity which we have, such type of cases may occur only in a lifetime, if we will not focus then we will become only a mediocre country where people will be struggling which each other in the name of religion and politics. There is no model in this world which can provide jobs to 130 Crore people, but we can manage our food system, food is the basic requirement for existence, I do believe that it won’t affect much if there is no IIMs, IITs, AIMS, if there will be no food then what Education we are talking about which loots crores and lakhs in fees only to end up in something Rs.15-20 thousand job, or some intelligent brains who have invented Pakoda Employment or Pakoda Economics. Whenever there is Elections the whole of Government machinery stands still and the only goal is to win the elections, I haven’t found any other person other than the Great Atal Bihari Vajpayeeji who had told in the parliament to sit in the opposition, such leaders can provide a great jump to the country but internal politics hampers the development or we also haven’t found a PM who would have to take loan for his own Car that is Shastri, the country had supported him by fasting but didn’t give in to the pressure of the USA but nowadays we see Government who will worship foreign powers. We see that Donald Trump is now talking about Deglobalization and bringing back the US Companies, so it proves that the USA

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only wants there profit at any cost, they are sucking up the brain from the world, but at the same time will make immigration for their family difficult, India is still a country which has human values intact. The way the world is witnessing Trade War or should I say Currency War, the ultimate loss is to the citizens of respective countries, the only reason countries aren’t jumping into the war is Nuke Power, because everyone is sitting on the ultimate power which can wipe of human civilization, so such petty politics affects the whole of the population who never ever wants a war and only needs development and prosperity. Since the depression of 2008, we haven’t learned much, competition among companies is decreasing due to cartelization and influence of politics. In every part of India, houses at main areas are being unaffordable and even if loans are available then the value for money is zero. The way telecom spectrum was handled we won’t go into the technical but still even today when we are talking about 5G, we aren’t getting good coverage and speeds even in 3G and 4G.

The booming business is related to Education, India had a culture where Teachers were respected but nowadays that reputation is shining away. If we consider students as consumers the ultimate loser in this industry is the student. Because the way we are producing idiots which are unemployable and we cannot blame them, because the system itself wants to loot these people and left them at their own condition. In every profession, we see a boom but when they have their degree in hand we offer them jobs which itself doesn’t require that degree, we can take any of the sector Private or Public nobody wants to give a decent pay even when we talk about so and so amount of money and GDP numbers all only make rich those who are already rich. As there is a hell of a problem in the education sector because schools have become hotels and parents also doesn’t want their kids to face any struggle and making them away from real-life problems. The number of suicides has increased but such things generally don’t bother us until it happens or we become its victim.

There is no benefit seen by corporatizing the education, I only question that even after spending lakhs and crores the student is unemployed then people need to understand that if that money was invested then he/she would yield more return and value. We are not giving importance to skills and just following the herd that if you have a degree you are smart. Start-Ups have created a bubble which will soon burst, and the soon the PE Players are going to cry, because if we go to the background of Big Companies then it took many decades and these Start Ups want billions in few years it’s not a game and soon World will realize that all its just show-off, PR Stunt and Propaganda. I haven’t seen a single Start-Up owner who is visionary all want short term gain.

How petty it would be when we talk about Nalanda and Takshshila we have schools who sell every stuff eliminating education at basic and parents are proud that their kids go to so and so school and college. We boast our self on social media that so and so CEO are Indians but they aren’t owners and they wouldn’t be so much success here. We are living in an era were Government is visionless and only spends money on drama, the same things are going on in other countries. In the US the way media and social media is used to hijack people’s mind and people have lost their own thinking in the era of smartphones. Owning an iPhone isn’t an achievement, the way income disparity has increased only because people are spending too much and all the money is gathered at big business houses. I do believe that debt is the ticking bomb which will make the US economy to collapse and all experts will be sitting outside the church praying! The way it was too difficult for Indian Businesses to sustain the attack at the British Era in the form of taxation, and how the whole education system was made to make people order following human robots, it hampers independent thinking, today also we are not acknowledging the real talent but only see the memory power or mug up power of the student.

Innovative Companies need independent thinking and we are simply not developing that. The number of

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Educated Unemployed or ending up in a low paying job is increasing which should be alarming for the Government and society at large to take necessary countermeasures otherwise our economy will be stuck at a mediocre level.

The simple reason the Chinese Economy reached so far is that they became Global Manufacturers, and when we see the Indian economy we are still on heavy numbers of Agriculture and Service sector cannot accommodate such vast population. We see that the Chinese may see the downturn in their success so they are investing in other countries. In India, we see a lack of will power to take decisions, be it on Corporate Level or in Government at Bureaucracy level. We are not putting industry required qualified people in technical sectors. IAS cannot do all the job we have to break this myth, and Prime Minister Narendra Modi has shown that courage, by giving preference to Private People to guide the Government in Decision Making. The need of the hour isn’t the GDP race but is the rise in individual prosperity which the western world is also facing criticism, any of the trillions in a few hands cannot solve global problems. Wealth needs to be equitable.

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Declining Female Labor Participation in India By: Sneha Kamath (Xavier School of Human Resource Management) The decision of and ability for women to participate in the labor force is the outcome of various economic and social factors that interact in a complex fashion at both the household and macrolevel. Female participation rates in India declined from 34.1 per cent in 1999-00 to 27.2 per cent in 2011-12, and wide gender differences in participation rate also persists. Also, there are considerable variations between urban and rural areas. The participation rate of rural women decreased from 26.5 percent in 2009-10 to 25.3 per cent in 2011-12, while the rate for urban women increased from 14.6 per cent to 15.5 per cent over the same period.

In India, much of the discussion on the falling trends has focused on three key explanations: 1) Rising educational enrolment of young women 2) Lack of employment opportunities 3) Effect of household income on participation Recent research has found a U-shaped relationship between participation and income of women in the workforce. As women gain more education and skills, there is an increase in their potential earning power. So, in less time and with less work, they earn more, allowing them to spend more time on leisure and home work.

Furthermore, women with higher education tend to get married to higher-income households, which for sociocultural reasons may also inhibit their participation in the labor force.

Higher earnings have slowly made it possible for more rural women to stay at home, it is claimed, and in a largely patriarchal society this is a favored household option. Certain factors in the recent literature include rising young girls ' attendance at school and the lack of institutional support for children in the light of declining family sizes. Such reasons are consistent with the fact that in urban areas women LFPR is much lower as the latter receives higher incomes, has more options for education, and holds less extended families.

This falling trend in the case of younger women could be due to higher levels of attendance at school and college, correlated with an increase in family income. That doesn't explain the big drop, however. There may be non-economic, social and cultural factors that prevent women from entering the labor force. Motherhood is one big factor. After having a child, many women who join the workforce are unable to join. The 2016 reform legislation, entitling a woman to 26 weeks of paid maternity leave, should have helped women participate. But a Team Lease study estimates that this has raised business costs and may have prevented recruiting women. The estimated loss of female jobs for fiscal year 2017-18 was between 1.1 to 1.8 million, higher than the usual job loss due to maternity-related attrition.

The main driver of the decline in female LFPR is the transformation of job opportunities at the local level beyond the income effect and measurement issues. In India, as elsewhere, urbanization involves rural urban migration. Women's work outside the home is appropriate in a traditional society if it takes place in settings that are viewed as healthy and allow flexibility for multi-tasking. From this viewpoint, it can be anticipated that female LFPR would rely on the availability of suitable jobs such as agriculture, which are versatile and mostly "at home." Beyond the rural-urban gradation in India there is a ' valley ' with suitable job prospects. In recent years there has been a dramatic decline in suitable job opportunities for women in villages and small towns. A complex but very critical issue is the issue of wider, deeper and more meaningful participation of

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women not only in the workforce, but also in legislatures, police, armed forces, and the judiciary. While lowerlevel governments have achieved gender parity by reserving legislative seats, a similar Bill has been pending for decades for Parliament. As for the workforce, far beyond maternity benefit entitlements and other quotas, much needs to be done. Making women's salary income-free would be a useful and easily implementable idea.

That may sound revolutionary, but to increase India's female workforce participation would be a brave and successful measure.

In recent years, government policies aimed at addressing the falling FLPR have mainly focused on launching employment programmed with special provisions to incentivize female employment such as MGNREGA, PMEGP, MUDRA; diluting protective legislation; launching special skill training programmed; and heavy investment in programme that support education of the girl child.

However, not much attention has been given to addressing the underlying social norms that compel women to be primary care-givers and disproportionately place the burden of care responsibilities on women. According to the NSSO – National Sample Survey Office, the proportion of women engaged primarily in domestic duties has only increased between 2004-05 and 2011-12 from 35.3 per cent to 42.2 per cent in rural areas and from 45.6 per cent to 48 per cent in urban areas.

One thrust area in which government support can have direct implications for reducing the time burden on women is child-care support. Child-care subsidies free up mothers’ time to enter the labor force and have had significant implications in impacting female employment. Also, child-care subsidies can also have positive spillover effects on the education of young girls for they no longer have to be left behind to take care of their younger siblings.

In addition to childcare, women’s care-taking responsibilities often extend to the elderly and to family members with disabilities. In transition countries, the need for elder-care has increased and will continue to do so inexorably. Informal elder-care—unpaid care provided by family members—is common many countries.

This suggests that informal care for the elderly and people with disabilities will be an increasingly relevant issue for women.

A potentially promising intervention in countries to encourage female labour force participation—and, more generally, greater social inclusion of women—is support for female entrepreneurship. Such support can be especially effective in countries with a culture that perpetuates traditional gender roles and with limited employment opportunities. Female entrepreneurs not only create jobs for themselves but may also generate employment opportunities for other women. Female entrepreneurs are less likely than male entrepreneurs to discriminate against women and more likely to hire them. Most important, female entrepreneurship can have powerful indirect and long-lasting effects by modelling entrepreneurship for younger generations of women and by helping to transform deeply rooted cultural norms and gender stereotypes that limit women’s options in the labour market. Starting such virtuous cycles can lead to both greater labour force participation of women and, more generally, to their greater economic and social inclusion.

The government can do a lot to support female entrepreneurs, in particular to increase the scale of their activities and their probability of success. The policies have to be designed carefully, based on the needs of particular target groups of women. For example, female entrepreneurs, especially those who are poor, seem to benefit more when financial support is coupled with intensive training and follow-up visits tailored to their specific economic activities. Better-off women will need less comprehensive support. Receiving in-kind

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capital increases the probability of success of female entrepreneurs by helping women retain more control over their entrepreneurial activities and re-invest in their business. A similar effect has been associated with savings programs and payment instruments that allow women greater privacy and control over the revenues generated by their economic activities.

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Contemporary topics in Finance and Economics By: M.R. Mohamed Asif Shaw (Jamal Mohamed College) INTRODUCTION Now we are living in a diversifying united India where industrial production talked but not the Agrarian output; private investments are being discussed but not the farm reforms; weeping for automobile closedowns but not of unemployment; encouraging demonetization but lost the liquidity; supporting the GST but not scared of inflation; concentrating more on artificial demand nut not for necessity; unnecessary government spending on infrastructure building or rebuildings; debating on ’economic slowdown’ but not doing any precautions for ‘recession’ which ultimately leads to GREAT DEPRESSION. CAUSES Considering the situation of the present day, there exists the use of artificial demand. But the artificial demand should be used temporarily only for a short period of time. However, the over usage caused the surplus production likely to be in the additional and unnecessary products even to the day-to-day life of an individual.

The online shopping also put off on the lives of the retail shopping and marginal vendors.

Since, the demand on automobile industry in abroad is quite less than that of India. And so, it resulted in enormous production. But this huge production doesn’t sound great for no longer as they failed to predict the future automobile world. Today, the electric engine has been launched its foundation all over India soon even though they produced the supply for the demand for pre-existing fuel engine cars and motorbikes. Overall, this crisis ultimately ends up with unemployment. This unemployment makes every people to be in control of spending the money. In our country, the GDP is calculated by expenditure method. According to Anurag Singh Takur (Minister of State for Finance) the CGST collection was ₹3.28 crore which was fallen by 40% below ₹5.26 crore (budgeted for April-November 2019).

“The constant amendments done in the Goods and Services Tax (GST) and frequent changes in the rates is not good for the economy. The GST has resulted in a clatter of taxation, which has made compliance very difficult for small business” -N K Singh (Chairman-15th Finance Commission)

The ground reality is that the India’s GST intake is not growing in a projected pace. This critical pace also explains why States are demanding that they be compensated for long than five years agreed upon. Hence, its multiple rates are a cause of confusion. The administration is also scuffling with high compliance burden. A deep economic downturn has also heavily forced the GST Council to raise the tax rates for the first time in the new indirect tax regime.

“It is too early to talk about digital currency, and the RBI would in no way allow private digital currency. It is very early; technology is still evolving. World over, the central banks and governments are against private digital currency because it is a sovereign function” -Shaktikata Das (Governor of the RBI)

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The Indian Economy is cash driven economy but the demonetization has largely affected the liquidity in the hands of the people. On another point of view, the low availability of cash forced the people to turn towards the Digital Economy. Though it is useful, the main disorder will be in the primary sector. People in these sectors won’t use e-money for their business as well as their personal use and only strive for the cash. This merging policy results in the exclusion of the workers in the banking sectors in order to minimize the expenditure of providing salary and to exclude the surplus human resources. So, there must be a contraction in consumption and expenditure.

The root cause was that the crisis lies in the shadow bank- NBFCs which is known as the backbone of the Indian Economy. Already there is a big crisis in the treasury of the RBI which was resulted in providing of excessive loans to higher business magnets who were fled to abroad. Yet the center suffers still by a great vacant in the cyclic flow of the liquidity because of non-repay of the large debts. This crisis is not only caused by the debtors but also by some of the officials in the banking sectors which was recently happened in the PMC scam. But the current situation shows that NBFCs are finding difficult to raise funds and having to repay the enormous cost for doing so. This slowdown in credit also leads to Economy-wide knockdown effect.

MEASURES Development of market mechanism involves the regulation of prices which are demanded by the farmers.

These are the reforms that can also double the income of the farmers. Farm loan waiver wants to be implemented with full efficiency which is to reach nook and corner unto the poorest farmer in India. The Indian economy is built within a pyramid where people of different occupation stands in hierarchy. The population of poor is higher in which they are placed at the base of that pyramid. By reforming and developing the lives of the poor results in the development of others in that hierarchy.

The construction as well as the renovation of dams, reservoirs, canals and irrigation facilities should be made for the development of agriculture in our country. Also, the capital for constructing tanks and other minor rebuilding of agricultural infrastructures should be provided for the farmers at zero interest.

Healthcare research centers and medical aids need to be given to the public a zero cost which was considered to be a unique service to the humans in other countries. The ideas of closing government and aided schools must be condemned and the idea of opening new schools and colleges with zero cost of fee should be implemented all over the country which we practically applied in CANADA. The health and educational sectors are the soul responsible for the higher development for the GDP. The unavailability of sufficient amount of the cash has already occurred. By reducing the taxation to a lower rate, such that ordinary people have money in their hand in which it is used to make the consumption rate higher. This makes the economy to run and if there is a money flow, the demand and supply will be maintained in harmony in the economy. So, there must be the flow of money in order to increase the purchasing power of the people and so it ultimately results in increased GDP. This could be controlled by controlling the supply of money and doing reforms like initiating a special force to dig-out the black money and by bringing that black money into circulation can definitely bring the inflammation in control and results in higher purchasing power.

CONCLUSION

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What we forget? We are remembering our father of the nation- The Mahatma Gandhi ji, the real meaning of cleaning is not the physical cleaning but also the mental cleaning of the minds from corruption which is most essential for the country. Mahatma has shown us the wonderful path for many circumstances. One of his best ideas for economy is within THE GANDHIAN PRINCIPLES, he advices us to support the cottage industries other than large scale industries as they were responsible for many socio-economic evils which are still occurred today!

“Get some more money in the hands of the poor and they will spend it” -Abhijit Banerjee

REFERENCES

1. ^N K Singh, “Calls for further simplification of GST”. www.economictimes.com 2. ^Shaktikanta Das, “Too early to Digital Currency”. www.thehindu.com 3. ^Abhijit Banerjee,” Nirmala was my contemporary in JNU” www.ndtv.com

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Real Estate 2020: Waking a sleeping Giant By: Siddharth Sharma (IIM Rohtak) "The Real estate sector plays a catalytic role in providing employment."-Narendra Modi. We all are waiting for this catalyst to revive as the unemployment rate at this point is more than 6%, a four-decade high. Real estate sector is not only second largest job provider in the country, but it is also a source of demand for other industries like steel, transportation, cement, and many others, and because of the slump in real estate other industries are also laying off leading to a vicious circle of unemployment. So, in this article, we will try to understand the trends that may define the real estate sector in the year 2020.

Market size of the real estate industry in India from 2008 to 2028 (in billion U.S. dollars) Source: Statista 2020

One has to first understand the reasons behind the slump in the real estate before predicting its revival chances in the year 2020. Slump is associated with structural problems and the shocks of DeMo and GST. First taking about the structural problems, real estate projects in India take a long time to complete due to a complicated and corrupt regulatory mechanism. Land disputes are the main reason behind these delays and our ineffective judiciary system ensures that the projects are not on time. Real estate industry is heaven for corrupt administrators and politicians to hide their black money and this results in heavy involvement of politicians.

50% of black money is in the real estate industry. Apart from this, the real estate industry is facing a funding problem because of the NBFC crisis.

Now coming to the shocks, DeMo created a cash crunch which resulted in a drastic fall in the prices of properties, as a major part of the industry was cash-based. Within one-year GST gave another shock. Under

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construction, homes attract 5% GST for premium (mid-range) properties and 1% for affordable homes. Over and above 5-7% stamp duty and registration charges apply to both under-construction and ready to move homes. The perceived high cost of under-construction homes resulted in less pre-booking of underconstruction homes which leads to blocking of the source of interest-free funding for builders.

Can real estate revive in the year 2020? What changes are required to revive it? Could sentiments be a major player in the revival? Can Modi Government fulfill its housing for all promise on time? 2020 seems to be a positive year for real estate because, First, the structural changes in the form of Real Estate (Regulation and Development) Act, 2016 which created Real Estate Regulatory Authority (RERA) in each state for regulation of the real estate sector and also acts as an adjudicating body for speedy dispute resolution, has started showing results. Although it is a buyer favoring step and a topic of continuous debate of it benefiting the sector or not, it will bring transparency in the sector which will have a direct impact on the pricing. Second, the increase in the exemption limit (from tax) for interest paid on loans taken for affordable housing by Rs. 1.5 lakh to Rs. 3.5 lakh per annum for houses valued up to Rs. 45 lakhs have increased the number of units sold in the year 2019 as compared to 2018, although the value of sales has not picked up. Interestingly Commercial leasing has shown strong growth in the last year at the time when residential sales growth is lagging.

Data for top seven cities of India 2018 Residential Sales (Units) Commercial Leasing (Million sq ft)

2019

242000 261000 50 59

Growth % 7.85 18.00

in

Third, a major shift in the commercial use can be seen from the fact the growth of co-working spaces has been very sharp, with the segment accounting for 13% of the total office transactions in 2019 from 5% in 2017. The structure of buildings catering to co-working requirements is completely different from the traditional ones which push builders to cater to this new demand.

Nirmala Sitharaman had recently said that an internal survey showed that around 4.58 lakh housing units were stuck in India with over 1600 realty projects stalled. To bring back the momentum in the sector government had set up an alternative investment fund (AIF) worth of Rs.25000 crore to provide relief to developers with unfinished projects to ensure delivery of home to buyers. This move will help to complete stalled budget projects, at present total stalled budget projects in the Mumbai Metropolitan Region (MMR) and the National Capital Region (NCR) are the highest with at least 4,00,000 units pending completion. Although Rs. 25000 crore funds are not sufficient to cater to Rs 4,64,300 crore worth unfinished realty projects in top seven cities, but it has started a chain which other sovereign and pension funds are likely to join in the coming years Entering into a new decade we cannot skip talking about technology transformation. Technology is playing its role in better construction techniques leading to less gestation period, simplifying the buying process through quick access to reliable information. Buyer experience is improving with the advent of augmented and virtual reality, as they can experience the property without physically visiting it. The high-end housing sector is using sophisticated technology to bring customization, although it has a nominal share in the sector.

Present affects the future more than the past, and this makes us focus on the Budget 2020. As per Knight Frank, the budget falls short of the real estate sector's expectations. This was depicted by the stock market, as

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Nifty Realty was down by 6.77% and BSE Realty Index was down by 7.82% at the end of 1st Feb 2020. The government lowered the income tax rates with the removal of exemptions, with the expectation of boosting consumption, but experts are skeptical about this move. Impact on consumption has to be seen, but it is for sure that removal of exemptions under the new income tax regime, implying no tax benefit on principal and interest for home loans would be a dampener for the sector. One positive that came out of the budget was the extension of benefit for affordable housing i.e. additional deduction of up to Rs.1,50,000 for interest paid on loans taken for the purchase of an affordable house by one year. This is expected to stimulate some demand.

A sound NBFC sector is essential for long term stability in real estate sector, in this direction government has proposed to reduce the NBFC's eligibility criteria for debt recovery under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002 Rs 500 crore to asset size of Rs 100 crore or loan size from existing Rs 1 crore to Rs 50 lakh. All of these steps will require time to start showing impact, what can immediately turn the coin is sentiments of you and me. Our economy has the potential to become a $5 trillion economy, but it will require continues structural improvement, incremental use of technology, reducing red-tapeism, transparency, and most importantly the belief of citizens which they can show through robust investment then only we can achieve our target of becoming a superpower.

References • • • • • •

https://www.statista.com/statistics/951859/number-of-proptech-launches-globally/ https://www.thehindubusinessline.com/opinion/the-trends-that-may-define-the-real-estatesector-in-2020/article30394524.ece https://www.zricks.com/Updates/Outlook-for-the-Indian-Realty-Sector-in-2020/9604 https://www.financialexpress.com/money/6-key-trends-that-will-shape-real-estate-in-india-in2020/1814378/ https://www.indiatoday.in/india-today-insight/story/rebuilding-real-estate-1640836-2020-0128 https://realty.economictimes.indiatimes.com/news/industry/what-indian-real-estate-gainedin-budget-2020/73838367

https://www.thehindubusinessline.com/news/real-estate/budget-2020-budget-falls-short-of-real-estate-sectorsexpectations-says-knight-frank/article30711861.ece

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Role of AI & Predictive analytics for HR processes in the technology driven world By: Sarmistha Mohanty and Krishna Mandal (Ravenshaw University) At the Internet Association’s 2017, Amazon CEO Jeff Bezos noted, “Anything that involves emotional intelligence is unlikely to ever be replaced. But at the bottom end of the value pyramid – things that are about replicating a process – those will be automated.”

In its most basic form, Artificial Intelligence is a computer system designed to learn, make decisions and carry out tasks that would normally require human intervention. Speech recognition software, self-driving cars, chatbots that talk to the public and manufacturing robots all rely on Artificial Intelligence. In future, perhaps we can look forward to robot butlers that can cook and clean, police that patrol the streets 24/7, and we believe in James Cameron movies, an eventual Terminator-style apocalypse where the machines become self-aware and decide to wipe us out. All have also probably read the headlines about artificial intelligence and how “robots are going to take all our jobs” one day.

Well that’s quite scary, right? But it doesn’t need to be all doom and gloom. In my personal opinion, we will always need a human touch when it comes to recruitment and selection. We need that gut instinct and judgement to know whether someone will actually fit into the team. And we all know hard skills aren’t everything. We also need to assess cultural fit, personality and soft skills like confidence and emotional intelligence. Machines can’t do that. What AI can and will do, however, is help us track down great candidates, faster. AI can scour the internet to find great candidates, make contact with them, conduct first stage interviews, help eliminate bias from the process., standardize interviews and CV assessment. But obviously, we will still have to make a final decision on the right hire for our company.

Following are two examples stating how AI can impact HR processes: Beamery is a candidate relationship management system that uses machine learning to enable proactive recruitment, power collaboration and drive better decisions with predictive analytics. The start-up works with Facebook, among others, and analyses interactions between candidates and employers to identify candidates you should target and helps recruiters to build relationships with them.

Another example is of MYA, where you can encourage the right candidates to apply in the first place which parent company First Job claims will automate approximately 75% of the recruitment process. It’s a combination of a chatbot at the front end, which effectively answers queries and gives feedback through messenger apps like Facebook, and an AI-powered search at the backend.

Along with AI, Predictive analytics in HR is considered a game changer in the industry. It can take unprocessed data and extract actionable insights which can be applied to everyday processes and operations. Back in 2016, only 32% of employers were ready to build a predictive analytics management model but 2019 has already seen that figure rise to 71% with companies actively taking steps to improve the way they view people data.

According to Azim Premji, Chairman of Wipro, “The power of analytics can make a sizable difference at every step – bringing an element of ‘predictable, quantifiable outcomes’ to something that’s quintessentially dynamic – human capabilities.”

Predictive analytics gives leaders in the organization the insight to be able to make evidence-based decisions from previous data. The process of analyzing existing data can enable business leaders to learn from previous

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experiences and forecast future outcomes. The other benefits can be gained from implementing predictive analytics in HR model are improved turnover, employee profiling and segmentation, employee attrition and loyalty analysis, forecasting of hr capacity and recruitment needs, appropriate recruitment profile selection, employee fraud risk management.

When you have thousands of employees, you have a wealth of data flowing inside your company. Predictive analytics decodes and deciphers that data in order to provide the kinds of insights you need to say predict when you’re going to need to hire more people in different regions of the world. Or perhaps you’d like to be alerted when a key strategic hire may be looking to quit his or her job. With the right machine learning, you can start to capitalize on all the historical data and the predictive nature of how individuals come in, grow and eventually leave your company.

It is an unfortunate myth that implementation of AI and predictive analysis will cost us HR job position. In general companies view AI and automation as an opportunity to retrain employees to cover other tasks, in conjunction with robots and high-tech features, so the company can improve productivity.

Summing up everything, AI and predictive analytics in HR are likely to transform HR operations in three profound ways. First is the emergence of the conversational interface, where we can talk to systems, ask questions and interact through chat. This can be supplemented by augmented and virtual reality, which is developing even faster than we thought. Second is machine learning, where software analyzes people-related data and offers smart recommendations and decisions. The third is the growth of predictive models, which are systems that can identify patterns and quickly find areas of risk, fraud and other possible performance problems.

Sundar Pichai, CEO of Google noted,” The last 10 years have been about building a world that is mobile-first.

In the next 10 years, we will shift to a world that is AI-first.” While there is no denying that AI and predictive analytics can lead to a significant impact on the HR value chain, there needs to be a facilitation of some fundamental factors. These factors should create a value proposition for future HR processes and workforce.

The organizations need to begin with the right mindset towards AI adoption with a clear business vision. The responsibility of which does not lie only with the HR heads, but with the overall leadership. The leadership also needs to propagate AI technology adoption at every level.

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