Halfway on talent front
The 2007 Budget can be categorised as an honest attempt to simultaneously manage growth, inflationary and political compulsions.
By TNN |
The 2007 Budget can be categorised as an honest attempt to simultaneously manage growth, inflationary and political compulsions. It was a tough ask and, unfortunately, it does not create significant impact as it’s not a bold budget. While there are some silver linings in the Budget from a talent standpoint , it falls short of addressing some key talent challenges that the country is facing and which could possibly derail our growth story. Let's examine the contours of some key talent themes that emerge.
Education cess negates rise in I-T exemption limit
Overall, the employee loses, as the marginal increase in exemption limit is more or less nullified by the 1% education cess. It is surprising to see ESOPs under FBT especially since all gains are already taxed at the hands of the employee when he exercises the option. So on the face of it, this would amount to double taxation especially since most employers are likely to pass on the additional tax burden to their employees. Moreover, FBT on ESOPs (or any equity linked incentive) is dampener for corporates who were just beginning to embrace the use of ESOPs as a strategic rewards tool to manage compensation and drive retention . India lags behind its western counterparts in adequate leverage of equity-linked incentive. It will impact local corporates in sectors like IT, ITeS & banking, which are increasingly been used as a tool to manage employee rewards at all levels.
No policy-level intervention to ease supply side dynamics
India is entering the age of demographic advantage over other nations and to fully realise the demographic dividend we need to create employability for our population. Education is the most critical driver on that front. It is heartening to see outlay impetus and policy interventions on the primary and secondary education level. This will help create a pool of employable talent at the blue collar and unskilled en-try level. It will help alleviate non supervisory entry level talent crunch in service sectors like Retail, Hospitality etc, which can easily deploy such talent after basic training. The ITI upgradation plan through public-private partnership is a great model that will help create a skilled worker pool and will support maintain high growth in sectors such as manufacturing and engineering etc.
Education cess negates rise in I-T exemption limit
Overall, the employee loses, as the marginal increase in exemption limit is more or less nullified by the 1% education cess. It is surprising to see ESOPs under FBT especially since all gains are already taxed at the hands of the employee when he exercises the option. So on the face of it, this would amount to double taxation especially since most employers are likely to pass on the additional tax burden to their employees. Moreover, FBT on ESOPs (or any equity linked incentive) is dampener for corporates who were just beginning to embrace the use of ESOPs as a strategic rewards tool to manage compensation and drive retention . India lags behind its western counterparts in adequate leverage of equity-linked incentive. It will impact local corporates in sectors like IT, ITeS & banking, which are increasingly been used as a tool to manage employee rewards at all levels.
No policy-level intervention to ease supply side dynamics
India is entering the age of demographic advantage over other nations and to fully realise the demographic dividend we need to create employability for our population. Education is the most critical driver on that front. It is heartening to see outlay impetus and policy interventions on the primary and secondary education level. This will help create a pool of employable talent at the blue collar and unskilled en-try level. It will help alleviate non supervisory entry level talent crunch in service sectors like Retail, Hospitality etc, which can easily deploy such talent after basic training. The ITI upgradation plan through public-private partnership is a great model that will help create a skilled worker pool and will support maintain high growth in sectors such as manufacturing and engineering etc.
This is only a part of the story. India Inc is grappling with a significant talent crunch in white collar workforce especially at the technical and managerial level . There is a crying need for policy and/or infrastructure level intervention to ease the supply side dynamics. It's thus disappointing to see the Budget not addressing this critical area through intervention targeted at higher education. For eg, policy measures such as tax incentives and credit support to encourage pri-vate partnership in higher education would have been a welcome move. Budgetary support to augment quality and number of faculty at higher and the technical education level would also have gone along way in creating white collar talent supply to fuel our growth.
Falling short on addressing mismatch in supply-demand
While Budgets have historically focused on sectoral sops to provide a growth impetus, yet talent and skill growth measures in that sector are typically ignored. This year biotech and pharma will get a growth impetus given excise, duty cuts and service tax exemption for clinical trails. But talent supply management is left to corporates to manage. Given our current context of talent supply-demand mismatch in most sectors, Budget should focus on balancing growth and talent supply measures.
Not bold enough to push through retail sector reforms
The Budget sends a strong signal by targeting 3% growth in the farm sector, which in turn will create employment in the agrarian economy. But, a bold step would have been to push through retail sector reforms, which would have pushed agricultural growth. To conclude, the Budget only goes halfway on the talent front, but we hope this to be the beginning of a new journey on our country’s talent strategy.
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(Writer is with Practice Leader Consulting, Hewitt Associates)Start a SIP with as low as ₹500 with ET Money App!
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