India’s economic slowdown and market stagnation may result in more than a million job cuts by the end of the year – but there’s more to the trend than just numbers.
Job Cuts and layoffs: Everyone is talking about it and no one is. An economic crisis is looming large over India. Furthermore, with a sharp liquidity crunch impacting the entire country, consumers have cut back purchases of everything.
Large and small companies have been forced to shed thousands of employees to keep running.
The bearish trend in the World’s sixth largest economy is stagnating business from automobiles to clothing and food. Moreover, large and small companies have been forced to cut-down production and shed thousands of work force to keep running.
As per official data, June quarter showed even weaker activity since the March quarter which at 5.8% was the slowest in four years. The value of proposed new projects is at its lowest since 2004. Consequently, India’s purported $3 trillion economy is headed for a lengthy phase of economic oppression and crunch.
June quarter showed even weaker activity since the March quarter which at 5.8% was the slowest in four years.
The Indian government and Finance Minister have been touting an economic stimulus to revive growth. But on the contrary, with the recent row over India overestimating growth. Also, as suggested by former Chief Economic Advisor Arvind Subramanian, we might be in for darker times ahead.
Lakhs of layoffs across sectors
Meanwhile, from cars to biscuits, major players across sectors are laying off hundreds of employees. Auto markets are most in news and worst hit having experienced over two lakh job loss in the last three months. The sector has been forced to slash a fifth of its five million or so workforce.
Since the recent #layoffs at @Uber and @Cisco, we asked our users if they see cost-cutting at their company. @symantec, @WeAreIntel and @Oracle made the top of the list.— Blind (@teamBlindapp) August 20, 2019
Find out more on our blog: https://t.co/puuViGJ3G3 pic.twitter.com/1PWfFFZqOx
India’s biggest player Maruti Suzuki India cut over 3,000 temporary employees due to the ongoing slump. Japanese carmaker Nissan shed 1,700 jobs in India. On the retail end, 32,000 jobs have been cut loose from 286 showrooms closures across 271 cities in an 18-month period.
Automotive sector has been forced to slash a fifth of its five million workforce.
Amid reducing profit margins
Amid reducing profit margins in technology segment, Korean giant Samsung is planning to lay off around 1,000 employees in India. Recently, global IT giant IBM fired 300 Indian employees from their services division. Similarly, US-based IT services company DXC is planning to cut almost 5,000 jobs in India.
“About 70% of the automotive industry is based on contractual labour, hence, a slump in industry’s performance directly impacts the employment numbers.” says .@VinMehta , Director General, #ACMA on concerns over potential job losses. pic.twitter.com/gkLdS98a5T— ACMA India (@ACMAIndia) July 24, 2019
Similarly, FMCG giant Parle Agro Products which is one of the world’s leading biscuit makers is expected to layoff around 10,000 workers. Omnichannel furniture retailer Urban Ladder shed 25% of its workforce in March.
FMCG giant Parle Agro Products is expected to layoff around 10,000 workers.
The recent closure of India’s once biggest airline Jet Airways and consumer electronics giant Videocon culminated in over 20,000 professionals becoming jobless. Major public sector companies like BSNL and MTNL are on the cusp of closure and will result in the loss of around 17,000 jobs.
India's auto parts makers warn of 1 million job cuts if slowdown continues https://t.co/XzXozbPLm6— Reuters India (@ReutersIndia) July 25, 2019
Not just the organized by the unorganized and small trader network is experiencing a deathly crunch. For instance, BSP leader Mayawati recently highlighted the crisis in the trader community which had led to job cuts which forced many labourers to commit suicide.
An array of factors
There has been noise and an apparent slowdown and often witnessed stagnation for over a year. Likewise, economists and experts have floated various theories ranging from the 2016 demonetization leading to liquidity crisis, and complex new value-added tax that slowed domestic trade, to problems in shadow banks highlighted by financial frauds and lower government spending asserting a weak economy.
Slowing demand across sectors
The slowdown in economic growth has been directly blamed for thousands of job cuts in crucial industries like automotive, FMCG, industrial manufacturing and electronics. Additionally, as per market research firm Nielsen opined in July that “India’s consumer goods industry was losing steam as spending in the rural heartland cools and small manufacturers lose competitive advantages in a slowing economy.”
Another FMCG Giant, Britannia Industries’ Managing Director Varun Berry said of the market situation that “consumers were “thinking twice” about buying products worth just 5 rupees. Obviously, there is some serious issue in the economy.”
Changing nature of Jobs
Experts have opined that job losses in the auto industry will go on for almost a year. But its not just because of the slowdown. There’s also a change happening in the nature of jobs across India. As a result, manual workers are changing hands with technologists.
Certainly, the recession is expected to peak in the next two-three quarters. But that won’t stop the trend of layoffs as per some experts. As companies continue to look for new skill sets there’ll be changes. In other words, the trend will continue across major sectors driving the economy.
Since the implementation of the new tax system of GST, big corporates, industry bodies and think tanks have been expressing concern. Many experts opine that fiscal problems like liquidity crunch post the IL&FS situation, weak economic health with key economic indicators either stagnant or declining are policy related issues.
देश में व्यापक बेरोजगारी, गरीबी, महंगाई, अशिक्षा, स्वास्थ्य, तनाव/हिंसा आदि की चिन्ताओं के बीच अब आर्थिक मन्दी का खतरा है, जिससे देश पीड़ित है। व्यापारी वर्ग भी काफी दुःखी व परेशान है। छटनी आदि के उपायों के बाद वे आत्महत्या तक को मजबूर हो रहे हैं। केन्द्र इसे पूरी गंभीरता से ले।— Mayawati (@Mayawati) August 17, 2019
Additionally, tighter financing conditions and uncertain regulatory landscape have also contributed to the poor consumer sentiments. The higher taxes have hurt businesses as well as consumers as all parties have been forced to reconsider their budgetary dynamics.
Tough road ahead for Government
India is struggling to counter the weakening economic sentiment. The Union Budget 2019 announced some measures to give impetus to the market. But, there haven’t been any signs of improvement. Since 2016, the number of job cuts has increased by around 25 per cent.
Since 2016, the number of jobs laid off has increased by around 25 per cent.
Consequently, India’s revenues are underwhelming which has sparked expectations of miss lower fiscal deficit target of 3.3% for the year. Reserve Bank of India has already cut borrowing costs four times in 2019. But the banks and lenders have sluggish in passing on the benefits.
So much so that the current situation smells of 1991, when an economic crisis made India overhaul the economy and head towards liberalisation. However, that did not help with the unemployment scenario, which remains one of the biggest criticalities of the act.
The PM Narendra Modi-led Bharatiya Janata Party has an unprecedented majority, culminating into unchallenged legislative power. But, the government has a massive list of economic issues to be tackled. Above all, Union labour laws and better skilled workforce stand right out in the current situation.