Career Point: Total 2 Million Jobs SACKED in year 2008 (Full Details)

The textile industry has been hit the hardest by high interest rates, low domestic consumption and cancelled export orders

He was the archetypal yuppie with an MBA, married to a part-time teacher with two kids aged seven and five studying at a fancy school in Noida, not far from his east Delhi home. His home was funded by a neat mortgage, his car was company-owned and he wore his professional pride well with his pin-striped suits.

Last week, fate edited this happy family picture. He lost his job as a management executive with a large conglomerate. He’s still smiling but in complete disbelief. Reality is catching up; the smile dims as he wonders how he will service his mortgage. More importantly, will he be able to keep his kids at school?

With malls reporting low footfalls and even lower consumption, most retail players are trimming expansion plans

It is a vignette reflected in mirrors across the country. Yet a faint mixture of dots, a dull image that is bloodied by the day as a ghoulish dance of economic destruction sweeps through the economy.

Every morning urban India flips open the papers to follow the grisly tale of job losses in packaged daily episodes.

People across the economic spectrum now know someone who has lost or could lose their job.

The job shredders are from the marquee of the corporate world.

Motorola, Goldman Sachs, American Express, Merrill Lynch, Reliance Retail, Jindal Steel, real estate major DLF, L&T Infotech, Kingfisher Airlines, Jet Airways… the pattern is similar. A rumour, an SMS followed by a speculative report that is eventually confirmed by the company.

Recession strikes

An estimated one million jobs have been lost through 2008.
Financial services, BPO & KPO outfits, textiles, garments, exports and automobiles are the worst hit.
3 lakh fewer jobs will be created by India Inc in 2009.
Almost all sectors show hiring lower by between 30 per cent, with worst-affected sectors down by over 50 per cent.
7,00,000 jobs lost in the textile and garments sector alone.

The rumours are further fuelled by an unending stream of bad news.

Barring the fall in crude oil prices to below $57 per barrel, there has hardly been any good news. In fact, all macroeconomic indicators show a marked deterioration.

Industrial output for the first six months of this fiscal, as measured by Index of Industrial Production (IIP), stood at 4.9 per cent compared to 9.5 per cent a year ago and manufacturing, which accounts for 80 per cent of the index, grew by 4.8 per cent in September, from 7.4 per cent a year ago.

Exports for October dipped by 15 per cent and excise collections dropped by 8.7 per cent.

The automobile sector, already battered by the domestic slowdown, reported negative growth across segments for October vis-à-vis the previous year with goods carriers— the barometer for cross-country movement of goods—performing the worst.

Sectoral analysis - I

Textile

India’s largest employer has been hit hardest by high interest rates, low domestic consumption and cancelled export orders.The sector has already seen layoffs to the tune of 7,00,000 jobs, both in the organised and unorganised sectors. It seems to be heading for worse.
51% of new jobs to be created are already cut. Large-scale layoffs are expected.

Retail

The nascent boom of the $150-billion sector seems to have been nipped in the bud. With malls reporting low footfalls and even lower consumption,most retail players are shedding staff and trimming their expansion plans.
78% of planned hiring is on hold. Worse, closure of unviable outlets will lead to layoffs.

Real estate

Five years of stupendous growth in construction and valuation had made billionaires out of millionaires. But thanks to the credit crunch, unreal valuations have crashed, exposing hollow business plans and the bubble underneath.The downturn may drag many other sectors such as manufacturing, finance with it.
78% of the planned hiring has been cancelled. Worse, layoffs are a daily routine.

Hospitality

The India Story and the Incredible India Story fuelled an unprecedented boom. Already hurting with a dip in corporate travel and lower occupancies, the sector fears the worst following the global meltdown as both tourists and business travellers drop off the radar.
50% of the expected jobs are slashed as most players put brakes on their expansion plans.

IT and Software

Hit badly by the global meltdown, thanks to dependence on the US and EU for 60 per cent of the business.Worse, over two-thirds of its billings are dependent on the health of banking and financial sectors.With the export target of $60 billion eluding them, expect more layoffs.
82% drop in hiring from planned levels.

Across the country, bankers and brokers spend their mornings exchanging notes on bad news that isn’t public yet. A steel company in south India has put off operationalising its plant because it can’t find takers for its existing output.

If it goes on-stream, it will be an NPA on Day 1.

The downturn in real estate may drag many other sectors with it

A real estate major has stopped work at six of its biggest projects, including a mall, and is borrowing at over 25 per cent interest to fund its liabilities hoping against hope for the market to turn around.

A petrochemical giant has shut down two plants as inventory worth a billion dollars piles up.

At a dealers’ meeting of a multinational automobile company in Delhi, transporters and dealers exchange whispers about vendors not being paid for over 120 days. Cost-cutting has replaced top-line growth as the new mantra.

A Bangalore-based software outfit has cut fuel allowances by 40 per cent and introduced a shuttle service for which users will be charged Rs 800 per month. Such is the rigour that in one large conglomerate anyone travelling abroad has to get the chairman’s sanction.

Workers at knowledge processing outsourcing centres across the country are processing a different kind of knowledge. Who is losing jobs where? Companies are paring down capital expenditure to a 10th of what they had planned. It’s like what Patrick Swayze tells Keanu Reeves in Point Break: “Fear causes hesitation and hesitation makes your worst fears come true.”

Indeed, the India Today-Ma Foi Survey, the first of its kind since the meltdown, validates the fears explicitly. The study, contacted over 1,000 companies across India, across 22 sectors, assesses future hiring intentions.

Barring health, FMCG and education, virtually every sector is cutting down on hiring. In 2008, these companies hired 9,48,563 people. Prior to the meltdown in October, the forecast for 2009 was an additional 9,75,313 employees.

After the financial crisis and the spurt of bad news, these companies have cut their staffing requirements by over 30 per cent to 6,67,490.

When taken cumulatively to represent the organised sector as a whole, the drop of 30 per cent triggered by overall pessimism, inflation, high cost of credit and global business outlook is perhaps the biggest slash in staffing seen this decade.

Real estate, retail, IT, automobiles, hospitality and textiles are clearly the worstaffected sectors.

And this is just the tip of the iceberg as only the job cuts of the organised sector are being reported. It’s much worse in the largely unreported unorganised sector.

Take Jaipur, the hub of the gems business which employs nearly half a million people. Because the US and EU account for over two-thirds of the gem and jewellery business, most units are reporting cancellations of export orders.

Ditto in the textile business which employs the largest number of people. D.K. Nair, secretary-general of the Confederation of Indian Textile Industry, reports that over 7,00,000 people have already lost their jobs this year and 5,00,000 more could be laid off. “Mills are running three-four days a week only and are operating at 75 per cent or have reduced shifts.”

It is not official yet but estimates peg the number of jobs lost in the last one year at nearly a million—in the organised and unorganised sector.

Sectoral analysis - II

IT-enabled Services

Hit hard by global gloom, the sector may survive on domestic demand.
33% lower than planned hiring. May drop.

Cost-cutting steps at SAP Labs India

Monthly fuel allowance for company car lease users cut by 40 per cent.
No new mobile/BlackBerry connections or laptops to be issued. Monthly mobile bills to be restricted to Rs 3,500 per month per user.
All team budgets frozen. Employee events will not be held in Q4 of 2008.
Fresh applications for higher education won't be considered in Q4 of 2008.
Employees being encouraged to avail their balance privilege leave by Dec 31, 2008.

Education, training & consultancy

Booming sector now hit by slowdown although education is thriving.
20% drop in planned hiring for next year.Among the better-off sectors.

Banking & Financial

Saved by the fact that 80 per cent of banking is with public sector banks. But the downturn has hit them all.
21% expected cut in hiring. Expect more layoffs.

Power

Investments in infrastructure notwithstanding, the sector has not seen steroidcharged growth.
51% jobs are likely to be cut, hitting production.

Indeed, last month industry body Assocham released a study that stated: “Nearly 25 percent of the workforce will be laid off in seven key industrial segments, comprising steel, cement, ITES and BPOs, financial and brokerage services, construction, real estate and aviation.” Intuitively, the study seems to have got at least the big picture right and that is perhaps why the Government arm-twisted the chamber to withdraw the report.

With the export target of $60 billion eluding the IT and software sector, one can expect more layoffs

Not just that, the Government then convened a meeting of top tycoons, including Anand Mahindra, Mukesh Ambani, Venugopal Dhoot, Sunil Mittal, Nandan Nilekani and Y.C. Deveshwar where Prime Minister Manmohan Singh along with Finance Minister P. Chidambaram and Industry Minister Kamal Nath urged India Inc to not lay off people, promising sops in return.

But that is easier said than done. On the face of it, barely a fifth of the GDP depends on external demand. Indeed, the dip in GDPgrowth from 9.4 per cent to 6 per cent represents barely $30 billion in absolute monetary terms. But economics is not just arithmetic.

The ITand ITES sector, for instance, depends on the US and EU for two-thirds of its revenues. Sixty per cent of the billings come from the worst-affected banking and financial sector.

With companies in these two economies tanking, IT and ITES sectors are hit badly. In fact, software body Nasscom has stated that the revenue target of $60 billion by fiscal 2010 seems to be difficult to achieve as does the target of $40 billion for fiscal 2008. Take gems and jewellery. Again like IT, demand is from the developed economies where consumers are scrambling to meet day-to-day needs. The gems and jewellery sector alone could have lost one lakh daily-wage jobs by some estimates.

It’s worse in textiles and garments. Rajinder Gupta, Trident chairman, says: “The pipeline of orders has almost dried up. The scenario demands a political call from the government if jobs are to be saved.” The Government has only messed up the scene. S.P. Oswal, chairman, Vardhman Group, explains this rather eloquently: “Thanks to votebank politics, the Government hiked the MSP for cotton from Rs 1,950 to Rs 2,800 per quintal. The 40 per cent hike came when international prices crashed by 40 per cent. Net result: Indian products are expensive and uncompetitive.”

Hospitality and tourism, big employers again, were reporting 40 per cent growth annually. In many ways, the India Story and the Incredible India spin were luring travellers into the country. Suddenly with the global economy going into a tailspin, hotels are reporting low occupancy.

In Goa and Kerala, tour operators are already reporting lower charter arrivals. Prafulla Hede, chairman of the Hede Group, reveals that already low occupancy levels in hotels are expected to dip further by early next year. Aviation, the co-occupant of this ride downhill, is struggling to survive between high costs and low traffic. One airline flying Bangalore-London is losing a crore every day it flies.

Back home too traffic has dropped by 20 per cent. Last week, Civil Aviation Minister Praful Patel was so struck by the empty lounge that he asked the Kingfisher staff whether the flight was going and if boarding had started. It had and there were barely 40 passengers on the busy Mumbai-Delhi route.

The choice companies are making is between saving jobs and survival. And the crux is in the timing. For the first time in decades, India seemed to be at the right time at the right place when global growth took off in 2003. Companies went into an overdrive of investment, acquisition and expansion.

Sectoral analysis - III

Media & Entertainment

Fall in revenues, rising costs and slashing of ad budgets has hit both the print and electronic media.
65% Expected drop in hiring but could come up for review 2009-end.

Pharma & Chemicals

Wait and watch is the mantra as the players cope with the slowdown. Companies with global presence have kept hiring on hold.
66% hiring affected. Limited growth likely.

Engineering

New orders are drying up affecting the manufacture of machinery and equipment.The SSI sector is specially hit by the economic downturn.
51% jobs to take a hit as companies decide to wait and watch.

Transport & Logistics

Impacted by the slowdown in retail, construction and consumer goods players put expansion plans on hold.
78% jobs are likely to be slashed next year.

The optimism was fuelled by two critical factors— valuation derived from domestic demand and global optimism. In their mid-investment cycle, companies were first hit by the old phantom called inflation.

In perpetual election mode, the Government ignored supply side issues and attacked demand. As interest rates were hiked, sales in three critical sectors—real estate, automobiles and consumer goods —were hit.

And even as they appealed to the Government, the global meltdown hit them. First, it destroyed the valuation-based business model where they could have raised funds in return for equity paper. Second, debt is not only hard to harness but also very expensive.

So companies are now trapped in expansion mode even as they struggle to sell output from existing capacities. With lower incomes, not only is expansion on hold but the focus is on cutting costs through retrenchment.

As Laveesh Bhandari of Indicus Analytics, who analysed the job survey, puts it: “New hiring is highly sensitive to investment. As investment growth takes a steep downturn, so will organised sector employment growth.”

And for every organised sector job lost, three to four jobs will be lost in the unorganised sector as vendors/suppliers who are largely from the small- and medium-scale sectors are impacted by loss of orders from big companies.

If growth dips to 6.3 per cent as forecasted, the economy will create only around six million jobs and leave a third of the nine million entering the job market jobless adding to the already high 10-plus per cent unemployment rate.

The elementary and immediate imperative is to kickstart investments to push growth and thus create jobs. There is no dearth of literature as the UPA’s A-team knows or opportunities to do this.

We badly need power, good roads, low cost housing and public facilities. We have a savings rate of over 27 per cent, we have improved productivity, have the skill set to execute big projects and have been innovative in funding them.

What is required, or rather, what is lacking is the political will to align needs and opportunities. Look at China. Just one example should suffice. India added 24,000 MW in five years and plans to add 48,000 MW in the next five while China added 1,05,000 MW in just 2006.

The Chinese economy has only slowed down to 9.9 per cent and yet they have announced a $586-billion stimulus package. We face worse and are yet waffling about the steps we need to take. Even if the Government helped push 10 of the stalled investments worth $180 billion, it would generate enough charge in the economy. The current crisis will not be cured by mere sops or fractional reduction in cost of money.

The 2004-2008 bull run of the economy was engineered by private enterprise, private consumption and foreign capital. This time the India Story will have to be authored with Indian capital, skills and innovation. It will require astute political leadership. The first step is to accept that there is a problem.

—with Nivedita Mukherjee, Nandini Vaish, Ramesh Vinayak, Rohit Parihar, Stephen David, Anand Natarajan and Amarnath K. Menon

India Inc. sheds jobs to survive slowdown : http://www.webnsn.com/

Career Point

Total 2 Million Jobs SACKED in year 2008 (Full Details)

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