With no signs of a turnaround in the economy — manufacturing output has fallen by 0.2% year-on-year between April and July while growth in private consumption dropped to a decade's low of 1.6% in the first quarter of the current fiscal — corporate India is hunkering down. The slowdown in industry has meant large layoffs. An FE survey, across select sectors, threw up a number of close to 2 lakh job losses in the last eight to 10 months.
At current employment elasticities — growth in job creation due to GDP growth — around 8.7 lakh jobs get created for every extra percentage of GDP growth. So, if GDP slips from the 9% that was being generated a few years ago to under 5% today, that means around 35 lakh less jobs generated each year.
Cuts in the automobile sector alone are estimated to be in the region of 1.2 lakh. “At least 14,000-15,000 temporary jobs have been lost in the current downturn so far in the automobiles space and the collective trimming numbers, which include the ancillary industries, will be far higher,” said E Balaji, independent HR consultant and former MD and CEO, Randstad India. Given that for every worker with an original equipment manufacturer (OEM) there are seven across the supply chain, the multiplier effect has resulted in a retrenchment number that’s several times larger.
Mahindra and Mahindra (M&M) is believed to be running its plants at an average capacity utilisation of 70% while at Tata Motors, it is lower at 60%. In an announcement that indicated the situation wasn’t getting better, auto parts maker Bosch said on Friday that it would suspend manufacturing operations at its Nashik plant for three days this week to avoid an unnecessary build-up in inventories.
Manish Sabharwal, CEO of staffing firm TeamLease, said that there has been a workforce reduction of 30-40% across both OEMs and suppliers. Sabharwal pointed out that with an estimated 10 lakh people working directly in the industry, this puts the job cuts at as high as 3-4 lakh.
If the automobile sector is seeing sluggish sales, a cutback in discretionary consumption spends, coupled with confusion on policy changes relating to gold imports, has meant fewer job opportunities in the gems and jewellery industry, where close to 1 lakh jobs have been lost in the past six months. “We’ve been forced to let