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 go of around 1 lakh temporary and contract workers in the last six months,” Nikhil Kadam, chairman, Mumbai region, All India Gems & Jewellery Trade Federation, told FE. The spike in import duties on gold from 2% to 8% together with rules to tighten gold imports has hit the jewellery trade hard.
The construction sector, where between 50% and 60% of the workforce is temporary or contractual, is also under pressure due to the slowdown in the execution of projects. Bangalore-based Corp Placement's managing director, Anand Vadakepat, believes around 10,000 jobs may have been lost in the construction sector.
“The slowdown in the infrastructure build-up has impacted us and with a view to making the operations lean and efficient, we are rationalising the organisation to the current level of operations,”a spokesperson for Mumbai-headquartered Hindustan Construction Company said, reluctant to reveal the exact number of workers that have been let go.
As receivables pile up and hit cash flows, staff cuts have started to pick up across infrastructure companies like GMR and Lanco, which let go off about 4,000 people in FY13, according to company officials. In FY14, so far, with Lanco not bidding for new projects, 300 more have been asked to leave. Troubled wind turbine maker Suzlon Energy too has reduced headcount by over 775 in the first quarter, having already reduced the employee base by 2,000 over the course of FY13.
"GMR, Ramky, HCC, Cairn Energy, Gammon – all have laid off workers at the project level or they have left as salaries get delayed and growth prospects get stunted due to execution hurdles on their various projects,” said Vadakepat, who offers contract staffing services to companies.
In FY13, GVK reduced its workforce by 281 people while rival GMR cut around 200 jobs. Mumbai-based Reliance Infrastructure also laid off 112 people though the largest layoffs were seen at Delhi-based construction major DLF, which slashed 1,100 jobs to end the fiscal with 2,600 people compared with 3,700 staff in the previous fiscal. The rest of the real estate industry – which employs about 50 million people – too is in wait and watch mode, hoping for a turnaround with the upcoming festive season. If that fails to materialise,10-30% of contract and permanent jobs could be at risk. "The next two to three months will be crucial," said Lalit Kumar Jain, who heads an an association of developers, pointing out that the sector has not seen many layoffs so far.
The stress in the services sector is apparent from the number of brokers shutting shop in the wake of low retail participation in the capital markets. The number of brokers fell below the 10,000 mark for the first time in four years in May this year, according to data from the Securities and Exchange Board of India. The number of sub-brokers has also been steadily reducing and in FY14 so far, 4,200 sub-brokers have shut shop.
According to industry estimates, job losses in the stockbroking industry in FY13 have been anywhere between 9,000 and 12,000. About 75,000-85,000 people were employed in the industry at the end of FY12. "The last three years have been extremely tough for the broking industry. Except for select replacement hiring, there isn't much of hiring happening in the industry at present," said Alok Churiwala, vice-chairman, BSE Brokers' Forum.
The education sector remains broadly untouched so far, although some stressed companies like Educomp have been letting go of staff with nearly 3,500 employees losing their jobs at the company in the last three months.
However, hiring activity in oil and gas, telecom and pharmaceuticals has seen the biggest dips in the range of 13-14% in August, according to the Naukri Jobspeak index. Hitesh Oberoi, MD and CEO, Info Edge, which promotes Naukri.com, points out that hiring is bound to come under pressure in an unstable macroeconomic environment. “In such a situation, most companies focus only on replacement hiring and this cautious approach is reflecting in the demand for professionals across sectors,” Oberoi said.
Given how the global economy is still on the mend while disposable incomes at home are smaller and discretionary spends are coming off, the tourism industry too is facing headwinds. “Travel agencies have started consolidating their staff and employees now take on more work booking both domestic and international tickets. The staff strength across IATA-affiliated agencies has reduced by about 40% during the last 12 months and we expect about 25% of all travel agencies to close down, as they will not be able to manage their cash flow after January 1, 2014,” said Pradip Lulla, national general secretary, Travel Agents Federation of India. From January, payment circles to airlines stand revised from fortnightly to weekly, which could lead to a cutback in travel agencies.
Cut to the bone
* M&M is said to be running plants at an average capacity utilisation of 70%, while at Tata Motors it is is at 60%
* Gems & jewellery sector has seen 1 lakh job cuts in 6 mths on consumption spend cuts and gold import policy changes
* Hiring activity in oil and gas, telecom and pharma has seen the highest dips in the range of 13-14% in August
n Construction, where between 50% and 60% of the workforce is temporary, is also under pressure
* At current employment elasticities around 8.7 lakh jobs get created for every extra percentage of GDP growth
(Shubhra Tandon, Roudra Bhattacharya, Devangi Gandhi, Ashley Coutinho, Rhik Kundu, Kirtika Suneja and Rachit Vats contributed to this story)