|
Economic Highlights
Job Loss A Reality
NO KNEE-JERK SOLUTIONS PLEASE
By Shivaji Sarkar
New Delhi, November 13, 2008
Will there be job losses, as Assocham, the industry
representative predicts? Or is the government right when it
dismisses the prediction as outrageous?
The Assocham report cannot be faulted, but its timing can. It
was politically incorrect to predict the stark reality at a
crucial time, the elections. The forecast was made soon after
Jet Airways gave pink slips to its employees and cut pay
packets of its pilots by ten-fold. Indeed, the report rattled
every one, more so the policy makers.
A glance at the recent corporate results testifies that the
job-loss report is closer to reality. Instead of panicking, a
realistic approach should have been taken about the report.
Well, for one, the Prime Minister’s meeting with CEOs on the
issue was a correct approach and so also the setting up of
high-powered economic committee.
The Assocham report warns that 25 to 30 per cent employees in
various businesses would be given the pink slip. The
businesses could vary from information technology (IT), to
aviation, or steel, or financial services, real estate, cement
and construction. The reason for such a move is an obvious
overall slowdown and cost cutting, of which the easiest is in
human resources, explains Assocham President Sajjan Jindal.
Jindal is right. Except banks, for higher interest rates and
fees, pharmaceutical companies which sell more during
stressful times and telecom and metals, almost all other
sectors have fared poorly as per their latest balance-sheet.
Aditya Narayan, an analyst with Citigroup, in an India
Strategy reports says that automobiles, capital goods, media,
hotels and consumer business has had disappointing
performance.
Consumer goods and automobile firms, including Tata Motors,
had the worst growth in net profit. Even the mega
pharmaceutical company Ranbaxy turned in one of its worst
performances clocking a loss of Rs 394 crore compared to a
profit of Rs 207 crore only a year ago.
According to another study, the aggregate net profit has come
down to 5.7 per cent compared to 25.8 per cent in the second
quarter (July-September) of 2007-08 and 10 per cent during the
first quarter (April-June) this year. The number of
loss-making firms has risen by over 33 per cent as against 14
per cent of last year. Even some IT companies have shown a
fall in their net profit.
The loss makers include big companies such as Indian Oil (Rs
7047 cr), Hindustan Petroleum Rs 3219 cr) and the construction
firm DLF (Rs 1935 cr). Interestingly, while Reliance Telecom
showed Rs 1531 cr profit, Reliance Retail has a dismal outlook
with the UK-based supply chain Wincanton severing its ties
with the retail outlet. In turn, the latter has quietly sacked
or laid-off large number of its employees.
Similar actions has been taken by many IT and business process
outsourcing (BPO) firms. Their recruitment process has clearly
taken a hit. Besides, many companies have reduced the
facilities extended to their employees. The smaller companies
have quietly closed shop. These job losses have yet to be
taken into account.
Moreover, as a number of companies functioned as ancillary
units, their performance has been affected with the slump in
production. It is a harsh scenario all around. More so because
the job market in the public sector came down from 190 lakh
jobs to 180 lakh between 1991 and 2005, as per estimates of
the Union labour ministry. On the other hand, jobs in the
private sector rose from 76 lakh to 84 lakh. The reason being
that with a near-freeze in recruitments in the public sector,
the private sector added jobs.
The present slowdown, which is yet not officially termed as a
recession, has not only brought a halt to these additions but
has in fact reduced staff strength. The labour ministry notes
that despite the growth in private sector jobs till 2005,
unemployment has increased to 8.28 per cent. This so because
the total employment in the agriculture sector has dropped
from 61 per cent to 52 per cent.
In urban India, trade, hotel and restaurant services, IT and
manufacturing had gradually emerged as major employers.
However, as all indices show a fall in the performance of
these sectors, the country is headed for drastic job cuts
across the board. This is likely to throw a major challenge to
the 11th Plan goal of adding another 45 million jobs. In fact,
the ongoing trend may even put the Plan development goals off
the target. And, with the government feeling the fund crunch,
we may face a major problem.
Higher unemployment in all likelihood will further affect
revenues and market-related growth, which is more excruciating
when corporates and individuals are made to pay taxes at an
exorbitant rate. Clearly, there is need to have a fresh look
at the tax policies.
Odd as it may sound, despite a gloomy scenario, the
international rating agency Standard & Poor’s (S&P) has
reaffirmed India’s investment ranking. In a statement from
Singapore, S&P has reaffirmed long-term rating and says it is
stable. It has cautioned a downgrade only if there is a fiscal
slippage on the part of the government or if there is a marked
decline in the external liquidity indicators or policy
measures, which weaken economic growth prospects.
The S&P predicts that India’s business environment is likely
to improve in the years ahead, notwithstanding the current
dislocations in the global credit markets. However, it is a
veiled warning about the slowdown continuing and that jobs may
not come by easily.
So far, the reduction in foreign exchange kitty is $ 15.5
billion--another grim reminder of the impending scenario.
Pumping more money, as the RBI is doing, is not a solution.
Credit off-take has come down owing to high interest and
banking costs. It needs to be reviewed – as the S&P has
indicated about weak policy initiatives. But it does not
require knee-jerk solutions. Instead, it calls for measures to
rejuvenate the economy, to achieve the 11th Plan goals. If
that is done, the present blues would not last long. Emphasis
needs to be laid on job creation and not profit of a select
few. ---INFA
(Copyright India News & Feature Alliance)
E-Mail :
newseditor@sarkaritel.com
|
