July 30, 2013
NEW DELHI: While fresh hiring has already taken a hit, thanks to the slowing economy, India Inc has for the first time acknowledged that large-scale layoffs are already underway and the job market is likely to get much worse if growth isn't revived fast.
July 30, 2013
NEW DELHI: While fresh hiring has already taken a hit, thanks to the slowing economy, India Inc has for the first time acknowledged that large-scale layoffs are already underway and the job market is likely to get much worse if growth isn't revived fast.
Most companies have imposed a hiring freeze. Automobile, IT and banking firms have seen thousands of job losses
"Layoffs of contractual staff have already started and this could soon move to permanent employees," FICCI President Naina Lal Kidwai has said, warning the government of "a grim employment scenario" unless growth is revived urgently.
"With the slowdown becoming more discernible, fresh hiring is already taking a hit. Unless the growth trajectory is reversed, we will be facing a grim employment scenario," Kidwai said ahead of the meeting of the Prime Minister's Council of Trade and Industry on Monday evening. Estimates indicate that about 10 million people join the workforce every year; however, there remains a yawning gap between the skills acquired by these new entrants and skill set required by the employer.
An internal note of Ficci reviewed by ET states that the job market is 'gloomy' with sectors such as auto, IT and banking seeing thousands of job losses, while most companies have imposed a hiring freeze.
"Particularly in the auto sector, which has been operating at low capacity due to weak demand, thousands of temporary staff has already been laid off and fresh hiring is on a complete freeze," FICCI said. "Job market in other sectors also reflects a slowdown. UBS recently surrendered its commercial banking licence to the RBI and had begun firing employees from its commercial banking division."
The surrender of the banking licence by UBS reflects a growing disenchantment among foreign investors about India's prospects in the near to medium term. Since procuring such an asset like an operating licence in the country entails long and complex procedures, often running into years, this indicates that it doesn't expect the Indian market to be lucrative for a while to come.
" IBM, as a part of its restructuring process, had already started laying off employees in North America and more jobs are likely to be cut in other nations like India," the FICCI note states. Headhunters said the stress in the job market is visible, though it hasn't become an across-the-board phenomenon yet.
"We are seeing a lot of CVs coming from employees in the banking and technology sectors, looking for opportunities in other sectors," said Dony Kuriakose, director of Edge Executive Search, adding that a bigger re-alignment is underway in hiring strategies.
"No one is looking at mass hiring or entry-level recruitments off campus, instead the focus is now on niche, specialised hiring," he said. This poses a serious threat for new entrants into the job market and could lead to high youth unemployment. Over 10 million young Indians join the workforce every year but a mismatch in the skills they have acquired and the skill sets industry is looking for makes it difficult for them to get formal employment.
Industry-wide surveys conducted by Assocham and Ficci show a steady decline in the number of firms that expect to hire more people, which also euphemistically implies that there are greater pressures to downsize staff numbers. For instance, FICCI's Business Confidence Survey found that just 20% respondents expect hiring to go up in the second quarter of 2013-14, down sharply from 30% of firms who indicated the same in the previous quarter.
A similar poll by Assocham found that almost three out of every four firms doesn't expect any new jobs to be created this year. Another indication of harder times in the job market is the sharp decline in margins across the services and manufacturing sectors, which is forcing companies to curb operational costs.
Data compiled by the Centre for Monitoring the Indian Economy (CMIE) shows that net sales growth in manufacturing sector eased from 9.3% in the third quarter of 2012-13 to 5.2% in the fourth quarter. The sales decline had hit sectors across the board: food and chemicals, metals, steel, cement and transport equipments.
Profit margins and operating expenses also saw a similar decline in that period, and industry believes things have got worse in the first quarter of this year, with no tangible revival in any of the core economic barometers.
Courtesy: ET
