From auto to real estate: The curious case of vanishing jobs

ndia’s total job outlook is weakening with each passing day as small-scale firms across several sectors cut production amid low consumer demand.

The slowdown over the past two quarters has forced cash-strapped companies to serve severance notices to existing employees.

While contractual employees (mid-to-junior level) are becoming the first casualties of the slowdown, industry experts indicate that a prolonged effect could have a severe impact on India’s overall employment figures.

Several reports indicate that workers across the country’s various sectors are being asked to leave due to a decline in production activities. India’s auto sector, which employees over 3.5 crore employees, has already laid off almost 3 lakh employees.

Automakers, who are facing the sharpest effect of slowdown, already warned the government that millions of jobs could be at risk if the government does not implement quick measures.

Contractual workers or daily wage labourers, working at outsourced factories or companies, have become the initial victims of the economic slowdown.

However, the industry could let go of more people if demand does not improve during the festive season. Some automobile manufacturers are shutting production on some days to reduce costs as well.

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The $57 billion auto components industry could face bigger losses in the second quarter of 2019-20, following which several jobs–from front-end sales to production units–may decline further.

Industry experts including Society for Indian Automobile Manufacturers (SIAM) President Rajan Wadhera said 10 lakh contractual manufacturing jobs, associated with the auto sector, are at risk due to the consumption slowdown.

The figures are worrisome considering that the overall auto industry contributes to over 7 per cent of India’s GDP.

NOT JUST AUTO SECTOR

While the auto sector has faced the biggest jolt due to decline in consumer demand, there are other sectors that are facing the heat of slowdown and have already asked several employees to either take pay cuts or leave.

Real estate is another sector that is going through a rough period as many reports are now emerging from the ailing sector.

For instance, Macrotech Developers, formerly known as Lodha Group, has handed pink slips to over 400 employees, reported news agency PTI.

While the company said layoffs were conducted after a performance review, the fact the company’s gross debt rose 13 per cent to over Rs 25,000 crore is being projected as a strong signal that led to the job losses.

The real estate sector has lost over 1 lakh workers and daily wage labourers in the last 12 months. (Photo: Reuters)

Meanwhile, lower consumer demand in the real estate sector has directly impacted thousands of daily wage workers, who have ended up without any source of income. The sector has already shed lakhs of jobs, mostly contractual and daily wage labourers, over the past 12 months.

To make matters worse, experts from the real estate sector have predicted more than a million job losses over the next few months as it continues to face a multi-year demand slowdown.

The National President of National Real Estate Development Council (NAREDCO) Niranjan Hiranandani testified that liquidity crunch is inflicting serious wounds on the sector and that manpower would drop significantly before the end of the year if the government fails to intervene.

“My reading is that more than a lakh have already lost jobs in real estate over the last year. A majority of them would be blue-collar. By the end of the year, five lakh may lose jobs if developers aren’t able to start new projects,” Hiranandani told Business Today.

The liquidity crunch that started in 2018 along with the long-term effects of demonetisation is being highlighted by industry experts as the key reason for the slowdown.

Finance Minister Nirmala Sitharaman is likely to announce measures to boost the sector in the upcoming week, said Minister of State for Finance Anurag Thakur.

MSMEs HURT

While the full effects of a slowdown are slowly creeping into offices, its effects on production units and ancillary industries have led to lakhs of job losses.

Medium and Small Scale Industries (MSMEs), mostly involved in outsourced production and manufacturing work, are facing an acute crisis as there is no work due to the demand slowdown; many have closed down due to lack of liquidity and weakening consumer demand.

MSMEs across manufacturing-heavy states like Maharashtra, Karnataka and Tamil Nadu are under immense pressure as many units have not only stopped hiring but are focused on downsizing due to lack of work.

Maharashtra a leading state in terms of auto, food processing and agriculture, has been paralysed due to the demand slowdown. The combined MSME sector in the state leads to over 80 per cent employment generation, but a large chunk of those jobs are at risk as production dips across ancillary companies.

Meanwhile, industry-heavy states like Tamil Nadu and Karnataka are also bearing the burnt of the economic slowdown.

In Tamil Nadu, which has one of the largest numbers of MSMEs in the country, a significant dip in production activities across Chennai, Madurai, Coimbatore, and Tirupur, reported The Times of India.

Contractual workers in other industrial belts like Jamshedpur have also lost jobs as Tata Motors and Steel continue to feel the pinch of an economic slowdown. As Tata Motors has cut down on production due to decreased demand, many contractual workers are being asked to leave in order to save money.

Not just employees directly linked to Tata but other ancillary companies which manufacture auto components are also temporarily shutting shops to combat demand slowdown. As a result, many employees are now left without any work.

While demand slowdown has severely affected workers in the unorganised sector, the effects of the slowdown could soon hit major firms if the government does not provide stimulus packages to overcome sloppy demand.

TACKLING JOB LOSSES

Since the slowdown has been triggered by a mix of macroeconomic and external factors, the risk of job losses could spread to most sectors if the situation is not altered by the third quarter of 2019-20.

According to Centre for Monitoring Indian Economy, India’s unemployment rate has again hit a three-year high of 8.4 per cent in August 2019. With this, India’s unemployment rate is at its highest since September 2016.

At a time when both urban and rural employment seems to be vanishing on the back of a global slowdown, experts have urged the government to announce a mix of policy reforms, tax cuts and sector-specific packages for reviving demand.

While Finance Minister Nirmala Sitharaman has announced a few measures to tackle the slowdown, not much has been done to increase demand. All eyes will now be on the festive season, which could turn the tables as economists expect demand to increase.

[“source=indiatoday”]