Jobs are in distress. More than any secular trend - such as automation - it is the slump in credit growth and consumption that has now dampened prospects for employment across many industries. While job losses in India's automobile industry has been the most talked about, things aren't looking any better in real estate, in some segments of electronics, and even retail.
In automobiles, estimates of job loss vary between 2.30 lakh and 3.50 lakh across manufacturers and dealers. Many fear that nearly 10 lakh jobs could be wiped out if the slowdown in sales sustains going ahead. The industry contributes over 7 per cent to the country's GDP and nearly half to India's manufacturing GDP. It supports 37 million direct and indirect jobs.
Sale of automobiles slipped nearly 19 per cent in July, the worst ever decline in a month on a year-on-year basis since December 2000 when sales dropped 22 per cent. While passenger vehicle sales slid 31 per cent, the commercial vehicle segment declined 25.71 per cent. Business Today had earlier reported that "the slowdown in the industry is largely on account of a bad festive season last year, which led to the problem of higher inventories, tight liquidity with banks as a fallout of the NBFC crisis and an overall sluggish economy and low consumer sentiment". About 300 dealerships have shut shop over the last year and a half.
The real estate industry, meanwhile, is in the middle of a downturn too - the reasons are similar. Developers are facing a liquidity crunch while consumers are holding on to their purchase decisions. Over a lakh jobs have been lost over the last 12 months.
Niranjan Hiranandani, Co Founder and Managing Director of Hiranandani Group and National President of industry body NAREDCO says that some jobs are being currently aided by the government's affordable housing schemes. "However, if the liquidity crisis that is intense at this point in time continues, you would have a huge drop in terms of manpower before the end of the year," he says. "My reading is that more than a lakh have already lost jobs in real estate over the last one 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," he adds.
Developers, right now, are focussed on completing and delivering ongoing projects. Many of them have no capital to start new ones. India's construction sector generates about 9 per cent of the country's GDP while employing 44 million.
Consumer durables did okay this summer, air conditioners and refrigerators in particular. Considering the harsh summer months of North India, these are no longer discretionary purchases. The discretionary item in electronic appliances is television - the category slumped - the cricket World Cup provided little boost. The TV industry was growing at over 20 per cent for many years. However, in the last calendar year, volumes inched up just 3 per cent while the value growth remained flat. "The demand isn't growing. TV is at 15 million units annually. Many years ago, it was at 12 million," Manish Sharma, CEO - India and South Asia, Panasonic, told Business Today during an interaction. "TVs have been facing a tough time for almost three quarters. Last calendar year was flat and this year is going very tough. The first quarter has seen a de-growth - the segment would have de-grown 15-20 per cent versus the same period last year for the industry," he added.
What would be the impact of this slump in jobs? "One of the large manufacturers has already shifted production to another Asian country, which is a straight job loss for a lot of people. The second set of jobs are in supply-chain, which is not getting impacted right now because the opportunity is shifting to e-commerce. Third, because television is rapidly moving towards e-commerce, jobs into sales promotion activities on the retail front may get impacted," Sharma predicts. Panasonic hasn't cut jobs yet "although there is a huge pressure".
Retail front-end jobs appear to be safe as of now but one doesn't know how the rest of the year would pan out. 1-IndiaFamilyMart, a chain of value retail stores in smaller cities, says its apparel business is impacted. JP Shukla, co-founder of the company points out the abundance of marriage days in April-May-June. "Yet, there was no upside in sales. We were looking at a double-digit growth in revenues. It was a flattish quarter for us," he says.
Although 80 per cent of his business is apparel, there is a slump in household goods too. "There shouldn't be a slowdown in the household category, basic items like utensils, bottles, plastic containers. There is a slip here too. Lot of innerwear companies see a slowdown as well. People simply don't want to spend," he adds. The slump in retail could have a ripple impact on manufacturing jobs soon. "The front-end in retail is on minimum wages. We need to have a minimum workforce standing on the shop floor. But if I am buying less, it would impact the garment manufacturing industry a lot," he says.
It is a tad difficult to estimate the impact of the slowdown in employment-intensive sectors such as tourism and hospitality, which contributes to over 9 per cent of the GDP while employing over 44 million. Much of this industry is unorganised. However, Business Today recently reported that the fastest growing services sectors were now hitting speed breakers. The bank credit to tourism, hotel and restaurant industry is in negative compared to six years ago; the credit outstanding currently stands at Rs 39,000 crore versus Rs 39,200 crore six years ago.
The bright spots in the economy - e-commerce - continues to hire in preparation for the holiday season, especially temporary workers. "The festive season is around the corner. Fair amount of hiring around festival spikes are on. If I compare it to last year, it is not drastically less or more. It is at the same level," Rituparna Chakraborty, co-founder at staffing company TeamLease says. Bulk of TeamLease's hiring is in sectors such as consumer durables, BFSI, and e-commerce.