India’s looming jobs crisis is starting to unravel within the first 21 days of coronavirus lockdown
- Reports of job cuts and salary cuts in Indian media have started to flow in while many other sectors have reduced hiring by as much as half.
- There will be more unemployed youth on the streets in the days to come as new jobs dry up and existing ones vanish.
- India needs an estimated 10 million jobs a year to employ the new youth joining the workforce annually.
- The rising anxiety over livelihoods will make it difficult for Prime Minister Narendra Modi to enforce lockdown and ensure people adhere to the extension of lockdown required to contain the spread of novel coronavirus in India.
The excitement and cooperation seen for ‘janta curfew’ (the one-day voluntary lockdown on March 22) and on April 5 (when Modi asked people to light candles and lamps for 9 minutes at 9 PM) will be tested as people across the country get increasingly anxious about who’s next on the firing line.
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An unemployment crisis was expected but not so soon
The damning impact of bringing the economy being brought to a grinding halt is no surprise but most people hoped that companies will have the wherewithal, and the empathy, to help people survive in an unprecedented situation like this. However, a majority of India's employers are unorganised and small and do not have the ability to sustain costs with little or no revenue.
Unemployment in India was already high at about 7.5% to 8% even before the lockdown came into effect— it has been rising steadily since mid-2017. The latest estimate for unemployment in India is a shockingly high 23%, according to the Centre for Monitoring Indian Economy.
|Sector||Hiring in March 2020|
|Hotels, restaurants, travel, airlines etc.||-56%|
|Automobiles and ancillaries||-38%|
|Banking and financial services||-9%|
The media sector is taking the early hit as companies cut back on advertisements, choking cash flow for many smaller firms in the space. Not just news organisations, Business Insider has learnt that the CEO of Prime Focus — an Indian firm that contributed visual effects for the Hollywood blockbuster Avatar — has told the employees there will be reduction in headcount.
Even for market leaders like Zee Entertainment and Sun TV, the ad revenues between Jan-March 2020 are down 28% and 20% respectively, a report from Emkay Global estimated.
Many more sectors are likely to succumb to the pressure, and according to one estimate, nearly 136 million jobs are on the line. Hiring by technology majors like Tata Consultancy services (TCS), Infosys, HCL Technologies, and their peers fell 9% in March, for the first time in two years, according to CLSA.
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There will be more unemployed youth on the streets in the days to come as new jobs dry up and existing ones vanish. “We believe staffing requirement would come down drastically, leading to deferment/complete halt on any fresh hiring activity and reduction in pre-crisis contracted staff levels,” a JM Financial report said while cutting down estimates for the human resources firm Teamlease by 34% for the financial year ending March 2021.
A recent survey by the job search platform Indeed also said that half of the Indian businesses already trimmed the contractual workforce and freelancers to cut operational costs. On the other hand, India has to generate at least new 10 million jobs a year to engage the youth entering the workforce every year.
From airlines to movie production houses, from daily-wage labourers in factories to contract staff at shopping malls and quick service restaurants, the livelihoods for the bottom half of the Indian pyramid are at risk.
Some of the big companies in these spaces have high employee costs and a sharp fall in revenue estimates for the year.
Source: Various brokerage estimates
|Company||Employee cost||Change in FY21 revenue estimate|
|Aditya Birla Fashion & Retail||11.20%||-16.40%|
From Ratan Tata to Mukesh Ambani to Sunil Mittal to Azim Premji, many Indian billionaires have made significant contributions to the PM-CARES, a fund dedicated to combat the novel coronavirus pandemic.
The Indian Prime Minister needs the support of smaller businessmen, in the form of keeping livelihoods intact and providing income visibility to their employees as well as contract staff, to ensure that a population of a billion-plus people continues to cooperate with the fight against the epidemic.
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