Job losses mount as recession bites India

Anuj Chopra, Foreign Correspondent

• Last Updated: February 02. 2009 9:30AM UAE / February 2. 2009 5:30AM GMT

PUNE, INDIA // Jitendra Rana, a software engineer, remembers when getting a job was effortless. Such was the glut of employment offers amid India’s economic boom, that no sooner had he posted his CV on a jobs portal four years ago than his phone began trilling with calls from employers, each offering a plumper salary than his previous employer.

But now, as the grim reality of the global slowdown bites, the job market has dramatically altered. Last month, Mr Rana, 37, got a shock when his employer asked him to resign. Technically, that is tantamount to sacking an employee, done only to keep his CV unblemished from the taint of being fired.

“Hunting for a new job in these times is a formidable task,” said Mr Rana, who declined to reveal the name of his company as that might inhibit his chances of getting a relieving letter, a prerequisite for a new job. “Not sure how I will repay my car loan, pay for my children’s education. It’s all very distressing.”

Unlike in the West, there is no system of social security, or unemployment insurance, in India, and most workers who are laid off are on their own.

In recent years, thanks to a booming economy, Indians enjoyed some of the highest salary rises in the world. Last year, pay rose by an average of 15.1 per cent, the steepest rise in Asia, according to Hewitt Associates, a global human resources services company. Growing incomes spawned an earn-and-burn generation of high-earning, high-spending, middle-class Indians like Mr Rana.

But now, as the growth of India’s gross domestic product ebbs – down to between six per cent and seven per cent after hitting a high of nine per cent in 2007 – for the first time in several years, this generation faces the dour prospect of job cuts and a crimp in salaries.

A US-style wave of layoffs has not hit India, but the Associated Chambers of Commerce and Industry estimates that Indian businesses could lay off nearly 25 per cent of their workforce this year across such areas as information technology, real estate, construction, aviation and financial services. Close to 40 million middle-class workers are employed by these sectors.

Indian exporters expect to cut about 10 million jobs by March as the global recession prompts buyers overseas to cancel orders. India’s industrial output contracted for the first time in 15 years in November.

“The year 2009 is going to be the worst year in history,” said A Sakthivel, president of the Federation of Indian Export Organisations.

Last month, the International Labour Organisation predicted that global unemployment would increase by 18 million to 51 million people this year from 2007 figures. About 200 million workers could be pushed into extreme poverty with incomes as low as US$1.25 (Dh4.6) a day, of which 140 million would be in Asia.

In an election year, the spectre of job cuts worries the Indian government. Lal Krishan Advani, the leader of the opposition, recently said that job cuts caused by the global recession were posing “more danger than terrorism”.

There are concerns that mass layoffs could spark social turmoil in this crowded democracy of 1.13 billion people.

Just this month, activists from the labour wing of the Shiv Sena, a nationalist political party, clambered over the gates of the InterContinental Grand Mumbai hotel, and vandalised its lobby to protest against the sacking of 21 hotel staff.

In late September, the chief executive officer of Graziano, an Italian auto parts manufacturer based in Noida, an industrial hub in northern India, was beaten to death by sacked employees.

India’s labour minister, Oscar Fernandes, later issued a statement that said the violence should serve as a warning to management. “It is my appeal that the workers should be treated with compassion.”

In October, when Jet Airways Ltd, a money-losing private airline, sacked 1,900 employees, the crews, clad in their golden yellow uniforms and posh sunglasses, staged aggressive protests outside the airline’s office in Mumbai. Political pressure mounted as well. The Maharashtra Navnirman Sena, a nationalist political party in Maharashtra, warned the airline that its activists would not allow a single Jet flight to take off if it did not take back the sacked employees. The next day, Jet Airways rescinded its move and rehired all of them.

Because of such incidents, companies view the issue of layoffs with trepidation. Many are looking for innovative ways to prune staff and cut costs. Some companies are making layoffs under the guise of natural attrition, pressuring employees to voluntarily resign.

“We don’t lay off in large numbers together,” said a management-level official in Mr Rana’s company who requested anonymity. “We shed a few employees every month so that doesn’t invite attention.”

The official admitted to laying off 50 employees in the past six months, nearly 20 per cent of the company’s workforce. Salaries of all existing employees were slashed by five per cent.

Many other employers are compelling their staff to go on forced furloughs to cut costs.
Air India, the state-owned airline, which is also losing money, declared last month that it was willing to let 15,000 workers voluntarily go on leave without pay for three to five years. But this was not tantamount to layoffs, it said.

“We can’t have the American-style hire ’n’ fire in India,” said Paranjoy Guha Thakurta, a Delhi-based commentator on India’s political economy. “It has to be done in a more humane way. There has to be a golden handshake or there will be social strife.”

achopra@thenational.ae