The ongoing coronavirus pandemic has crippled the world economy to the extent that many are estimating that this could spark a recession worse than the 2008 financial crisis. Many sectors of the economy like travel and airlines have come to a total standstill with the travel restrictions imposed by various governments globally. In an attempt to contain the virus and prevent community transmission, the Indian government has gone head-to-head with it and the economy here has become the collateral damage.
With companies trying to prevent cash burn and sustain themselves for future months, job losses has become common news. Although the central government has repeatedly asked organizations to avoid laying off employees, it seems like that the domino effect has been triggered. The pandemic has also led to the nation’s largest work-from-home experiment though many companies were still ill-prepared for such an experiment.
Rising unemployment rate
According to the data released by the Centre for Monitoring of Indian Economy (CMIE), early estimates of jobs data indicate that the coronavirus effect may have left a devastating impact on the economy, sending an overall unemployment to 23.4%. Based on a rough calculation, about 50 million people might have lost jobs in just two weeks of the lockdown. While the lockdown has been extended to its second phase till May 3rd, the increase in coronavirus cases in the country is compelling the Narendra Modi-led government to opt for a longer period of lockdown.
Industry body NASSCOM’s former President R Chandrashekhar has even said that the prolonged lockdown may even lead to further job cuts in the Indian IT industry, which is so far somewhat unaffected by the unprecedented crisis.
The International Labour Organization (ILO) in its report titled ‘ILO Monitor 2nd edition: COVID-19 and the world of work’, describes the coronavirus pandemic as “the worst global crisis since World War II.” In its earlier report, the UN body had estimated that the pandemic could lead to a loss of about 25 million jobs globally.
Another survey done by CII titled CEOs Snap Poll highlighted that a majority of the firms expect a significant decline in revenues, falling demand and job losses. According to the survey, around 52% of top corporate bosses in India anticipate that job losses will occur after the nation-wide lockdown is lifted. The survey also found that 46% of the CEOs do not expect job cuts while the rest 2% are not sure.
The CII Poll also showed that access to manpower and movement of products are the major constraints in essentials manufacture, transport, and distribution. Companies involved in the manufacture of essential services have said that there is a major constraint in the manufacture, transport, and distribution of goods. While 65% have said that there are constraints in the movement of goods, 35% have said that there are constraints in access to manpower.
Mass exodus of migrant workers
Photo by Reuters
According to a report by the Press Trust of India, about 400 million people working in the informal economy in India are at risk of falling deeper into poverty due to the coronavirus crisis which is having “catastrophic consequences”, and is expected to wipe out 195 million full-time jobs or 6.7% of working hours globally in the second quarter of this year, the ILO has warned.
Much of this problem can be attributed to the mass exodus of migrant workers from major cities in the country to their hometowns. As soon as the government imposed a lockdown, migrant workers across the country started their journey on foot for their homes fearing hunger and lack of facilities for them. These migrant workers survive on a hand-to-mouth basis. Their entire livelihood depends on the daily wage they earn for various works, mainly construction activities. The lockdown has forced builders and constructors to halt every project till the restrictions are lifted. Many are migrating to their hometowns, citing a definite death due to hunger than a probable chance of contracting the virus.
The airlines industry is in a totally devastated scenario. A report by the International Air Transport Association (IATA) shows that among the Asia Pacific countries, the Indian aviation sector would be the worst hit in terms of jobs, with a likely impact on 29,00,000 jobs. The report also said that the revenue of the sector in India may fall by $11,221 million this year compared to 2019. It further highlighted that the passenger demand is likely to fall by 47% in the country.
New talent entering the market
Another problem knocking the government’s door is the rising numbers of talent entering the job market. Already the government was struggling with an unemployment crisis when the coronavirus pandemic shook India Inc making them resort to downsizing. Now with new talent looking for jobs, the pile of problems on the job creation front seems to be overburdening the NDA government. This will also have a direct effect on the Prime Minister’s image as his party manifesto for the 2014 Lok Sabha election had promised to create 2 crore jobs every year, if his party comes to power.
According to a leaked report from the National Sample Survey Organisation (NSSO), over the next two decades, roughly 18 to 20 million Indians will enter the job market every year, but half of them will not actually enter the workforce. Another interesting fact that adds up to the current job scarcity is the gross enrolment rate in higher education, which has gone up from 19.4% to 25.8% between 2010 and 2018. This is a major reason why young job seekers from the age of 17-26 are over represented in the unemployment figures. A student who has invested heavily in education would want a formal good-paying job than enter the unorganized sector with lesser pay.
Hirings halted
While creating jobs was already a problem for the government, due to the coronavirus crisis India Inc has freezed hiring. As per a PTI report, hiring activity during March has declined by 18% compared to the same month in 2019 with major impact in cities like Delhi, Chennai and Hyderabad, according to Naukri JobSpeak Index. Some of the key industries like IT, BPO/ITES, BFSI and accounting/finance that form a significant base of hiring activity in India within the white-collar segment have shown a lesser decline during these unprecedented times. A lot of this can also be because of the fact that many outsourcing companies are now looking to shift their bases to other Southeast Asian countries where lockdown norms are relaxed.
Stimulus package awaited
To tackle the crisis, India Inc was hoping for a stimulus package, but with the meeting between Finance Minister Nirmala Sitharaman and Prime Minister Narendra Modi rescheduled for next week nothing can be said about it at the moment. The Prime Minister has held a slew of meetings with Niti Aayog CEO Amitabh Kant and finances ministry officials alongside industry bodies like Confederation of Indian Industry (CII) and Federation of Indian Chambers of Commerce and Industry (FICCI), where they had made detailed presentations on India’s economic situation and their demands.
Most of the corporates in the nation are hopeful of government assistance, but they aren’t solely banking on it, with no clarity yet on the amount of package and the date of the announcement, most companies have started working on their future plans. Experts say salary cuts and layoffs are just the beginning, the impact of COVID-19 will be felt for the next couple of months across the country.
Bottomline
All the above-said facts and data point in the same direction regarding the situation of joblessness in India. With more and more qualified candidates entering the job market and unemployment on the rise, the government can no longer disassociate itself from the scenario. Before the situation worsens, India must revise its policies, release stimulus packages, bring unemployment benefits for a larger population and create an environment where innovation and job creation needs to be facilitated with relaxed rules and norms. Otherwise, the country’s diverse population can turn into a demographic burden with inflation on a continuous rise.
Sandeep is a journalism and mass communication graduate with a keen interest in politics and business. He is a part of Research & Content team at HrNxt.com.