Job losses will cause drop in consumer spending and hit the economy
One of the biggest promises PM Modi gave when he was campaigning ahead of the 2014 Lok Sabha polls was that lakhs of new jobs will be created in India in the coming years. However, the overall economic scenario now makes it clear that lakhs of jobs have been actually been lost in the last couple of years because of recession and various other reasons
How much technology and how much of robotics is good for the society and where does it start hurting the interests of the public at large is a debate that some media platforms have taken up in the western world. Every corporate house wants to sack employees as a cost cutting measure but every corporate house also wants consumers! If more and more people lose jobs, where will the consumers come from? This is the question some of the economists are now presenting.
India is currently going through a phase where most, if not all, companies want to throw employees out in order to cut costs. One of the biggest promises PM Modi gave when he was campaigning ahead of the 2014 Lok Sabha polls was that lakhs of new jobs will be created in India in the coming years. However, the overall economic scenario now makes it clear that lakhs of jobs have been actually been lost in the last couple of years because of recession and various other reasons.
One of the big reasons for losses of jobs in sectors such as manufacturing or automobile and IT is the advent of technology which is moving towards automation. There are obviously other external reasons such as the foreign policy of western governments which are looking inward. Domestic reasons such as job losses in the informal sector because of demonetisation of 2016 are hurting the economy very badly.
According to a prominent business magazine, executive search firm Head Hunters India has predicted that job cuts in IT sector will be between 1.75 lakh and 2 lakh annually for next three years due to under-preparedness in adapting to newer technologies. Typically, almost all major companies in the industry shed between 5-7 pc of their poorest performing staff each year to hire superior talent. That’s 2 lakh jobs shed every year, but another 2 lakh people replace them. Besides, the IT sector has a natural attrition of around 15-16 per cent. That’s nearly 6 lakh of the 39 lakh people leaving their jobs voluntarily for better options.
According to a business publication the reason why India can’t say for sure how many jobs it created-or shed-is because the comprehensive, reliable data doesn’t exist anywhere. The Labour Bureau covers only 8 sectors. Last year it claimed 1.38 lakh new jobs were created in those 8 sectors. In contrast, just the ministry of skill development claimed it placed nearly 6.5 lakh last year. This is just one case of how one arm of the government doesn’t know what the other is doing. Interestingly, the Labour Bureau doesn’t cover the two sectors, e-commerce/e-tail and logistics/warehousing - which have created the most jobs in the past 4-5 years. Employment data in corporate balance sheets - which should ideally be a mandatory declaration every quarter - is scarce to find in the annual reports. Companies declare them at will -sometimes, none at all.
The reality is that jobs are being lost at a high rate in India’s urban and rural areas and it is bound to have an impact on the economy in the long run as consumer spending is likely to drop nationally because of uncertainty. In such a case even self employment opportunities and start-ups would suffer because people don’t have confidence.