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BW Businessworld

Sorry, We’re Not Hiring

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I am afraid I don't have good news to give about the employment scenario in 2012. The job market will be sluggish till economic growth heads north again. The past 4-5 quarters have witnessed a continuous softening in the Indian economy. This has happened partly because of volatility in the external environment and partly because of the government policy of tightening interest rates.

The job market in India is all about growth of  the Indian economy. In India 10 per cent growth is a boom and 6 per cent, a recession. If growth surges above 9 per cent, we witness a boom with massive wage inflation and talent shortages. Below 6 per cent, you see companies downsizing and jobs actually contracting rather than expanding. And the impact of that can be disastrous as we witnessed in 2009. This is in contrast to the developed economies of the West. There population is steady, growth is flat — desired to be around 2 per cent — and economic booms are characterised by people being able to retain their jobs and obtain a 4-5 per cent increment each year.

What is significant about the current situation in India is that the recovery was extremely short after the meltdown in 2008-09. What a second down cycle so soon after the previous one means is that companies have not forgotten how badly they got burnt last time around. So they will be extremely cautious and will slow down hiring the moment there is any hint of bad news. And that is precisely what is happening with Indian companies to add to the woes of a slowing economy.











THE JOB MARKET GOES SIDEWAYS
IN INDIA, THE RECOVERY WAS EXTREMELY SHORT AFTER THE MELTDOWN IN 2008-09

COMPANIES GET CAUTIOUS ON HIRING IN TIMES OF VOLATILITY

AS SECTORS SUCH AS, AUTO, INFRASTRUCTURE AND FINANCE GROW SLOW, JOBS WILL BE HIT

GLOBAL UNCERTAINTIES ABET THE CRISIS

The volatility in the international economy does not help either. The appreciating US dollar, high oil prices, the crisis in Europe, conflicting signals from the US — all have meant that predictability is poor for companies and sectors that have dependencies and linkages with international markets, and this includes financial services, real estate, information technology, IT-enabled services and a whole range of other sectors. When there is volatility, companies get cautious about hiring. Nobody wants to make long term bets.

The macro scenario apart, if one analyses major sectors, there is no good news either. In IT, the star over the past decade and a half, the depreciating rupee may seem like positive news, but there is serious demand side softening given the economic situation in Europe and the US. Ditto for BPO and other export industries. Telecom faces a problem of over-capacity and declining prices and margins. This sector is a prime candidate for downsizing before it expands. In insurance, regulatory changes over the past year or two has meant that companies will go through a bout of pain before growth returns. No good news from retail either, with the FDI policy put in cold storage.

The infrastructure order books are not looking good. One is not sure how soon major hiring will happen here. The automobile industry is going through serious demand softening. Capital markets are in a bearish phase impacting all jobs related to this space. The much hyped e-commerce firms have limited employment potential in the near term. In any case, many of these companies will not be able to raise further rounds of funding and valuations may have peaked for a while.

Having said this, the situation could reverse pretty soon with growth and jobs coming back. For this to happen, both government policy and the macro economic factors would have to be favourable.

While the government cannot do much about the external environment, a few judicious policy measures to stimulate growth could help. But even if these are taken tomorrow they will take a few months before they have an effect. Until then, however, it is a period of the job market going sideways.

(This story was published in Businessworld Issue Dated 09-01-2012)