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Job losses mount, recession looms as India battles Covid-19

Contractual staff and daily wagers most hit by the 21—day lockdown

Sabrangindia 07 Apr 2020

LockdownImage Courtesy:reuters.com

Defying government orders that asked employers to be humane to employees and not cut their salaries or remove them from their jobs during the 21-day lockdown imposed in the country to fight the Covid-19 battle, some IT and ITeS companies in Karnataka have allegedly begun effecting pay and job cuts, reported the Deccan Herald.

Karnataka State IT/ITeS Employee Union (KITU) General Secretary , Ullas C said that they had received complaints from at least 50 people employed in various companies across the state. The union has asked asked affected employees not to resign if asked to do so by the company management. “The union strongly condemns the illegal and inhuman act by their managements,” he said. “Most of these are mid-level and small companies, not multi-national companies. Most of the callers said that they have been communicated about a salary cut, but some complained about being sacked. We urge the companies to refrain from doing so,” he added. Ullas also said that most IT companies in Bengaluru are involved in either services or software development. He added, “We expect that those engaged in development to take a hit, while the companies in the services sector are expected to fare better during the economic crisis.”

The union said that though the lockdown was issued in national interest, the companies were acting against national interest by violating government orders during this time of crisis. Demanding that the State government take action, the union said, “KITU demands the urgent intervention of the government in this matter and strict action against the companies violating the advisory note and labour laws.”

It has been widely reported that various companies are resorting to these measures to weather the economic impact of the Covid-19 outbreak. Economic Times spoke to online insurance firm Acko which has now laid off 500 employees in the customer service, operations, sales and marketing segments. Varun Dua, founder of Acko told ET that 45 people were “impacted”. He said, “These are unprecedented times and we have to be prepared for a situation where the world is not normal for a long time.” He also said that the leadership team had taken salary cuts between 50 to 70 percent to do what’s right in the interest of the majority. Some business lines have been impacted and we don’t see them recovering for a long time and we’ve been forced to rationalize in those areas and consolidate a few teams and roles,” he added.

ET also reported that cloud communication firm Exotel has capped salaries at Rs 40,000 for the next two months and will look at the situation after a month to take further measures.

Technical recession and job losses

A report by the financial services company Motilal Oswal said that economic activity was at a 7-month high in February, but with the lockdown, it may have declined 15 – 20 percent year-on-year in March 2020. The firm’s Economic Activity Index (EAI) for India’s real Gross value added (GVA), called EAI-GVA suggests that economic growth picked up from 5.2% YoY in January 2020 to 6.5% YoY in February 2020 – the highest in the past seven months.

The domino effect caused by the coronavirus lockdown is shown in the report which reckons that only 30 – 40 percent of the economy is currently operational and that India’s real GDP growth could decline 2 – 3 percent in the fourth quarter of FY20 and another 10 percent year-on-year in the first quarter of FY21.

The report says that a single day of lockdown could shave off as much as 14 – 19 basis points from annual growth. This implies that with seven days of complete lockdown and eight days of partial lockdown, the real GDP could decline 3 percent year-on-year in the fourth quarter of FY 2020 as against the initial estimate of 4.7 percent.

“This will be the first- ever quarter of de-growth since the quarterly data became available since late- 1990s, and with two consecutive quarters of GDP decline, the Indian economy could see its first technical recession since 1990s,” the report said.

This lower productivity growth would be largely driven by ‘casual workers,’ who receive wages as per the daily terms or periodic work contracts, according to the report. However, it said, If the economy, remains affected for a longer period, the ‘self-employed’ people (52 percent of all employment), who operate their own enterprises, and the ‘regular wage / salaried workers’ (23 percent), would also be seriously affected.

The Goldman Sachs group too has said that India’s economy will likely contract in the first two quarters of 2020, reported ET. The virus pandemic has brought “an unprecedented sudden stop” to activity in India, where consumption makes up 60 per cent of the economy, the economists said.

Speaking to ET, Principal Economist at ICRA, Aditi Nayar said that due to the 21-day lockdown, there has been a production shutdown in many sectors and there has been a growing fear of job losses, especially of contractual staff and a substantial loss of income for daily wagers which will be difficult to make up for even after the lockdown is over.

The National Herald reported that 1.5 lakh employees in India’s IT industry might lose their jobs over the next three-to-six months. The industry employs about 45-50 lakh, of which and smaller firms account for about 10-12 lakh.

ITeS BPO firm Fareportal which caters to the travel industry and has laid off more than 300 employees and issued pay cuts to top bosses, says that business in the wake of the lockdown went down by 85 percent and that most of all the unclear situation about the development and tackling of the coronavirus is leading to these decisions.

Experts say it will take longer for recruitment to resume and no clarity on how long it will take for companies to recover.

Hope in sight

Though talks of a global recession are making the rounds, experts say that India may be better placed at bucking the trend. The International Monetary Fund (IMF) has said that it expects a recovery in 2021 provided that countries succeed in containing the coronavirus and preventing bankruptcies and layoffs.

India’s investment system has been abuzz with fundraising. Startup companies have raised more than 700 million in capital. The Indian Express reported that Flipkart founder Sachin Bansal invested nearly Rs. 3,000 crore in his financial services firm – Navi Technologies. Reliance Industries Limited acquired a Rs. 100 crore stake in education platform Embibe. Online food platforms Swiggy and Zomato too received fresh funding, with Swiggy raising $43 million and Zomato receiving $5 million. Beauty and personal care retailer, Nykaa, too saw a fund infusion of $13 million.

The pandemic has turned investors to start-ups working in the med-tech, ed-tech and fintech space. Bengaluru-based bio-tech start-up Med Genome raised $55 million (Rs 419 crore) from global investor LeapFrog in the latest round, which the company says it will utilise in consolidating research on drug disxovery as well as clinical genome testing across tier-1 and -2 cities.

The United Nations Conference on Trade and Development (UNCTAD) too has said India is one of the two countries, after China, to be least exposed to the recession.

Related:

Non-profits extend helping hand to poor people during Covid-19 lockdown
Essential commodity and fuel prices fluctuate amid Covid-19 lockdown
30 per cent pay-cut for all Members of Parliament for a year

Job losses mount, recession looms as India battles Covid-19

Contractual staff and daily wagers most hit by the 21—day lockdown

LockdownImage Courtesy:reuters.com

Defying government orders that asked employers to be humane to employees and not cut their salaries or remove them from their jobs during the 21-day lockdown imposed in the country to fight the Covid-19 battle, some IT and ITeS companies in Karnataka have allegedly begun effecting pay and job cuts, reported the Deccan Herald.

Karnataka State IT/ITeS Employee Union (KITU) General Secretary , Ullas C said that they had received complaints from at least 50 people employed in various companies across the state. The union has asked asked affected employees not to resign if asked to do so by the company management. “The union strongly condemns the illegal and inhuman act by their managements,” he said. “Most of these are mid-level and small companies, not multi-national companies. Most of the callers said that they have been communicated about a salary cut, but some complained about being sacked. We urge the companies to refrain from doing so,” he added. Ullas also said that most IT companies in Bengaluru are involved in either services or software development. He added, “We expect that those engaged in development to take a hit, while the companies in the services sector are expected to fare better during the economic crisis.”

The union said that though the lockdown was issued in national interest, the companies were acting against national interest by violating government orders during this time of crisis. Demanding that the State government take action, the union said, “KITU demands the urgent intervention of the government in this matter and strict action against the companies violating the advisory note and labour laws.”

It has been widely reported that various companies are resorting to these measures to weather the economic impact of the Covid-19 outbreak. Economic Times spoke to online insurance firm Acko which has now laid off 500 employees in the customer service, operations, sales and marketing segments. Varun Dua, founder of Acko told ET that 45 people were “impacted”. He said, “These are unprecedented times and we have to be prepared for a situation where the world is not normal for a long time.” He also said that the leadership team had taken salary cuts between 50 to 70 percent to do what’s right in the interest of the majority. Some business lines have been impacted and we don’t see them recovering for a long time and we’ve been forced to rationalize in those areas and consolidate a few teams and roles,” he added.

ET also reported that cloud communication firm Exotel has capped salaries at Rs 40,000 for the next two months and will look at the situation after a month to take further measures.

Technical recession and job losses

A report by the financial services company Motilal Oswal said that economic activity was at a 7-month high in February, but with the lockdown, it may have declined 15 – 20 percent year-on-year in March 2020. The firm’s Economic Activity Index (EAI) for India’s real Gross value added (GVA), called EAI-GVA suggests that economic growth picked up from 5.2% YoY in January 2020 to 6.5% YoY in February 2020 – the highest in the past seven months.

The domino effect caused by the coronavirus lockdown is shown in the report which reckons that only 30 – 40 percent of the economy is currently operational and that India’s real GDP growth could decline 2 – 3 percent in the fourth quarter of FY20 and another 10 percent year-on-year in the first quarter of FY21.

The report says that a single day of lockdown could shave off as much as 14 – 19 basis points from annual growth. This implies that with seven days of complete lockdown and eight days of partial lockdown, the real GDP could decline 3 percent year-on-year in the fourth quarter of FY 2020 as against the initial estimate of 4.7 percent.

“This will be the first- ever quarter of de-growth since the quarterly data became available since late- 1990s, and with two consecutive quarters of GDP decline, the Indian economy could see its first technical recession since 1990s,” the report said.

This lower productivity growth would be largely driven by ‘casual workers,’ who receive wages as per the daily terms or periodic work contracts, according to the report. However, it said, If the economy, remains affected for a longer period, the ‘self-employed’ people (52 percent of all employment), who operate their own enterprises, and the ‘regular wage / salaried workers’ (23 percent), would also be seriously affected.

The Goldman Sachs group too has said that India’s economy will likely contract in the first two quarters of 2020, reported ET. The virus pandemic has brought “an unprecedented sudden stop” to activity in India, where consumption makes up 60 per cent of the economy, the economists said.

Speaking to ET, Principal Economist at ICRA, Aditi Nayar said that due to the 21-day lockdown, there has been a production shutdown in many sectors and there has been a growing fear of job losses, especially of contractual staff and a substantial loss of income for daily wagers which will be difficult to make up for even after the lockdown is over.

The National Herald reported that 1.5 lakh employees in India’s IT industry might lose their jobs over the next three-to-six months. The industry employs about 45-50 lakh, of which and smaller firms account for about 10-12 lakh.

ITeS BPO firm Fareportal which caters to the travel industry and has laid off more than 300 employees and issued pay cuts to top bosses, says that business in the wake of the lockdown went down by 85 percent and that most of all the unclear situation about the development and tackling of the coronavirus is leading to these decisions.

Experts say it will take longer for recruitment to resume and no clarity on how long it will take for companies to recover.

Hope in sight

Though talks of a global recession are making the rounds, experts say that India may be better placed at bucking the trend. The International Monetary Fund (IMF) has said that it expects a recovery in 2021 provided that countries succeed in containing the coronavirus and preventing bankruptcies and layoffs.

India’s investment system has been abuzz with fundraising. Startup companies have raised more than 700 million in capital. The Indian Express reported that Flipkart founder Sachin Bansal invested nearly Rs. 3,000 crore in his financial services firm – Navi Technologies. Reliance Industries Limited acquired a Rs. 100 crore stake in education platform Embibe. Online food platforms Swiggy and Zomato too received fresh funding, with Swiggy raising $43 million and Zomato receiving $5 million. Beauty and personal care retailer, Nykaa, too saw a fund infusion of $13 million.

The pandemic has turned investors to start-ups working in the med-tech, ed-tech and fintech space. Bengaluru-based bio-tech start-up Med Genome raised $55 million (Rs 419 crore) from global investor LeapFrog in the latest round, which the company says it will utilise in consolidating research on drug disxovery as well as clinical genome testing across tier-1 and -2 cities.

The United Nations Conference on Trade and Development (UNCTAD) too has said India is one of the two countries, after China, to be least exposed to the recession.

Related:

Non-profits extend helping hand to poor people during Covid-19 lockdown
Essential commodity and fuel prices fluctuate amid Covid-19 lockdown
30 per cent pay-cut for all Members of Parliament for a year

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