In the Line of Fire
Pink slips are no more a western phenomenon; India Inc too is succumbing to the economic turmoil. Having information before hand just might prepare you to sail through…
There is little doubt that 2009 brings with it tough, and unprecedented economic slowdown all over the world. Every economic pundit, investment guru and finance minister will agree that recession is a reality and the world economy has taken a rough beating. What started as housing bubble burst or subprime mortgage crisis in the United States has now affected the rest of the world. Till January 2008, India Inc was perceived to be isolated from the economic downturn in western countries, markets were at an all time high, key statistics were showing healthy growth and the economy was in sound condition.
Reality dawned by end of January 2008; stocks markets dived. Still, it was not a reason to worry, at least that is what FM P Chidambaram said. The economic fundamentals are strong, he reiterated time and again. But stock markets continued their free fall.
Second tsunami hit the capital markets when Lehman Brothers filed for bankruptcy. AIG, DSP followed suit. Everybody realised the gravity of situation but jobs in India were considered to be safe. Jet Airways gave everyone a rather not so pleasant wake-up call when it decided to lay off 1900 of its employees. It's an entirely different matter what followed (reinstating the sacked employees etc). MNCs like Citibank, HP, Amex have already gone ahead with retrenchment, whereas Indian firms are trying to find a better way to do it. In November 2008, Dunlop India, one of the leading tyre manufacturer announced the shut down of its Shahagunj plant. 1200 people were asked to go on a paid leave – with 50-60 percent salary cuts. Financial service providers, such as Motilal Oswal, Anand Rathi and Indiabulls have cut down salaries of their employees by 10-30 percent. On the other hand, realty major DLF has already announced staff reduction of 10-15 percent.
Who is next?
In the line of fire is the real estate industry. Before the economic slowdown, real estate market in India was overheated, urging companies to borrow more and invest in various projects. Malls, residential projects were coming up around every nook and corner. MNCs, FIIs invested heavily in real estate firms, Lehman Brothers was also one of them. Cracks started appearing when foreign companies started withdrawing investments. Banks and financial institutions became wary of extending loans to realty companies and retail buyers, which aggravated the problems further. The result is that realty firms are barely, if at all, making any sales; they are heavily under debt and many of ongoing projects are stalled. Stocks of realty firms like DLF, Unitech, Omaxe suffered heavily, trading 80-90 percent lower (November 2008) from their highest levels in January 2008.
Such a situation makes this industry vulnerable to job cuts. People from non-technical background, such as marketing managers, sales officers, etc and even from core activities like civil engineers, architects may lose their jobs in absence of any new projects taking off or suspension on suspension of ongoing projects.
Another sector which has indirectly burdened the fall-out of real estate sector is the Retail Industry. Hysteria of sorts gripped the nation with so called retail revolution. Everyone tried to ride the wave, in turn shooting up the real estate prices. Large firms rented or bought the properties at exorbitantly high prices. Retailers were gung ho about the footfalls malls got. But very few were concerned about how many of those footfalls actually translated into sales. Soon it became apparent that a mere 15-20 percent of the people who visit malls or retail outlets make purchase. Furthermore, customers have cut down on retail therapy. Grand expansion plans of retail outlets by major player have been stalled. Owing to high rentals of commercial properties, loss making store are being closed. This will affect a large number of people who are employed in this sector, right from store attendants to store managers.
Banking, Financial Services and Insurance (BFSI)
With the job cuts, investments from retail customers are bound to come down. This again is going to affect one of the fastest growing sectors, BFSI. Retail investors who used to pour money into capital markets via MFs, insurance or equity are pulling out. With less business coming in, organisations operating in such areas will have to cut down on costs by closing down offices, in turn laying off employees. By announcing a job cut of 15 percent (52,000) of its workforce globally, Citigroup has already strengthened this notion. Based on a survey, HR firm Ma Foi has predicted job losses around 30 percent in this sector.
Auto, travel and tourism
The growth in auto industry can be attributed to easy availability of finance options from financial institutions and banks. Today, the same sets of institutions are lending in a conservative manner; auto sales are definitely affected. This will also affect the auto ancillary business, which again is directly dependent on growth in auto industry.
Travel and tourism is beginning to be hit as well. Companies have started advising their executives to cut down on business travel, which is not a good sign for this industry. Airlines have reduced flight frequencies; Kingfisher showed door to over 20 ex-pat pilots and cancelled lease agreements of many aircraft. State run Air India will be giving its employees an option to take a three year leave without pay.
In wake of all this, industries like advertising, publishing will be affected as well. Apart from cutting down costs by reducing employees, companies also cut down the ad spend. Fortunately, a major chunk of revenue for the advertising world comes from the FMCG companies; these will be affected less comparatively. As far as publications are concerned, with corporates spending less on advertising, the primary revenue stream is bound to dry-up and lead to closures. Internationally, Conde Nast owned Mademoiselle has been closed down. Time Warner Inc. is also planning to educe its portfolio by January 2009. How this is going to affect Indian publications is yet to be seen.
Is the whole amounting to a naught?
So is every sector in India facing job cuts? Not really. Pharmaceutical companies are insulated from any sort of slowdown. Tax and auditing is another such vertical. Same goes for education, healthcare sectors which should remain isolated from the turmoil. As far as consulting industry is concerned, it is very subjective. Consulting industry strives on its underlying industry. So if that particular sector gets affected, consulting firms are also going to be affected. However, if companies are trying to cut down costs, management consultants, who specialise in such areas, are in for a good time.
What about IT?
Instead of saying that the IT industry is in the middle of recession, it would be safe to say that the Indian IT industry is correcting itself. Of course companies are cutting down jobs, but at the same time, equal number of people are being hired. Infosys, TCS will be hiring close to 50,000 people by early next year. But fat pay packages are being trimmed down and perks are being cut. Recession in a sense has been boon for the BPO sector as well. Attrition rates in BPOs were as high as 35-40 percent; these have come down considerably to 15-20 percent. Salaries have gone down to the 2005 levels. But according to Preeti Shenoy, Regional Sales Director Asia, Mphasis, "25, 000 to 30, 000 job cuts in IT sector India is nothing. Those people will be absorbed easily somewhere else." Darshana Ogale, Vice President, Capgemini Consulting India Private Limited seconds it by saying, "Due to the sub-prime issues in the US, IT industry in India now facing a temporary slowdown. The industry will continue to grow, but there are going to be tremendous cost pressures."
So how will it affect professionals across industries? For entry level candidates, especially from B-Schools, jobs from the financial sector are expected to slow down. Same will be the case with jobs from realty and retail sector. However, other industries which never got a fair chance to attract talent have an opportunity to hire. FMCG and related sectors are expected to be the front line recruiters this year and in all probability will be doing so in 2009 as well. Consulting firms are also expected to hire, but in a measured manner. Accenture India will be adding 10,000 people in its workforce by 2010, whereas Deloitte Touche Tohmatsu will hire 3500 by 2011.
Experienced job seekers need to be extra cautious in such a scenario. In absence of any firm and clear cut laws, companies are retrenching employees even without a day's notice. Sticking to your current job would be the best bet. Volunteering for work outside your designated purview will definitely help you earn those extra brownie points. And despite everything if you still lose your job, it might be an opportunity to change your career track, do some freelancing work or even start your own venture, conditionally you have saved enough or you find a suitable financer.