Downsizing - Its impact on India

The post slow down effect, that came after the subprime crisis and going down of the big ticket finance companies like Lehman, Fannie Mae and Freddie Mac had a huge ripple effect all around the globe. This global meltdown is now being considered as the biggest meltdown after “The Great Depression” that began in 1929. This is certainly the gravest and biggest one as it directly impacted many more economies and people (directly and indirectly) than any economic crisis ever did in the human history.

The direct impact of this crisis is felt not only by the developed economies like US and European Union but it also shook the fast developing giant economies like China, India and Brazil. The companies which were up-beat and were willing to take high risks are now into damage control mode with cost cutting and lay-offs. All around the globe companies are cutting jobs in a hurry. Citi group leading the pack with job cut in excess of 50,000. British Telecom cutting 10,000 jobs. Peugoet is axing 3,550 jobs. Russian firms will lay off around 200,000 workers from their companies.

Developing economies like China and India are also facing direct impact in their growing patterns due to this crisis. With the international demand hitting an all time low the exports from these countries are facing a sort of chin music. China which had been a strong export oriented economy has been impacted hugely due to this with reports of about 300,000 workers working in different parts of China had already returned to their native places by November mid.

This crisis had also touched India with its GDP growth forecast coming down to 6-7 % after clocking 9% for three successive years. Though there had not been a huge direct impact on India thanks to the huge consumer market India has and tight banking policies of India. India Inc is still watchful and is applying to wait and watch policy on how this crisis will pan out along with reducing the costs in the more traditional way. A few of the cost reducing methods that India Inc is undertaking are companies are now trying to lease out most of the assets instead of owning them, they are reducing the expenses by using resources more efficiently.

Though Indian companies are banking on cost cutting they are still reluctant to downsize its workforce. While IT Majors like Satyam are reviewing their hiring process, many companies have deferred their hiring plans to end of this fiscal. Most of these outsourcing companies are waiting for the dust to settle down and are aiming at major outsourcing contracts from west that are put on shelves after the turmoil. As a lot of people can foresee big outsourcing projects coming the India way to reduce costs as India is one of the major IT cost centre for the world with cheap work force available. Even in some other sectors also, HR Managers are willing to wait for some time before they go for hiring again.

But even in the tough times like these there are sectors like Auto, Insurance and Banking that reviled their desires of hiring in big numbers with Toyota and Maruti being the forerunners on the hiring front in the slowing Auto Sector showing the amount of confidence these companies have in strong fundamentals of India. But this is not the only case with Metlife banking big on India by promising to add about 32,000 jobs in India in current fiscal. Following it closely are PSE’s (public sector enterprise) and banks like SBI (promising to create 25,000 jobs) and IDBI bank. Most of these companies are looking to explore the Indian market for higher revenue in times of international slowdown.

So for India even in these tough times all is not lost. India being a strong consumption driven economy and RBI pumping more money into the system through rate cuts, the credit crisis being faced by the companies would also get subsided. So we can hope that within about next half year or so, India will emerge out successfully of this crisis with just few job cuts. By the time world is over this crisis India will be hopefully be a much bigger and stronger economic power than ever before.

(Data for this article was taken from various articles from http://economictimes.indiatimes.com and http://www.in.com)

(Written on 29th Nov 2008)