Spate of Layoffs Clouds PM Modi’s ‘Make in India’ Push
NEW DELHI: When Prime Minister Narendra Modi launched his ambitious “Make in India” campaign last month, there were hopes that a large number of jobs would be created over the next few months leading to rise in income levels and adding to domestic growth. Rapid creation of jobs is important to ensure employment for over 10 million Indians, who join the workforce every year.
However, events over the last few days have dampened the sentiments in the jobs market. On Tuesday, Yahoo Inc confirmed that it was downsizing its Bangalore office, which employs roughly 2,000 employees and is Yahoo’s largest engineering facility outside California.
The same day, global handset maker Nokia said it would suspend production at its troubled Chennai facility from November 1. The Chennai factory, which employed about 6,600 full-time workers in April, has been caught in a tax dispute with the government. Former Infosys chief financial officer and board member TV Mohandas Pai tweeted, “Nokia to Shut Down Chennai Factory From November 1. Where does make in India go? Sad.”
On Monday, global tech major Hewlett-Packard decided to eliminate another 5,000 jobs as part of its turnaround plan. HP, which is splitting into two listed companies, had earlier announced a restructuring plan that involved cutting the total employee count by 50,000.
It is not known how many Indian employees will be axed as part of HP’s global cost-cutting strategy, but shares in Mphasis, an Indian company in which HP has 60 per cent stake have seen a sharp selloff over the last few days.
Mphasis shares lost 3 per cent in a flat market today. The stock is on course for its seventh straight decline. Over the last one month, Mphasis shares are down 12 per cent as compared to a small gain in IT sub-index on the BSE.
Last month, India’s third largest outsourcer Wipro said it plans to slim its workflow down by about a third through deploying automation. According to Angel Broking, Wipro is looking at being around 1 lakh-strong workforce in three years from 1.46 lakh as on FY2014.
The development at Wipro confirms the broad trend across India’s over $100 billion IT industry, which is moving towards greater automation and non-linear models (revenue growth delinked from hiring). Hiring in the IT sector is already under pressure because more and more companies are resorting to “just-in-time hiring” because of abundant labour and predictable demand. Wages (at entry level) have not risen for years. )
These developments have huge ramifications for India’s services sector, which employs around 27 per cent of workforce.