Manufacturing firms may cut 40% staff in 2017 COST CUTTING

Cost-cutting exercise had led to 30% job losses in 2016, says survey

Major manufacturing firms axed about 30 per cent of their staff in 2016 and retrenchment levels are expected to reach 40 per cent in 2017, said a survey.

Entry-level jobs face the most risk as companies continue to drastically cut costs and try to claw their way out of the current sinkhole of low growth, according to TeamLease Services, the largest human resource services company in the country. The survey was an internal assessment of more than 2,500 of the Fortune 500 company’s corporate clients.

The latest government data had shown economic growth hitting a three-year low in the first quarter of 201718. At 5.7 per cent, the growth was the lowest since the Narendra Modi government took charge. Demonetisation and massive de-stocking before the launch of the goods and services tax (GST) took a toll on the manufacturing sector, which grew just 1.2 per cent in the first quarter of 2017-18 against 5.3 per cent in the fourth quarter of 201617 and over 10 per cent a year ago.

Till 2015, the manufacturing sector had seen the highest share of new hiring at 75-80 per cent, which came down to 50-60 per cent in 2016, Munira Loliwala, the business head of the engineering, manufacturing and pharmaceutical division at TeamLease Services, told Business Standard.

Increasing automation continued to contribute to the shrinking of job opportunities, she said, but the sector was hit by low demand and a rise in costs.

On top of this, the slow pace of private sector investments over the past two years had hit critical levels when the demonetisation exercise was started in November. As a result, she added, more than 60 per cent of TeamLease’s clients operating in the manufacturing sector saw losses last year as outputs fell.

TeamLease provides employment services to major corporates such as Dabur, ITC, Pfizer and Bayer, among others.

The unorganised segment has been increasing competition pressure. “While the number of small manufacturing units in the unorganised segment saw a rise of

30%:

Staff axed by major manufacturing firms in 2016

Expected retrenchment levels in 2017

Share of new hiring by manufacturing sector till 2015

40%: 75-80%: 50-60%:

Share of new hiring in the sector in 2016

5.7%:

Economic growth in Q1FY18

1.2%:

Manufacturing sector growth in Q1FY18 against 5.3% in Q4FY17 more than 45 per cent last year, the rise in jobs has not been commensurate with that,” a senior official of the ministry of micro, small and medium enterprises said.

A result of this has been underutilisation of capacity, which the government hopes to address by bringing out a comprehensive manufacturing policy soon. Commerce and Industry Minister Suresh Prabhu has said this empty capacity would be reduced by focusing on exports.

Manufacturing activity, calculated as part of the Purchasing Managers’ Index (PMI), showed an increase in August to 51.2 points from 47.9 points in July. To cope with high workload, manufacturers hired extra staff at the fastest pace since March 2013, the survey showed. Nevertheless, worries about the possibility of unexpected policy decisions weighed on the confidence of those surveyed for the PMI and the level of sentiment fell from July’s 11-month high.