No expansion, no consolidation
The general slowdown in the Indian economy will, unsurprisingly, take a toll on retail as people spend less and save more in anticipation of a protracted slow growth. Major organised retail chains like Pantaloons, Shoppers Stop and Lifestyle are dealing with high debt and lower revenues by rationalising manpower. Even McDonald’s is not immune. The fast food giant has cut its regular and breakfast menu prices by 6- 10 per cent in north and east India starting August 1. The growth in sales at comparable outlets has
dropped to high single digits in AprilJune from double- digit growth last year in 2011- 12. “Most of the organisations are focused on reducing costs and protecting their markets than on hiring or expanding,” says Vikram Bakshi, managing director, McDonald’s India.
The organised sector is expected to grow by 25- 30 per cent in 2012- 13, only marginally lower than in 2011- 12. Unorganised retail will grow by only 56 per cent this fiscal year. “The retail sector is definitely more cautious than it was two years ago. There is lack of expansion and consolidation,” says Rachna Nath of consulting firm PricewaterhouseCoopers.
The situation could have been different had the Government managed to push through FDI in retail. The arrival of foreign retail chains like Walmart, Tesco and Carrefour and the setting up of supermarkets would have generated thousands of white collar sales jobs. However, it botched its attempt to introduce the measure in November 2011 when a key ally, Mamata Banerjee of the Trinamool Congress, objected to the proposal. Later, another key ally, Samajwadi Party chief Mulayam Singh Yadav, also expressed reservations. It seems unlikely that FDI in retail will be introduced in the tenure of this Government. Thousands of potential white collar jobs which would have been generated are now lost. It
has taken almost a year for India Inc to let its pessimism translate into fewer jobs. But with prospects bleak for the remainder of UPA term in office, reality has taken a firm hold. According to Naukri. com’s latest bi- yearly outlook survey on hiring, fewer recruiters expect new jobs to be created this year while more foresee a possibility of job cuts. More than half expect replacement hiring to be the trend while 5 per cent recruiters are expecting lay- offs.
“The economy is slowing down and that will have an impact on hiring. Companies are being extremely cautious in hiring. Most vulnerable are insurance and telecom, especially because of their regulatory issues. Sentiment on hiring is definitely poor,” says Sanjeev Bikhchandani, the founder of Naukri. com.
That downbeat sentiment is likely to last for the rest of the financial year, until March 2013, given that the probability of an impressive recovery either in the global economy or in the Indian economy is very small. The children of liberalisation, born in 1991, and set to enter the job market in 2012, will bear the brunt of an economic miracle that has just got a reality check. It may be a while before the job market boom returns.