Friday 05 June 2020

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Post-lockdown, is your job secure? (By Ashwin Tombat)

 

During the lockdown, Indian companies have outright sacked people, asked employees to go on indefinite leave without pay (furlough), or slashed salaries by 10 to 85 per cent. India has never been in such a difficult situation



Up to 70,000 tourism-related jobs could be lost in Goa as a result of the coronavirus pandemic

There’s no sugar-coating this: at least 10 crore Indian jobs are at risk after the Covid-19 lockdown. The Confederation of Indian Industry (CII), a leading industry association, says that out of 200 industry CEOs it interviewed, one-third expected job losses of 15 to 30 per cent. Another 47 per cent felt it might be slightly less than 15 per cent.

Companies have outright sacked people, asked employees to go on indefinite leave without pay (furlough), or slashed salaries by 10 to 85 per cent. India has never been in such a difficult situation.

Food delivery company Zomato has announced that it will cut 13 per cent of its workforce, and implement a temporary pay cut of up to 50 per cent for the rest of its staff. The reason? Zomato CEO Deepinder Goyal says that he expects the number of restaurants in India to shrink by 25 to 40 per cent over the next six to 12 months: “We need to make sure that we preserve as much cash as possible to weather the storm.” The company will pay its sacked employees half salary for six months or until they find a job, whichever is earlier. But few other employers will have the resources to be so kind. Its rival Swiggy cut about 1,000 jobs in its private kitchens business in April, as food delivery orders continued to remain low. The pain of unemployment will be severe over the next six months, perhaps even longer.

One of the severest downturns caused by the lockdown is for the travel and tourism sector in India, says international audit, consulting and financial advisory firm Deloitte. The tourism and hospitality sector contributes nearly 10 per cent of India’s Gross Domestic Product (GDP).  

International consulting firm KPMG, in a report released on 1 April, estimates potential job losses in the Indian tourism and hospitality industry at around 3.8 crore. This is a staggering 70 per cent of India’s estimated total tourism industry workforce.

Why are we talking only about the tourism and hospitality industry?

That’s because even while the tourism industry may not be the biggest contributor to Goa’s GDP, over 40 per cent of the state’s population is directly or indirectly dependent on tourism for their livelihoods. Up to 70,000 tourism-related jobs could be lost in Goa as a result of the coronavirus pandemic, depending on how long the crisis continues.

The problem is, no one knows how soon there will be a recovery. Economists are debating whether it will be a quick, bounce-back, V-shaped recovery; a slow U-shaped process with a year or more of recession; or a disastrous, Great Depression-type, L-shaped one, with the economy languishing in recession for many years, with long-term, large-scale unemployment.

The answer does not depend on local conditions alone. The 21st century world economy is a very well-integrated one. No one country can independently flourish if most others sink.

But here, India has some distinct advantages.

We are much less dependent on exports as compared to China and Japan. Plus, India has a huge domestic demand. Lastly, economic crises in countries like India tend to boost labour productivity.

Experts may think there is no hope for travel and hospitality. But tens of thousands of people are stranded around the country and the world. Many of them may wish to visit their families. Others may want to holiday immediately after the lockdown ends; as if they have just been freed from prison. This could prevent an all-out disaster in the tourism and hospitality sector.

Still, there is little indication that while the pandemic continues to threaten, whether this state will be prepared to throw open its doors to tourists from India and the world.

Will Prime Minister Narendra Modi’s Rs20 lakh crore Atma-Nirbhar Bharat Abhiyan package pull India’s economy up by its socks, as it were?

The numbers do sound impressive. It’s close to 10 per cent of India’s GDP. Or is it?

The problem is, impressive as it may sound, PM Modi’s package actually requires the government to spend only a small proportion of the amount announced. As much as Rs8 lakh crore or 40 per cent of it is additional liquidity that was already injected into the banking system by the Reserve Bank of India (RBI) in February, March and April.

Fortunately, one major change is that the government has announced that it will guarantee all working capital loans given to micro, medium and small industries. Hopefully, this will encourage our risk-averse banks to actually lend this money, instead of parking it with the RBI.

The package also includes the Rs1.7 lakh crore fiscal package previously announced by Finance Minister Nirmala Sitharaman on 27 March. Even this package contained various existing schemes; its actual additional outlay was estimated at just Rs80,000 crore by experts. 

In the final analysis, the real financial outgo on PM Modi’s package may not be more than Rs4.2 lakh crore during this year. How do we know this? Here’s why. All stimulus packages are based on public borrowings. On 9 May, the central government revised its estimated market borrowings to Rs12 lakh crore from the Rs7.8 lakh crore it had announced in Budget 2020-21.

If you were wondering why the stock market fell as soon as FM Sitharaman gave the details of the stimulus package, you now have your answer. The Atma-Nirbhar Bharat Abhiyan package is mostly based on giving loans and on creative accounting.

That simply is not enough. As Bajaj Auto MD Rajiv Bajaj pointed out, Western governments have reimbursed employers up to 85 per cent of their employee costs during lockdown. He feels putting money directly in the hands of those who have lost their jobs is the need of the hour: “Unfortunately,” he says, “we are not seeing this here in India.”

His sentiment is echoed by many other industrialists. The Chairman of IT giant Wipro Azim Premji has said that emergency cash relief of Rs7,000 a month should be provided for at least three months (without biometric authentication) to each poor household or migrant worker. TVS Motor Chairman and Managing Director (CMD) Venu Srinivasan has sought at least Rs5000 per month per family as cash dole for the poor for the next three months.

Sadly, the so-called stimulus package has little or nothing to offer to India’s suffering migrant labourers.

Clever alliterative slogans like “land, law, labour, liquidity”, or catchy rhymes about becoming “vocal about local”, need to be backed by concrete strategies and hard cash. Otherwise, it all goes the same way as “Achche Din”, which India is still waiting to see.

Nevertheless, I still have my fingers crossed…




Blogger's Profile

 

Ashwin Tombat

Ashwin Tombat has been the Editor of Gomantak Times and Herald. Worked as an Associate Editor of national magazine Gentleman in Mumbai, before shifting to Goa. Loves sailing, also participates in Marathons. Has worked as an activist in students's union and trade unions in Maharashtra. Also an artist of Street Theatre during student days.

 

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