After Demonetisation Took Away 1.5 Million Jobs, 73% Manufacturers Say No Hires for 3 Months

India’s employed force grew from 401 million in April 2016 to 406.5 million in December 2016, it fell to 405 million between January and April this year.

Manufacturing sector

Slow hiring in the manufacturing sector could put more pressure on the market. Credit: Reuters

India Inc remains averse to hiring in the near term as doubts over the revival of the manufacturing sector continues to loom large, a recent survey conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI) has said.

Released on Monday, the quarterly survey on manufacturing showed that a staggering 73% of respondents said they are unlikely to hire additional workforce over the next three months. This was mildly lower than the 77% of respondents showing a similar concern earlier.

Slow hiring may put more pressure on the market even as job losses continue to be a major concern in the post-demonetisation era. According to another recent study, the government’s demonetisation exercise is estimated to have wiped away around 1.5 million jobs.

Earlier in the month, the new survey data put out by the Centre for Monitoring Indian Economy (CMIE) showed that while the country’s employed force grew from 401 million in April 2016 to 406.5 million in December 2016, it fell to 405 million in the four-month survey period of January through April, this year.

The FICCI survey comes at a time when less than half of all respondents expect production to go up in the next three months. Only 49% of respondents remained optimistic of production rising. In a previous survey conducted during the January-March quarter of FY17, around 48% respondents aired similar concerns.

India manufacturing

FICCI’s latest quarterly survey assessed the expectations of manufacturers for the first quarter of FY18. Views were taken for eleven major sectors including auto, capital goods, cement and ceramics, chemicals, and electronics and electricals, among others.

It had responses from over 300 companies, with a combined annual turnover of Rs 3.5 lakh crore, from a wide array of sectors.

Production expectations may be low on account of the stagnating order books. About 47% of respondents in the latest survey reported higher order numbers, which is almost the same as recorded in the previous quarter.

Incidences of rising cost of production have grown sharply as 69% of firms noted it was a reason to worry in the latest survey. The corresponding figures for the previous survey stood at 60%. This is primarily due to rise in minimum wages and raw material cost.

Firms reporting negative growth have come down to 17%, from 27% in the previous survey.

However, average capacity utilisation remains unchanged at 75% for manufacturing units. Idle capacity has hit future investment outlooks that had already been weak.
About 74% of respondents, as against the earlier figure of 75%, reported that they don’t have any plans for capacity additions for the next six months.

“High percentage implies slack in private sector investments in manufacturing, which is likely to continue for a few more months. Large volumes of imports, under-utilised capacities and lower domestic demand from industrial sectors and OEMs are some of the major constraints that are affecting the expansion plans of the respondents,” the survey noted.

Views on export outlook witnessed a marginal improvement as the percentage of respondents expecting a fall in exports during the first quarter of FY18 came down to 18.5%, from 22.8% in Q4 in the previous financial year.

By arrangement with Business Standard.

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  • Anjan Basu

    In this season of a gathering gloom, isn’t it extraordinary that the stock markets seem to be booming all the time? Can somebody please shine a light on the gigantic scam that is India’s capital market?

  • Anjan Basu

    Maybe you are right. Thanks for the explanation any way! But, to laymen like me it does seem odd that while the economy is floundering, manufacturing is slowing down and markets are shrinking ( because jobs, rather than being created, are being lost), the capital markets, which index economic activity, should manage to stay in a state of almost perennial buoyancy. For, liquidity without growth to my mind signals rising inflation, but day in and day out, we are told that inflation in India has been dipping steadily, almost precipitously.

  • Anjan Basu

    Like you, I have also long suspected that the official inflation numbers are often the product of adroit statistical jugglery, if not of plain fraud. Like you, again, I also believe that the current dispensation is fast losing the plot on every front. Of course, common people should be able to easily see through the fake narratives being thrust upon us all, day in and day out. But do we have enough reason to believe yet that the tide has turned? I hope it has, but am not so sure quite yet. The common man needs a voice, needs it desperately, but while the powers that be will go to any length to deny that voice any legitimacy, those whose duty it is to help that voice find a genuine outlet are either totally compromised themselves or are busy shooting themselves in the feet. One cannot help thinking of the parallels in our country’s current situation with Germany in the early 1930s.

  • Anjan Basu

    Yes, we must wait, we can only wait for now. For now, ‘the faith and the love and the hope is all in the waiting’, as one of 20th century’s great poets wrote once. We will wait, and keep hoping as we wait.