ED The slowdown in Indian economy building up for the last 18 plus months is unprecedented. While the signs have been cyclical in nature as indicated by reduced investment by corporates, low savings growth, slow rate of inflation because of weakening demand etc, the auto sector being the most affected with ripple effects on other sectors in the area of job losses particularly; it's more than that meets the eye.
Having said that the Indian economy is relatively in a better shape than the rest of the world, as the domestic consumption story is still intact. So far there is no widespread panic so far being witnessed. It just needs appropriate injections at the right time to push consumer spending up and supply steadiness to tide over the slowdown.
Is it restricted to India only because of localised circumstances or have reached to global level?
However, it depends on the exposure of India to these factors to the extent of trade relations and country dependence. So far, India seems to be doing fine as the foreign reserves are in good shape, the govt is sending positive feelers by relaxing FDI norms and policy around the ease of doing business.
ED Economic downturn is an outcome of slowdown in demand for goods and services. Investments aren't forthcoming as consumption slows down, which in turn affects the revenues, and job creation, which in turn affects the income levels, leading to reduced consumption. It's a vicious cycle.
Monetary and Fiscal policies : Monetary policy was focused on inflation control and impacted the interest rates. Firmed up crude oil prices have put inflation pressures.
How do you specify the relationship between economic downturn and job losses and how HR should address the challenge of job losses and maintain existing employees' morale?
In this context, HR has a challenge in retaining and keeping people motivated. HR needs to anticipate and understand the inflection points in the business and environment to take appropriate steps to maximise and optimise the utilisation of people by rotating, re-skilling and re-allocating.
In the words of the HR guru, Prof. Wayne Brockbank, the world would see high velocity disruptions in the following areas :
- Information proliferation and technological innovation.
- Shortened product lifecycles.
- Global competition for labour, capital, information, ideology.
Leaders must build institutions with the capabilities to respond to and pre-empt the above environmental dynamics and create pockets of opportunities. Many will be short lived; some may be longer.
How HR should prepare well in advance for such massive job casualties?
ED Let me share an example. About two decades ago when we all faced a similar situation, I was in an automobile company at that time and we were working towards our annual production plan. We had to hire some more people on the shop floor and as usual the production head had put pressure on us to get the people quickly. My young HR manager came to me and asked me "did you notice that there are many automobiles in the stockyard? Do you think that we really need to hire more people?"
In retrospect, HR has to equip itself with business acumen and skills to understand the business cycles and business environment and make some scenario planning for emerging trends. Secondly, HR needs to constantly, at regular intervals, check the skill level of the employees to see the capabilities needed for the future and accordingly retrain and re-skill the employees so that they meet the business needs.
ED Consider a family, if either a child or a parent is injured or there is a bereavement, who suffers - the family suffers. So it is in an organisation both the employer and employee suffer.
The levels of suffering are different for different stakeholders. For example, an employer who has made capital investment would be paying interest costs far greater than an employee cost in a negative cash flow situation or face liabilities.
Let us now go further to the value chain, your suppliers and their employees also suffer. However, since this is just not in our radar because we don't see them. Furthermore, an often unknown form of suffering is the suffering of being idle and unemployed. Normally this is also not perceived because everyone suffers in isolation and maybe silence. So you see when there are bad times, many suffer. I think in good times we need to exercise prudence and live within our means.
ED While no industry is recession proof, cyclical industries like the auto, cement and steel industries etc are more susceptible. Low value add and routine services that are easily replicable and transferable which have no entry barriers are also susceptible.
However sectors which are into Food, Healthcare and Clothing would not be impacted easily as it is linked to direct human consumption. As we know human consumption has been increasing with population growth.
ED Labour reforms, definitely, play an active role in enhancing and generating job opportunities. For example, the labour force participation rate has come down over the previous years, resulting in more people looking for jobs. Youth unemployment is also high. Interestingly with life expectancy going up there are more people who are still working till ages of 65+. This is choking up the job opportunities for the youth and requires major structural or policy reforms.