Article (October-2019)


Slowdown affects everything including people livelihood

Mritunjay Nath Sahu

Designation : -   Director Human Resources PT India

Organization : -  Federal-Mogul Goetze (India) Limited (A Tenneco Group Company), Gurgaon


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How do you see the current economic slowdown on a larger scale?

MN In a developing nation like India we have a target to reach the economy of 5 trillion USD in the next five years. To achieve this target, it requires year on year GDP growth from 8 to 10%. Whereas, we are at the growth level of 5% which is almost half of the year on year GDP growth target YOY. Slowdown in economic growth has resulted in job losses especially in the unorganized sector. The small-scale industries and small labour supply contractors have been wiped off their business and the urban labour has gone back to agricultural labour. This is a tragedy as the buying capacity for the 70% of the population has been reduced drastically which further has created a negative sentiment in the minds of the people. The FDI is also going to be adversely affected and impact the infrastructure plan which is the base for developing country like us. The projects like "Sagar Mala", "Bullet Train" and other mega infrastructure projects will not take off in time. This is a mismatch with the other industrial and services plans and hampers the extension plans of the industries.

When it comes to the automobile sector, almost 286 Auto Dealers have already closed their business across the country. The retrenchment and layoff are on in every nature of industry. The consumer goods like biscuits and other similar items have reportedly been laid off more than 10,000 people. Overall economic situation is in doldrums and there has been a negative growth in each sector.

Is it restricted to India only because of localized circumstances or has reached to global level?

MN India being a developing country the downturn of business has stepped into recession mode. The GDP decline has impacted the industry at large and has also created a sense of insecurity in the minds of the people. The impact in developed nations like US and Europe is not significant. However, the industries which are engaged in exports have also seen a downtrend compared to last year.

What is the factors which have triggered turn down?

MN The trigger point was NBFC (Non-Banking Financial Crisis) coupled with demonetization and implementation of GST without clarity. The industries did not cope up with these two events which appeared simultaneously and ultimately resulted into negative business sentiments. The Real estate Sector has been heavily impacted with highest ever inventories, making adverse influence on iron, cement and other construction related industries and the unorganized labor became jobless. The paying/buying capacity started deteriorating inch by inch which also affected the consumer industries.

Government announcement of electric vehicles without any plan marginalized the demand of gasoline and diesel Euro IV vehicles in all segments. The registration and insurance fee hike added fuel to the fire. No remarkable result has been witnessed in 'Make-in India' movement and startups.

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?

MN Economy affects everything. Human Resources department is the back bone of the company and has a very important role especially during the economic turn down resulting in job losses and de-motivation of the employees.

HR department should maintain a right balance of permanent/temporary employees maintaining 30% as temp employees giving opportunity to flex during such situations. HR Department must communicate to the employees about the real situation seeking their support and not to scare them. They should come out from their office and shoulder with shop floor in reorganizing the production shifts, working days, and block closures to save cost. At no point of time the environment of distrust, blame-game or confrontation should be created. It should be taken as opportunity to make job enrichment by adding responsibilities and reduce headcount.

Who does you thinks suffers the most during recession - employee or the employer?

MN It is the employer who suffers the most as he has to take unpleasant decisions such as Lay Off/Retrenchment/Reduction in head count which creates sense of insecurity in the minds of employees. This situation also results in talent loss. Such decisions taken by the organizations finally reflect on the employees, who suffer subsequently.

On the other hand there is revenue loss due to low order book which impacts the profitability of the organization & companies are forced to take measures in cost cuttings, delay payments of vendors and sometimes the statutory payments are also deferred. Furthermore, it may affect the brand image of the company and its credibility to future employees.

Companies may have to lose their customers due to volatile market condition which can worsen the situation beyond repair.

How HR should prepare well in advance for such massive job casualties?

MN The HR Department has to come close to business and prepare a strategy looking into the current business situation. HR is expected to monitor the growth/downturn trend of revenue and EBITDA targets and plan for the headcount and their cost to meet these targets. The complete operations should be divided into phased manufacturing system with required skills, ascertaining requirement of various categories of employees as permanent, temporary, casual and contractual. The HR department should also work parallel in preparing contingency plan, incase such targets are not met. The department should also be vigilant about the labour cost movement trend with reasons. There should be continuous communication to the employees and training should be organized to deal with such situation.

The HR department should also restructure the hiring plan and start working on reorganizing the headcount. Unions should be engaged in discussions to avoid surprises.

What is the jobs and domains that are most susceptible to economic slowdown? Are there industries or roles which are recession proof in some way or the other?

MN The jobs which are outsourceable bearing high cost are the most susceptible to be replaced or closed down during economic slowdown. In a manufacturing set up, the contract labour and the temporary category of employees which fluctuate as per the demand are the first on the firing lines.

However, jobs related to Research and Development, Innovation, Value Added services and automation are less affected with economic slowdown. Teaching, medical profession also falls under recession proof jobs.

Do you think labour reforms have anything to do with enhancing job opportunities and why rolled out labour reforms are not able to improve business sentiment and help recovering industry from downturn?

MN The current labour laws are entirely based on CRP economy i.e., controlled, regulated and protected economy which is out dated. In 1960s CRP economy growth rate witnessed less than 2%. When we are targeting 5 trillion economy in the next five years, the growth rate has to come to 8 to 10% YOY, requires a global and open mindset supported by flexible legislations. The proposed reforms will definitely attract investors to set up industries through FDI and domestic entrepreneurs. This will create jobs and also enhance confidence among investors. The trade unions who are opposing the labour reforms appear to be ignorant on global economy movement. Now they are only talking about 10% labour cost which is small portion of conversion cost and ignoring the 90% of cost which decides product position in the global market. If the product is not globally competitive, cannot stay for long. In such situation, the existence of company will be in question. Union should come out from this slender mind set and support of reforms where it is required the most. The government should make required amendments in the labour laws and also ensure job protection of the performing employees. The Industrial Disputes Act, Trade Union Act, Contract Labour Act and Bonus Act are the few which requires immediate revisit.

A balance needs to be created between the reforms and investments giving a sense of security among the employees and prosperity to companies.