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How safe is your job – Cover Story News

For 30-year-old Sasi Kumar, an Uber driver in Delhi, owning a car and earning Rs 15,000-20,000 a month was more than enough. It was more money than he had ever earned; it helped his small family of three survive. He also had the flexibility to earn more if he wanted to; more hours meant extra cash.

Life, however, came to a standstill for Kumar this March when the coronavirus pandemic overwhelmed the country. Stuck at home, his earnings abruptly halted, he has been at the mercy of the local moneylender for his expenses, of which the EMI (equated monthly instalment) of the car loan he took from an NBFC (non-banking financial company) accounts for a fat chunk. “Uber told me I’d be put on goods delivery duty, but it didn’t work. Getting (police) passes to move around is very difficult,” he says. He has got 20 kilos of wheat-free from the state government, but it isn’t sufficient.

Kumar earns his livelihood in a growing segment of the Indian economy that employs millions of semi-skilled workers, such as drivers and delivery agents, who work in asset-light businesses that do not offer a social security net. He is also among the millions who have been badly hit by the lockdown the country was put under on March 25 to arrest the spread of COVID-19. Indeed, in the 35 days of the lockdown so far, health statistics reveal that the transmission of the novel coronavirus has been slow. While every death is a tragedy for the family, a country of more than 1.3 billion people has counted a relatively low 1,008 deaths as on April 29, compared to, say, 59,284 in the US. We cannot be sure of the final outcome of the Great Lockdown on the lives of the people. But what we know for sure is the havoc it has wreaked on the livelihoods of those like Kumar. The Centre for Monitoring Indian Economy (CMIE), a private research organisation, estimates that 120 million Indians have been rendered jobless in the one month of the lockdown. Of the total 406 million people employed in the country, only 20 per cent, or 81.2 million, are in the ‘salaried’ category. While the pandemic won’t spare them either, the future will be bleaker for the remaining 324.8 million, who are either daily wagers, self-employed or small farmers.

Prime Minister Narendra Modi, in two televised addresses, one shortly after the lockdown, the other almost a month into it, had appealed to businesses not to lay off people and to pay their salaries during the lockdown. The Prime Minister’s Office is also said to be keeping tabs on news items reporting lay-offs and salary cuts. On March 29, the Union ministry of home affairs (MHA) issued a directive, reiterating what the prime minister had said. The Ludhiana Handtools Association even petitioned the Supreme Court against the order, but, on April 27, the apex court refused petitioners any interim protection against the MHA directive, even though it agreed to hear their plea.

Anecdotal evidence from across the country continues to point toward companies resorting to lay-offs and wage cuts. A recent survey of 200 CEOs conducted by industry body CII (the Confederation of Indian Industry) showed 52 per cent of them foreseeing job losses in their respective businesses. The tourism and hospitality sector, for instance, is staring at potential job losses of around 38 million, or a whopping 89 per cent of the 42.7 million people directly employed in the sector, a report by advisory firm KPMG said on April 1. The World Travel and Tourism Council, a global forum to raise awareness about the industry, pegs losses in the Indian sector at nine million. The Federation of Indian Export Organisations (FIEO) forecasts that over 15 million jobs could be lost in India’s export sector as half of all orders got cancelled and units are unable to repay loans. CMIE estimates show that unemployment shot up from 6.7 per cent in mid-March to 23 per cent in the first week of April.

Coming as it did at a time when the Indian economy was already grappling with one of its lowest growth rates in 10 years, the pandemic-induced lockdown will only further bleed the economy. Estimated before the COVID-19 outbreak at roughly 5 per cent, the growth rate for fiscal 2020-21 is now projected to be a dismal 1.5 per cent, according to an International Monetary Fund (IMF) assessment on April 14. And even that figure is optimistic, considering consultants such as McKinsey have predicted negative growth now that the lockdown will very likely be extended beyond May 3 in 170 ‘hotspots’. States that figure in the list of top hotspots are also the biggest contributors to the country’s economy. Maharashtra, Delhi and Tamil Nadu, for instance, collectively contribute 30 per cent to India’s GDP. This also explains why the government’s call to open businesses in non-hotspots by April 20 evoked a lukewarm response. All major consumer markets remain closed, and no manufacturer wants to create stockpiles that they can’t sell. Disruption in the supply of raw material and labour in addition to the threat of criminal prosecution should staff get afflicted by the disease has forced companies to keep their shutters down. “There is no light at the end of the COVID-19 tunnel,” says Manish Sabharwal, co-founder of TeamLease, an executive hiring firm. “We do not even know whether we are in the beginning, middle or end of the pandemic.”

The worst-hit among all sectors are front-end service businesses such as aviation, tourism and hospitality, followed by manufacturers of ‘non-essential’ goods and high-street retail. Mahesh Vyas, MD and CEO of CMIE, though, is reluctant to make such distinctions. “It’s like trying to spot the difference between sitting in an environment that is minus 35 degrees and minus 40 degrees. Both are so numbing that the distinction hardly matters,” he says. For instance, in March, one week into the lockdown, the consumption of petroleum products dropped 18 per cent, while the demand for electricity was down 8.8 per cent. “Mind you, these are industries exempted from the lockdown,” says Vyas. “If one screw of an aeroplane doesn’t work, it can’t fly,” he says. As many as 45 per cent of the households CMIE surveyed during the lockdown said they are worse off than they were a year ago. What’s also worrying is the constant decline in India’s labour participation rate, from 47-48 per cent before demonetisation to 45-46 per cent during the note ban in November 2016, down to 42-43 per cent after the Goods and Services Tax was implemented in July 2017, to 35.5 per cent following six weeks of the lockdown.

As the pain in the economy deepens, the prospect of job and salary cuts only worsens. This is because very few organisations have the ability to survive a sustained lockdown and the resulting economic uncertainty. Only 19,500 companies in India have a paid-up capital of more than Rs 10 crore and, of our 63 million enterprises, only 12 million or roughly 19 per cent, are registered for GST, says Sabharwal. Salaries could well comprise 30-50 per cent of the overall cost of companies, depending on the business they are in. Even if the lockdown is lifted, one does not know how soon the resumed economic activity will be able to generate enough cash flows to maintain operations. Till then, companies will have no option but to let go of some staff, prune salaries or both.

To assess the impact on the different sectors of the economy, we spoke to a range of entrepreneurs, executives, industry representatives and staff. The picture that emerges is one of deep distress and job uncertainty.

Automotive: A downhill ride

The car industry was one of the first to be affected by COVID-19, after imports from China worth $4.7 billion (Rs 35,720 crore) were hit between January and March. By the time supplies from China resumed after the disease was contained in Wuhan, India was under lockdown. Automakers were already battling a 45 per cent year-on-year dip in sales in March, but the complete lockdown poses an even more serious threat to the sector, which employs 44 million people and contributes 9.4 per cent to GDP. Even if the lockdown is lifted on May 3, it will take 3-4 months to get production back on stream, says CII president and Toyota Kirloskar Motor MD Vikram Kirloskar, because “we need to come out with a 100 per cent vehicle, not a 99.9 per cent one”. Supply chains have been disrupted, and with cash flows drying up, those in the auto aftermarket, component manufacturers, service centres and dealers, are finding it difficult to pay April salaries. Segregating districts according to the level of risk from the pandemic, a Crisil study shows that ‘high impact’ and ‘very high impact’ districts together account for 56 per cent of two-wheeler sales and 68 per cent of passenger vehicle sales in India. This puts 50 per cent of passenger vehicle sales at risk even if the lockdown is lifted on May 3. Pune-based Bajaj Auto has proposed a 10 per cent salary cut for all employees, with MD Rajiv Bajaj taking a 100 per cent pay cut for the extended lockdown period till May 3. Industry players estimate that one-third of the total 44 million employees, or roughly 14 million, are contract labourers, who can potentially lose their jobs as factories will keep volumes low even after restarting.

“We’re trying very hard not to lay off people,” says Kirloskar. “We have invested a lot in honing their skills. It will be tough [to decide].” Even if the industry recovers and sales pick up gradually (a U-shaped rec­overy), salaries may still have to be pared and jobs cut, says Deepak Jain, MD of Lumax Industries, a large components player, and president of the Automotive Component Manufacturers Association (ACMA). The auto components sector alone employs some five million people. Dealerships, which number between 15,000 and 17,000, may see over 1,700 of them exit. Overall, the dealership business could lose some 3,400 jobs right away, according to industry estimates.

Aviation: Grounded by COVID-19

The airlines sector has been staring at a bottomless chasm ever since international flights initially began to get cancelled before the ban on all air travel till April 14. According to the International Air Transport Association, passenger demand may decline by 36 per cent in India, and passenger revenue may fall by more than $8.8 billion (around Rs 66,880 crore), putting over two million jobs at risk, including sectors dependent on aviation. Airlines are facing a liquidity crisis, as apart from Indigo Airlines, none of the others have adequate cash reserves. On April 30, SpiceJet said it will pay salaries in part to 92 per cent of its staff “according to the work hours contributed, while maintaining basic thresholds,” adding that it won’t cut jobs “at this time”. IndiGo had at the beginning of the lockdown announced it would cut 25 per cent of staff salaries, but rolled back the decision on April 24. Kapil Kaul, CEO & director, South Asia, of the Centre for Asia Pacific Aviation (CAPA), says of the nearly 60,000 direct jobs in aviation, 25,000 may get impacted. Even after the sector reopens for business, both business and general travel are likely to remain subdued for months, while social distancing norms would mean airline companies will have to lower their capacities per flight, affecting revenues.

Real estate: On Shaky Ground

The property sector had already been in a pre­carious position for almost three years. Demand had lagged, leaving huge inventory. Several developers had defaulted on loans and the worsening of the NBFC crisis dried up funding, which, in turn, increased borrowing cost and strained the finances of real estate firms. With COVID-19, demand has further dried up as potential customers, insecure about their jobs and salaries, have postponed buying. Moreover, physical sur­veys by prospective buyers have come to a halt during the lockdown. According to property consultant Anarock, India’s top seven cities had unsold stock of over 644,000 units toward March-end. Of these, as many as 35,200 units, worth Rs 37,550 crore, are in the disease hotspots of Mumbai and Pune. “Cities like Mumbai bear the brunt of the pandemic as packed clusters do not allow social distancing,” says Gulam Zia, executive director at Knight Frank India, a property consultant. The lock­down has plunged both residential and commercial real estate in Mumbai, a key destination for realty investors, into uncertainty. Besides, the moment Maharashtra lifts the lockdown, hundreds of thousands of migrant labourers in the city, will want to go back to their homes in other states. With no guarantee of when they will return, says Zia, several projects will be in jeopardy. Migrant workers comprise 80 per cent of the construction sector’s 44 million workforce. The real estate sector as a whole employs 52 million, of which 41 million jobs are already affected. “This is like death for the sector. We’ll have to wait for its reincarnation,” a consultant says.

Tourism & Hospitality: No Show

According to a report by ratings agency Care Ratings on the Indian hotel industry, the sector is expected to book a revenue loss of Rs 1.25 lakh crore in 2019-20, assuming a 50 per cent loss in business during January and February this year, and 70 per cent in March due to suspension of international flights. The crisis will also change the rules of how business is conducted in the industry, with stricter enforcement of social distancing norms. It will be a long time before hotels or airlines can run at full capacity. With large-scale travel booking cancellations, the sector will incur a loss of Rs 85,000 crore, says the Indian Association of Tour Operators. Outbound and inbound travel will be at an all-time low even after the lockdown is lifted. Industry experts say the crisis will be greater than 9/11 or the 2008 financial meltdown.

MSMEs: Small Isn’t beautiful

The lifeblood of the Indian economy, the MSME (micro, small and medium enterprises) sector has a 120 million-strong workforce, contributing 33.4 per cent to India’s manufacturing output and comprising 45 per cent of India’s exports. At the same time, the sector is also among the most vulnerable, relying heavily on day-to-day business to stay afloat and more exposed to the vagaries of demand than their larger counterparts. They also have minimal reserves to dip into during periods of crises. According to estimates by the All-India Manufacturers Organisation (AIMO), between 22 million and 51 million jobs will be hit if the lockdown extends beyond 4-8 weeks, with disruptions in demand as well as in the supply chains, lack of economic activity and mounting bills. The key export markets of the US and UK are shut. Textile companies are sitting with ready orders. Being a fashion-sensitive market, most of the current stock could be deadstock by the time the summer season comes to a close. With most MSMEs, including textile companies, having just enough funds to tide over for a month perhaps, layoffs of the low-wage workers have already begun.

Information technology: A New Y2K moment

“Nobody knows what’s out there,” says Sangeeta Gupta, senior VP and chief strategy officer of Nasscom, or the National Association of Software and Service Companies. India’s IT sector provides direct employment to 4 million people and indirect employment to 10 million. It is also the industry that put India on the global map and it continues to attract talent from India and abroad. Much of the sector adapted rather quickly to the lockdown with a Work from Home (WFH) protocol, meeting domestic and international client commitments. Nimble digital organisations adapted faster, says Gupta; most of the big IT firms have nearly 92-93 per cent of their workforce working from home, some even 100 per cent. TCS has announced that even when things return to normal, 75 per cent of their 450,000 workforce will permanently work from home or from anywhere. The shift will take place over the next two years. The story could well be different for smaller firms, but, fortunately, nearly 90 per cent of the IT workforce is employed with big tech. Every company is focusing on rationalising costs and new fields they can explore. The good news is that the big IT firms are not looking at laying off workers. However, there will be no increments either this year. C.P. Gurnani, CEO of Tech Mahindra, says the new format of working has put him in direct touch with a larger employee base. Senior management at the company is forgoing their variable pay for the year. “We have decided that whatever steps we take, will start from the top. People who draw less than Rs 3.5 lakh-4 lakh per annum will not get any cuts. It all depends on how the market shapes up and until we conquer the enemy (COVID-19).”

Gems & Jewellery: Losing its Sheen

Employing over 4.6 million workers, the gems and jewellery sector is likely to witness 10-20 per cent job losses, say industry sources. Although manufacturing units have started opening in Jaipur and elsewhere too with certain restrictions, the general view is that employers will be paying 70 per cent of total wages for April. The two major jewellery shows scheduled for August and September in Mumbai are likely to be cancelled.

Retail: No One’s Buying

Industry estimates say of the 40-60 million jobs in Indian retail, 11 million are likely to take a hit. While production and supply of essential goods have continued despite hiccups, restarting production for non-essentials will be a daunting task as supply chains remain disrupted and bringing migrant labour back to the shop floor will be a challenge. Malls and shopping complexes will continue to be avoided. Demand was already slackening; there will now be even fewer takers for higher-priced goods.

Many see the present crisis as worse than the one precipitated by the 2008 financial meltdown. Nor is anyone able to accurately predict how long the pain will last, as a lot depends on how the disease spreads and how the country’s health infrastructure copes with it. Meanwhile, industry is looking to the government to announce policy measures to save businesses and jobs. The US House of Representatives passed a $484 billion spending package on April 23 even as 26 million people filed jobless claims there since the spread of the pandemic. By comparison, the Rs 1.7 lakh crore package finance minister Nirmala Sitharaman announced on March 27 is inadequate, say experts. They warn that in the effort to fight the pandemic, the collapse of livelihoods may well prove more gruesome than the disease itself if effective economic remedies are not offered. They have called for an additio­nal rescue package of Rs 10 lakh crore, about 5 per cent of India’s Rs 200 lakh crore economy, to redeem businesses.

The aviation sector is seeking a moratorium on loans, waiving airport and fuel infrastructure charges, and bringing aviation turbine fuel under GST. The auto industry wants the government to spur demand by reducing taxes and making loans cheaper. The government is also being expected to back firms taking bank loans with guarantees, and smaller players and dealerships are looking for a moratorium on bank loans. The real estate sector wants the government to stimulate demand through incentives, relaxing Real Estate Regulatory Act (RERA) compliance for projects for a maximum of six months, and fixing lending rates for realty projects at a lower repo rate. Travel and tourism services are demanding a GST holiday, a waiver for the next year on all power tariffs and property and excise taxes and working capital at lower interest rates. The textile sector, meanwhile, is seeking an extension of the tax compliance deadline, more credit support, waiver of electricity charges and other such rentals. The retail sector is seeking an extension of the 270-day moratorium on instalment and interest payments on term loans, GST waivers and faster clearances on production of non-essentials. It is also hoping for higher credit from banks and NBFCs. MSMEs are seeking government support to compensate for wages, power tariff waivers and relief from declaration as a non-performing asset.

The Future Workplace

COVID-19 has fast-forwarded changes in the workplace that will impact how business is done and businesses are run. Flexible work schedules, partitioned workspaces, lesser travel and conferencing, staggered workplace attendance and small huddle spaces will be the new norms. In large manufacturing units, new-age technologies such as artificial intelligence, machine learning as well as robotics are likely to gain ground. As migrant workers leave cities, wages for semi-skilled workers could even go up. The displaced workforce in cities could find itself absorbed in logistics, sales or customer services. India could see a surge in the gig economy, with more workers being hired on contract and less job security as companies look for ways to curtail fixed costs.

On the bright side, however, T.V. Mohandas Pai, chairman of Manipal Global Education, predicts a surge in productivity. Organisations will be deconstructed to become more efficient, agile and fluid. “If a sales meeting can be done on the phone and the sales agent can accomplish 10 meetings like that as against three in-person meetings, the results are positive,” he says. As India explores new ideas and ways of doing business, start-ups with disruptive ideas could become the big gainers. Capital to scale will not come easy but India will emerge as one of the favoured destinations for investments. Experts say sectors such as specialised e-commerce, e-health, education and entertainment will get a push.

However, India too, like the rest of the world, is currently grappling with uncertainty. Never mind innovation, most companies are struggling to maintain continuity. India’s crisis is amplified (or exacerbated) by all the red tape and the unease of doing business in a regulatory framework that requires businesses to jump through a myriad clearance hoops. At the same time, India is uniquely placed to take advantage of the new business wariness about China. It should, as Teamlease’s Manish Sabharwal put it, go for “flick-of-the-pen reforms and long-term structural reforms”. In waging its dour battle against the corona pandemic, India should not lose sight of the opportunity this great adversity brings.

Agony in the informal sector

Migrant workers, hundreds of thousands of whom made their way back to native villages and towns across India in March as the COVID-19 outbreak shut down factories and other avenues of their employment, are a grim reminder of the unique challenge the government faces as it looks to bring the battered Indian economy back on track. According to the Economic Survey of 2018-19, released in July 2019, almost 93 per cent of the workforce is ‘informal’.

Sonu Yadav, 25, from Hisua in Bihar’s Nawada district, worked at a factory making corrugated boxes in Chhattarpur, Delhi. He earned about Rs 11,000 a month. When the factory shut down on March 20, Yadav and 100-odd workers from Bihar and Uttar Pradesh were told to leave. “We waited for a week, hoping work would resume,” says Yadav. But with his savings depleting and the factory refusing to pay salaries during the lockdown, Yadav decided to walk home. He reached the UP border, where police put him on a truck that took him to his hometown.

The International Labour Organization estimates that the COVID-19 crisis could force around 400 million informal workers in India deeper into poverty. To soften the blow of the lockdown, the government announced a Rs 1.7 lakh crore package for the poor on March 27. Among the sops were free rations for three months, cooking gas and direct cash transfers.

That it could be months before migrant workers make their way back to cities for employment brings up a serious manpower crisis for factories looking to restart operations once the lockdown is lifted. When Rahul Ahuja, chairman of the Punjab unit of CII, got permission to restart his four auto spare parts factories, the administration allowed 350 out of his 1,000 employees to work, but only 200 were available. Around 3 million migrant workers are employed in Punjab. State industry representatives say factories will not be able to afford more than half of these workers during their post-lockdown recovery phase.

Economist Arun Kumar considers the situation “worse than war”. “During war, factories run at full capacity and it is a full-employment economy. Today, both supply and demand have collapsed,” he says, predicting that the industry needs at least 2-3 months to even get a whiff of a revival in demand.

with Anilesh S. Mahajan, Rohit Parihar and Amitabh Srivastava

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