New Delhi, Nov 19: Despite Moody’s sovereign rating upgrade, hiring by the private sector is expected to stay muted till the end of the current fiscal as corporate India is busy trimming balance sheets and rationalising costs, according to industry chamber Assocham.
Based on a survey of association members, the Assocham report on Sunday comes in the context of tepid job growth in the economy which has been recently impacted by demonetisation and implementation of the Goods and Services Tax.
“With corporate India placing most energies on rationalising costs, including wage costs, and trying to deleverage its balance sheet, the hiring outlook in the private sector is expected to stay muted till the beginning of fiscal 2018-19,” an Associated Chambers of Commerce and Industry of India (Assocham) release said here.
“The focus right now is how to deleverage, consolidate, exit from non-core businesses and achieve lean and mean balance sheets. Going forward at least in the next quarter and a half, corporates would be busy improving their margins and reducing their debt costs, even as the top line growth may take a back seat,” it said.
On Friday, US credit rating agency Moody’s upgraded India’s sovereign ratings to Baa2 from its lowest investment grade of Baa3 and changed the outlook for the country’s rating to stable from positive. It said this was based on the Indian government’s “wide-ranging programme of economic and institutional reforms”.
“Under these circumstance, the fresh hiring prospects do not look bright, maybe for the two quarters; however, things should look up in the next fiscal. The wage cost control would remain a key area of priority in the short term,” Assocham added.
The industry body also noted that as the state-run banks also bring down their employee-cost-to-operation ratio, post their re-capitalisation recently announced by the government, “fresh hiring may also come down there as well”.
The non-performing assets or bad loans in state-run banks on account of the private sector have accumulated to a staggering Rs 7.3 lakh crore.
“Though the Moody’s upgrade has given a sentiment boost, the next two quarters would be challenging for the private sector. But things would then improve and some of the pain points of the present like high debt and slow consumer demand should ease from April 2018,” Assocham Secretary General D.S. Rawat said in a statement.