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More layoffs likely as India’s manufacturing sales shrink

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New Delhi, February 27: Despite government’s efforts to attract investment under its Make in India campaign, sales of manufactured goods fell 3.7 per cent during 2015-16 — the first decline in seven years –sparking fears of layoffs and debt default in the months to come.

Spurred by a global slowdown and lack of demand, sales of manufactured goods were falling even before demonetisation, affecting sectors ranging from textiles to leather to steel.

As a result, in the six months to September 2016, engineering major Larsen & Toubro laid off some 14,000 employees. Companies such as Microsoft, IBM and Nokia were also reported to have cut back on their workforce in 2016-albeit on a smaller scale-blaming sluggish demand for downsizing.

In November 2014, just weeks after Prime Minister Narendra Modi launched his Make-in-India campaign, Nokia shut its factory in Chennai, rendering 6,600 full-time workers jobless.

Economists say the government must step in to support the manufacturing sector, which constitutes 15-16 per cent of the gross domestic product (GDP) and supports 12 per cent of the workforce.

Why sales are down? Investment falls, costs and import duties rise, demand contracts

A range of factors including falling investment, increased input costs, and higher import duties have caused demand for manufactured goods to fall, a trend that was visible before demonetisation and has strengthened since.

While the services sector grew by 4.9 per cent in 2015-16, faster than the 3.7 per cent recorded in the previous financial year, manufacturing contracted for the first time in seven years, from a growth rate of 12.9 per cent in 2009-10 to -3.7 per cent in 2015-16, Reserve Bank of India (RBI) data shows.

Small-scale private companies, with yearly annual sales of less than Rs 100 crore, have been more seriously affected as their sales have contracted continuously for the last seven years. Having registered an 8.8 per cent decline in 2009-10, their sales fell by 19.2 per cent year-on-year in 2015-16.

“Our sector is making huge losses as the price of electricity and raw material has gone up,” Shan Ali Syed, owner of a small-scale textile plant in the town of Bhiwandi, 32 km northeast of Mumbai, told IndiaSpend. “Hence, cost of final product also increases, and we are unable to compete with cheaper imported Chinese products.”

“Higher export duty and decline in demand has led to reduction in sales even before demonetisation,” Manoj Kishanchand Ahuja, a Mumbai-based small-scale gold jewellery manufacturer, said. “We were forced to reduce production. So, hiring of workers on contractual basis has also gone down.” He added that most of his business takes place in cash, and post-demonetisation, the situation has worsened.

Investment has fallen because of a decline in demand, leading to lower sales and profits. “New orders recorded a decline sequentially (quarter-on-quarter) as well as on a year-on-year basis and dipped into negative territory,” the RBI said in its latest report.

A cutdown in industrial output for the fourth straight month in December, along with a depressed investment outlook, could lead to more layoffs, industry captains have warned.

On top of that, net loans to the manufacturing sector, which account for 65 per cent of corporate loans, have declined by 77 per cent in the last six years, IndiaSpend reported in January 2017. Large-scale manufacturing units have been the worst hit, recording a fall of 69 per cent.

The fallout: Jobs and companies at risk

If sales do not improve, companies will act to cut costs, manufacturers and traders said.

“The most common way of cutting cost in India is to reduce the workforce,” economist Ila Patnaik, who has served as the principal economic advisor to the government of India, told IndiaSpend. “If the global economy and the domestic market do not improve, we can expect more layoffs in this sector.”

Companies forced to close down due to financial distress will also lay off workers. Closure of 186 industrial units led to net job losses of 12,176 in the manufacturing sector over the last four years, the labour ministry estimated in a December 2015 reply in the Lok Sabha.

Syed blamed the post-demonetisation cash crunch for falling sales as well as a shortage of workers due to mass exodus from cities. “Labourers have to be paid in cash as they don’t have bank accounts. Since we were unable to pay them in cash, the workers have returned to their villages,” he said.

In the first 34 days of demonetisation, micro- and small-scale industries have suffered job losses of 35 per cent and a 50 per cent dip in revenue, an All India Manufacturer’s Organisation study showed as the Indian Express reported on January 7, 2017.

Global upheavals have also caused problems for manufacturers, G.K. Jain, a large-scale manufacturer and exporter of readymade garments, said.

With sluggish growth and high unemployment hitting American and European economies, importers there want to pay lower prices to overseas manufacturers, squeezing exporters’ profit margins, Jain said.

There has been a rise in borrowings by vulnerable companies in the steel sector, the RBI report said. However, steel secretary Aruna Sharma said: “There was heavy investment in public and private steel sector in the past, and the investment takes place in cycles.” She added, “So, once the returns on that investment start coming, there will be big investments again.”

The RBI also noted that Indian manufacturers have collectively run up debt of Rs 6.9 lakh crore. The decline in sales and its impact on profit margins has impacted manufacturing industries’ ability to service their debt. In its study of the financial statements of 1,707 manufacturing companies over the last four years, the RBI revealed that the number of vulnerable companies whose debt-equity ratio is higher than 200 per cent has increased from 215 in 2012-13 to 284 in 2015-16-an increase of 32 per cent. A high debt-equity ratio means a company is aggressively using borrowed money to finance its growth, leading to higher risk for default.

The RBI’s analysis also showed that the debt at risk of default among private manufacturing companies grew nearly four-fold, from Rs 58,800 crore to Rs. 2.1 lakh crore ($32 billion) in the four years to March 2016.

What can be done: Invest in infrastructure, remonetise and increase overall public spending

Economists agree that the government must take steps to undo the damage caused by demonetisation by investing more in infrastructure, remonetising the economy and increasing the allocation for public-spending programmes.

It could take two to three quarters for the effects of the demonetisation-induced short-term shock to wear off and for normalcy to return, Patnaik predicted.

For longer-term support to manufacturing and job creation, new investment and enterprise are a must, economist Ajit Ranade said. “If we need to add two million jobs every month, then we need to create 20,000 to 50,000 new enterprises every month,” he said. “We need a big push in infrastructure.”

By Prathamesh Mulye (Indiaspend.org/IANS)

India

Indian Railways suffers as private players fail to meet wagon delivery targets

Wagon manufacturers are the mainstay of the railways as 90 per cent of its requirement is met by the private sector. Till October 1, Indian Railways has received only 2,717 of the 12,311 wagons that had been ordered from 10 major players in April.

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New Delhi, Oct 21 : A working capital crunch, coupled with lack of critical components, has slowed down the delivery schedule of railway wagons, affecting their availability with the transporter, a senior official said.

“Wagon manufacturers are the mainstay of the railways as 90 per cent of its requirement is met by the private sector. Till October 1, Indian Railways has received only 2,717 of the 12,311 wagons that had been ordered from 10 major players in April,” the Railways official told IANS.

Thus, the manufacturers are expected to produce 9,594 wagons, each of which costs Rs 25 lakhs, in the next five months, by March 2019, which seems to be a tall order, industry stakeholders said.

Expressing serious concern over the slow pace of delivery, the Railways has asked wagon manufacturers to improve the supply or face a penalty of two per cent of the value of the order as laid down in the contract, the official said.

According to industry sources, there are issues like lack of working capital and non-availability of critical components like bogeys, couplers, dropgear and airbrake systems from Research Designs & Standards Organisation (RDSO)-approved vendors.

While the price of steel has gone up around 20 per cent to 25 per cent in the recent past, there are also Goods and Services Tax (GST) issues.

Five per cent GST is applicable on wagons, while the GST on raw materials required for wagon productions is 18 per cent.

There are plans to approach the Finance Ministry to resolve the GST issue, industry sources said.

Meanwhile, the Railways has decided to opt for the reverse auction method to decide on its future tender for procurement of 21,758 wagons at an estimated cost of Rs 5,600 crore — the largest such order for the national transporter.

The order includes nine types of wagons, including covered, flat, open and brake vans to be supplied by the successful bidders in the next two years.

(Arun Kumar Das can be contacted at [email protected] )

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A library run by industrial workers means world of change for children

Messages from martyrs like Bhagat Singh, Safdar Hashmi and others adorn the walls of the library. “Behtar zindagi ka raasta behtar kitaabon se hokar jaata hai” (The road to a better life passes through good books) — a board outside the room says.

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A movie screening in the library

Ludhiana (Punjab), Oct 21 : At first look, it is just another small room with one wall almost crumbling. But this 25-square yard space means the world for children of factory workers and labourers in Punjab’s industrial hub Ludhiana.

Without any grant or support from corporates or the government, this education endeavour by workers and daily-wage earners living in the Rajiv Gandhi colony area of Jamalpur in Ludhiana’s Focal Point industrial area, is making a sea of difference to the lives of children who come here every single day with their working parents.

The Shaheed Bhagat Singh Pustakalaya has no fancy address, no high-profile CSR support and no big-time NGO dedicating its resources. Yet, it is on a mission — to create a small education revolution by touching the lives of the many children coming here to study.

Messages from martyrs like Bhagat Singh, Safdar Hashmi and others adorn the walls of the library. “Behtar zindagi ka raasta behtar kitaabon se hokar jaata hai” (The road to a better life passes through good books) — a board outside the room says.

“We established this library in April this year. It is entirely an effort of workers and labourers of the industrial units in Ludhiana, who live in the vicinity of the LIG (low income group) flats and Rajiv Gandhi colony,” Lakhwinder Singh, the man behind the mission to guide the workers’ children to a better future, told IANS here.

The library has been set up under the aegis of the Karkhana Mazdoor Union by collecting funds from the workers. Contributions ranged from Rs 100 to Rs 5,000. Most workers themselves earn less than Rs 10,000 per month.

Lakhwinder, 33, who himself has done an advanced diploma in dye and mould making from a central institute in Chandigarh and has been living in Ludhiana since 2006, is the main force behind the library project. He is married but has no children yet.

“We began everything on a small scale. We have got no funding from the government or any corporate. The children coming here are not being forced to do so. They come here on their own and are liking the concept of teaching here,” he pointed out.

Ludhiana, one of the largest industrial hubs in Asia, with a population of 3.5 million people, is known for its bicycle industry, textile units, auto-parts manufacturing and scores of other businesses. A majority of the workforce here is that of migrant workers from other states, especially Uttar Pradesh and Bihar, who have been living here for decades.

The library gets active from 4 pm to 7 pm every day when the children come here to get an education. Krishan Kumar, a teaching volunteer, uses hands-on concepts, including showing films, to create awareness and impart education. The library has over 500 books in Hindi and Punjabi stacked on iron shelves.

“We make a lot of friends at the library. It is like a family,” Arjun, 12, a student of class VI in a government school, said.

Lakhwinder pointed out that the parents of a majority of the children who come to the library have themselves not studied beyond Class VIII or are illiterate, but do not want their children to suffer the same fate.

“The room can accommodate over 30 children. At times, we have to put a stop on the numbers as the room cannot accommodate more children,” Lakhwinder pointed out.

For an annual charge of only Rs 50, the children are provided a library card and are allowed to take two books home at one time. The fee is charged so as to make the children responsible for the books they take.

“The children like to come here. They are allowed to express themselves freely even when they are being imparted education,” he said.

The children coming here are enthusiastic about what they are doing here.

“It’s quite nice and refreshing to come here. Learning here is a lot of fun,” Khushi, 13, a student of Class VII, said.

In its own modest way, this library is making a definitive change in the lives of the young ones.

(The weekly feature series is part of a positive-journalism project of IANS and the Frank Islam Foundation. Jaideep Sarin can be contacted at [email protected] )

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LinkedIn partners with Oracle to help HR teams attract right talent

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New Delhi, Oct 17: Cloud major Oracle on Wednesday said it entered into a partnership with professional networking platform LinkedIn to help HR teams attract, engage and retain employees.

A series of new integrations between Oracle’s Human Capital Management Cloud (Oracle HCM Cloud) and Taleo Enterprise Edition, and LinkedIn, will help HR teams to grow their talent pool and increase career development opportunities, Oracle said.

“The world of work is rapidly changing, and this is creating new opportunities and challenges for talent leaders,” Scott Roberts, Vice President of Business Development, LinkedIn, said in a statement.

“We are excited to be working with Oracle to create better solutions to make hiring and developing talent as seamless and effective as possible,” Roberts added.

The new integrations enable HR teams to take a holistic view of their talent’s experience, skills and career aspirations in order to achieve a meaningful alignment between each employee’s job responsibilities and an organisation’s overall business objectives.

They improve the candidate experience by enabling them to apply for a job via Oracle Recruiting Cloud or Taleo Enterprise Edition and identify and contact (via InMail) their LinkedIn connections who can best refer them for that job.

“The rapidly changing global talent market is forcing organisations across industries to rethink how they attract, engage and retain employees,” said Nagaraj Nadendla, Group Vice President, Product Development, Oracle.

IANS

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