Jan. 29 (Bloomberg) -- Indian exporters have shed as many as 1 million jobs, more than 15 times a December estimate, amid the most protracted decline in overseas sales in a decade, the commerce ministry said.
“The job losses are very substantial and are likely to be of the order of 700,000 to 1 million, including temporary staff,” Commerce Secretary G.K. Pillai told Bloomberg News in an interview in New Delhi yesterday. Exports fell 1 percent in December and any recovery “is likely only by June,” he said.
Governor Duvvuri Subbarao this week lowered the Reserve Bank of India’s economic growth forecast to a six-year low of 7 percent as a global recession pummels Asia’s export-dependent nations. Rising unemployment may erode the popularity of Prime Minister Manmohan Singh’s government as it prepares to fight elections due before May.
“Job losses are going to be substantial,” said Pillai, the top bureaucrat in India’s commerce ministry. “Labor- intensive sectors like gems, jewelry, clothing, textiles and handicrafts are the worst hit.”
The ministry last month estimated exporting companies had shed around 65,500 positions as contractions in the U.S. and Europe, the country’s biggest markets, damp overseas demand.
Gokaldas Exports Ltd., India’s largest exporter of clothes and controlled by Blackstone Group LP, plans to cut a “few thousands jobs in the next two months,” said Rajendra Hinduja, managing director of the company. The Bangalore-based company employs about 47,000 workers.
‘Urgent Help’
“Profitability is going to be nowhere near what it was last year and we are working just to keep our factories running,” said Hinduja. “The situation continues to be grim and our industry needs urgent help from the government.”
India’s exports tumbled 9.9 percent to $11.5 billion in November from a year earlier after contracting 12.1 percent in October, the first decline in seven years. Industrial production rose 2.4 percent in November, after dropping 0.3 percent in October, the first contraction in 15 years.
The government is scheduled to release December overseas sales figures on Feb. 2.
“The job losses are going to be much more enormous than what is appearing on the ground,” said Shishir Jaipuria, managing director of Ginni Filaments Ltd., a maker of fabric and textiles. Jaipuria says he’s fired 50 workers so far.
To help exporters, the central bank in November extended the period for subsidized pre-shipment credit to nine months from six months and increased the export refinance limit for commercial banks.
Stimulus Package
“The government may roll over credit to ease things for some of the worst-hit export-oriented industries,” Pillai said. “But any stimulus package will be of little help unless and until demand revives in the western countries” that are India’s biggest export markets, he said.
The International Monetary Fund yesterday said world growth will be 0.5 percent this year, the weakest postwar pace. That’s down from a November prediction of 2.2 percent.
The global expansion this year will come to a “virtual standstill,” said Olivier Blanchard, the IMF’s chief economist.
Demand for made-in-Asia goods has slumped amid the deepening global slowdown. China’s exports in December fell 2.8 percent, the biggest decline in a decade. Singapore’s exports posted the biggest contraction since 2002 in the same month.
“The government is engaged in a detailed and comprehensive analysis to figure out which sectors of the industry need help and to what extent,” Pillai said. “I don’t think we are going to announce any relief package in the next one month.”
Interest Rates
Measures to spur the economy began on Oct. 6 when the Reserve Bank of India cut the amount of money lenders need to set aside with the central bank. On Oct. 20, Governor Subbarao presided over the first interest-rate reduction in four years and the benchmark repurchase rate is now 5.5 percent, down from 9 percent in July.
Prime Minister’s Singh’s government has also announced two fiscal stimulus packages which include tax cuts, the injection of capital into banks, and allowing overseas investors to double purchases of debt.
Growth in India’s $1.2 trillion economy has weakened for two straight quarters, and the government is forecasting 7 percent growth this fiscal year, the slowest since 2003.
Sluggish exports and domestic demand have forced companies including Tata Motors Ltd., the nation’s biggest truck maker, and Hyundai Motor Co. to reduce output and workers in India.
Hyundai’s unit, India’s biggest car exporter, will miss its output target this year, the company said on Dec. 29. The company, which is cutting temporary staff in India, expects overseas orders to fall in the first quarter from a year earlier.
Source : Bloomberg.com