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Reasons of Increasing Layoffs in Indian Industry

Updated on August 5, 2014

Main Companies who laid off their Employees

  • TCS, the IT giant in India, asked 500 employees (having 2-3 years of work experience) to leave.
  • IBM laid off 700 employees (mostly freshers) from its Indian offices.
  • Yahoo! Laid off 45 employees.
  • Satyam Computers laid off 4500 Employees
  • Wipro Laid off 5000 employees
  • Infosys Laid off 3456 employees
  • Microsoft Laid off 700 employees
  • ITC laid off 5600 employees
  • Reliance laid off 6700 employees

What's the Reason of lay Offs in Companies

One of the most reputed organization in the IT sector, Yahoo! shook the IT sector by announcing the lay offs. Yahoo! created speculation ripples in the industry when it laid off 45 employees from its Bangalore office. As expected by the speculators, the reason cited was cost cutting, boosting its profitability etc.

Comparatively smaller firms like Headstrong have also being laying off employees citing their unsatisfactory performance as the reason.

The slowdown of the US economy has not only effected the IT sector and the Indian economy, but many economies and sectors across the world. Even the automobile sector has not remained unaffected. BMW has announced to cut its global workforce by thousands.

As estimated, BMW plans to reduce its workforce by almost 8 percent. Again the main reason cited for the downsizing is the cost cutting and boosting profits, optimum utilization of resources etc.

The axe is first expected on the temporary workers and the poor performers.
A similar trend or practice is being witnessed in the other sectors of the economy as well. Siemens, a renowned telecom player, announced in the last quarter of 2007, that it has plans to reduce its workforce by 4000.

The reduction in the workforce will be from its various units as a part of its restructuring plans including its IT services unit. The organization has plans to either restructure or shut the loss making units.

Before going to Understand this Subject, I think I should make you aware about the average salaries in India, you can know the salary in india for various jobs, designations, companies and skills.

Let's go Some Where!!!

Why Laying off in Indian job market

Recently the Indian job market has been flooded with news like TCS laying-off 500 employees, Yahoo! Asking 45 employees to leave, IBM laying off more than 700 employees from its Indian offices etc. Fearing the economic slowdown in the US economy, Indian companies who deal with the US companies or US multinationals in India are cutting down on the number of its employees.

Starting from the IT sector, the latest news of layoffs has come from almost all the sectors of the industry. Justifying the lay-offs, most of the organizations argue that the employees were asked to leave (not fired) because of their unsatisfactory performance. And the companies are doing the lay-offs in a hush-hush manner. And the organizations are not looking to re-fill the positions.

As mentioned above, the dismissal of employees or the “reduction in the workforce” is being seen across most of the organization in the IT sector. The average salaries in India being offered in the industry have also come down in the sector.

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Other view on the Reasons

Where at the one hand there is a growing concern about the grey areas of the possible recession, many optimists economy experts believe that this situation is only a temporary phase, and will only help the Indian industry to come out of it stronger.

As it is, the sector has seen a few cuts in terms of the orders received, there is no immediate threat. Moreover, the Indian organizations always have the low-cost advantage. And this slug will give time to the various sectors to focus on its core competencies and emerge for better competition in future.

And this reduction in the workforce is nothing but the usual practices of the companies on the basis of the performance or discipline. Even the top organizations like Infosys have been practicing this. It has reduced its workforce by 2500 employees spread over the last three years.

Which Industry Giving High Number of Jobs

Industry
1991-2000
After 2000
 
Services Sector
4.5-5.5%
27%
 
Retail
6%
14%
 
Tourism
6.2%
8.59%
 
Mining
2.1%
5%
 
Agriculture
10%
17%
 
This is an rough Idea, I have not tally with the Government

Am I Really Fired?????

How the value of rupee Affect the laying off in India

The rising value of rupee from the last year as already become an issue of concern for the many sectors of Indian economy due to the decrease in exports, the declining profits and the unemployment being created.

The US economy is the major client of the Indian IT sector, the main outsourcing clients are from the US economy, which is the largest spender on the IT products and services. Now that the US economy has started showing the signs of slowdown, and is moving towards a recession, it has started creating and sending the ripples across to the Indian economy.

The Indian IT sector is majorly dependent on the US and will suffer huge losses in case of the recession in US economy. With already decreasing profits due to the rising value of money, the reduction in the work assignments is also forcing companies to cut its workforce.

Know the Base of Indian Economy

Do you know the economy of India is the tenth-largest economy in the world by nominal GDP and the third-largest by purchasing power parity. The country is one of the G-20 major economies and a member of BRICS countries(Brazil, Russia, India, China and South Korea) . On the basis of per-capita-income India ranked at 141st position by nominal GDP and 130th place by GDP in 2012, according to the survey of IMF.

India is world's19th-largest exporter and the 10th-largest importer for the various items. The economy slowed to around 5.0% for the 2012–13 fiscal year compared with 6.2% in the previous fiscal year. On 28 August 2013 the Indian rupee hit an all time low of 68.80 against the US dollar. In order to control the fall in rupee, the government introduced capital controls on outward investment by both corporates and individuals.

India's GDP grew by 9.3% in 2010–11, hence, the growth rate has nearly halved in just three years. GDP growth rose marginally to 4.8% during the quarter through March 2013, from about 4.7% in the previous quarter.

The government has forecast a growth rate of 6.1%-6.7% for the year 2013–14, whilst the RBI expects the same to be at 5.7%. Besides this, India suffered a very high fiscal deficit of US$ 88 billion (4.8% of GDP) in the year 2012–13. The Indian Government aims to cut the fiscal deficit to US$ 70 billion or 3.7% of GDP by 2013–14

Know Indian Export and Import

We Export

  • Software
  • Petrochemicals
  • Pharmaceuticals
  • Precious stones
  • Textiles
  • Machinery
  • Iron ore
  • Chemicals
  • Automobiles


To

  • United States 12.7%
  • United Arab Emirates 12.3%
  • China 5.0%
  • Singapore 5.0%
  • Hong Kong 4.1%



We Import

  • Crude oil
  • Raw precious stones
  • Machinery
  • Fertilizer
  • Coal
  • Steel
  • Chemicals


From

  • China 11.0%
  • United Arab Emirates 7.7%
  • Saudi Arabia 6.7%
  • Switzerland 5.9%
  • United States 4.9%

Various factors those affect the Indian Economy

GDP is 1.824 Trillion USD in 2012, it is at the 10th position in world, and PPP is 4.684 Trillion USD in 2012, it at 3rd position, the GDP growth is 3.986% during 2012-2013, GDP per capita is USD 1491 it is at 14th position in world during 2012 and USD 3829 PPP in 2012 it is at 130th position in world.

Few Important Points

  • GDP by Agriculture :- 17.4%
  • GDP by Industry:- 25.8%
  • GDP by Services:- 56.9%
  • Population Below Poverty Line:-30%
  • Labor force in agriculture:- 51%
  • Labor force in Industry:- 22.4%
  • Labor Force in Service:- 26.6%
  • Underemployment:- 3.8%
  • Avg Gross Salary:- 1410 USD/year


Main Industries of India

  • Textiles
  • Chemicals
  • Food processing
  • Steel
  • Transportation equipment
  • Cement
  • Mining
  • Petroleum
  • Machinery
  • Software
  • Pharmaceuticals

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