Meltdown fallout: India to see unemployment zoom
The worst fear has been confirmed. India has been debating about the imapct of US meltdown its economy and projected growth rate.Signals of the slowdown in the US economy is most visible in the real estate sector where prices have corrected by 15-20%. Other sectors of the Indian economy have also started feeling the punch. Sectors of Indian economy like IT could be affected by a US slowdown because of its export-oriented nature.
The recession is likely to a decrease in demand for goods and services in Indian economy and that in turn will lead to a decrease in production, lay-offs and a sharp rise in unemployment. Unemployment rate are likely to zoom to new level.
Fears of the global economic slowdown hitting employment have deepened as government has reported a deceleration in labour intensive segments in recent data, a trend that might become more pronounced in the next weeks and months.
In response to a question in Parliament, minister of state for commerce and industry Jairam Ramesh has said that there has been deceleration in exports of labour intensive products, particularly textiles, leather, marine products, carpets, sports goods and handicrafts during 2007-08 as compared to the previous year.
The situation is unlikely to get better in the current year with other segments too tottering. RBI data, up to March 2007, indicate there are more than 1.14 lakh sick micro and small enterprises. And from 2006 up to August 2008, nearly 280 units have closed down rendering at least 12,000 people jobless.
The growth in domestic industry is reported to be poor with a negative central excise collection of minus 3.8% recorded for the quarter ending September. The lower excise collection came soon after results of the Index of Industrial Production (IIP) pointed a 10-year low in growth of industrial output based on the results for August.
The industrial growth, measured in terms of IIP, came down from 11.6% in 2006-07 to 8.3% in 2007-08 which led to a slower growth in the capital goods sector that makes equipment consumed by other sectors.
Both the intermediate and consumer goods sector witnessed massive downfall. While the intermediate goods came down to 8.9% in 2007-08 from 12% the previous year, consumer goods fell a steep 6.1% from 10.1%.
Another major employment generating sector, the information technology and BPO industry, has reported slower growth with many banking and financial companies in US and European countries going bust or reporting massive financial crunch.
Admitting a downturn in the IT and BPO industry, minister of state for communications and IT Jyotiraditya Scindia had informed Parliament on Monday that the growth rate for 2008-09 had been moderated to 21-24% as compared to an average growth rate of 30%-plus recorded over the last few years.