In one of the biggest cost-cutting exercises in its history, Snapdeal is laying off about 600 people. Snapdeal co-founders Kunal Bahl and Rohit Bansal have taken cent per cent salary cut, whereas several other employees have gone in for voluntary pay cuts. Reportedly, the company is also mulling shutting down offices in Hyderabad, Surat, Ahmedabad, Indore, Kolkata, and Bhopal, along with a few warehouses.
The downfall of one of India’s biggest e-commerce companies is not an isolated event. Flipkart has been devalued for the seventh time this January 2017. The shares have dropped considerably in the wake of the devaluation. India’s largest e-commerce marketplace Flipkart laid off 800 employees the past year. Similarly, taxi aggregator Ola has followed suit; it fired close to a thousand employees the past year. Fashion e-commerce firm Yepme.com is reportedly planning to reduce employee strength by 80-90% and forcing entire teams to sign the dotted line. Zomato and Foodpanda too fired employees.
“Has our company and industry been going through a troubled time? Absolutely. Did we make errors in our execution? No doubt about that,” Bahl said in an email.
The trend is not restricted to e-commerce industries. Hindustan Times has shut down a few branches and fired a number of its employees. The combined layoffs in Hindustan Times and Anand Bazaar Patrika (ABP) publications amount to more than 1,000. Telecom company Aircel would lay off 700 employees, which is almost 10% of its employee strength across the country. And this is just during the first phase of downsizing as the company moves ahead with the proposed merger with Reliance. Currently, Aircel has 8000 employees. There are examples galore: Larsen & Toubro (L&T), India’s largest engineering firm announced job cuts of 14,000 employees. The development is perhaps India’s largest layoff ever.
The statistics also tell the same story. India created only 135,000 jobs in eight labor-intensive sectors, according to the Labour Bureau in 2015, whereas the number of people working or looking for jobs grew by more than 10 million. According to the Economic Survey, annual employment growth in India was only 0.5 percent during 2004-12, whereas labor force growth was 2.9 percent.
Cash inflow has been scanty and fresh funds are drying up, partly of course due to the demonetization drive. In a labor-intensive country like India, the biggest metric of growth is jobs and not some GDP figure, which may also take a hit in the long run.
Major fast moving consumer goods (FMCG) players such as Hindustan Unilever Ltd (HUL) and Nestle, two of the biggest names in the industry, have reported profits and revenues slowing down. Almost all companies took a heavy toll in the December quarter. According to a Business Standard report, FMCG sales growth declined to 5.3% in the December quarter. Sales tanked in December, particularly in urban areas. FMCG major Nestle has admitted that it took a hit of Rs 100 crore the past quarter and that the sector will need at least six months to get steady. Hindustan Unilever Ltd also experienced a decline of 4% in volumes.
With layoffs happening left, right, and center, a slowdown seems imminent. When people don’t have incomes then how do they buy? Their purchasing power will nosedive. All fancy initiatives such as Skill India, Make In India, and Digital India would come to a naught if there is no job creation.