Thank you for your blessings and assistance!
Thank you for your blessings and assistance!
As industries wrap their heads around the current global crisis, there’s a young man from Jammu, who has been constantly providing solutions to overcome the challenges that this time has brought with it.
Meet Abheek Dutta, a software professional – currently serving as the Senior Vice President of the renowned Henson Group – who with his innovative ideas, strategic solutions and cutting-edge technology, is helping corporates, industries, and startups to tide over many hurdles and challenges that this COVID era is offering.
I must confess! My outlook towards the repercussions of the pandemic on the markets has taken a bolt. Not that I have entirely changed my stance from this being just a passing cloud but the varied opinions from different corners have educated me about the possibilities that we shouldn’t ignore.
In a recent poll conducted for my LinkedIn community, only 25% of respondents believed that we’ll bounce to normal very soon. On the other hand, approximately 40% believed this will begin a marathon of scary job losses which has just begun while 33% see it as an opportunity to revamp our skills and embrace the digital transformation.
2020 shall not go down in history with any pleasant memory. More than just a pandemic calendar, the year has knocked our socks off with repercussions that are beyond control. As the world economy takes a hit, the employment facet has changed with millions of people losing their jobs. From the unorganized sector down in the hierarchy to the most discussed markets such as IT, no one is spared. Particularly IT that performs closely with all sectors and verticals, is going through a highly volatile phase.
The COVID19 Impact
From the end of March till present, all IT companies have both slashed salaries, sacked employees and even forced LOP leaves for indefinite periods. Consequentially, abrupt job loss emails from the leadership had become a routine. All sorts of predictions from market experts and advisors were found backing the wrong horse.
If the developed economies in the west couldn’t absorb the wrath then imagine the impact faced by countries like India where the unorganized sector accounts for more than 90% of GDP. As per the Centre of Monitoring Indian Economy, the jobless rate in the country surpassed 27% by the beginning of May.
Courtesy – Centre of Monitoring Indian Economy
As per the findings, the unemployment rate in March had broken the record of 43 months. The rate of 8.4% had further risen to 23.4% in April. Scary but the truth!
So are we at risk of 100 million jobs?
Unfortunately, Yes! As per SC Garg, a finance ministry bureaucrat has cited 100 million going unemployed in manufacturing, construction and services. Putting it into figures, close to 14 crore Indians are at immediate risk of losing their jobs. Not only have these times put the careers of their employees trailing by 3 years but have also put the government under extreme pressure to organize relief packages.
In my previous post, I had discussed the government’s readiness to handle the crisis through relief packages for the workers. Besides enabling the moratorium facility for all the employees in the country, the authorities have identified millions of those in the unorganized sector to release the financial aid. As reported by the Economic Times, the government has been planning to release a swaddle of unemployment benefits under the Employee State Insurance Corporation scheme. These include benefits up to 50% of the last drawn salary in recent 3 months. Read more about the government’s readiness to fight the economic crisis here.
An explosive rise of the Gig’s economy has finally arrived
Freelancers and on-demand contractual service providers have been gaining popularity for more than a decade now. These professionals who are known to have adorned skills more than the usual full-time resources are economically more viable for enterprises. Since they are paid only for the tasks they have done, organizations have confirmed saving fixed overheads. It is obvious that those fixed cost roles and profiles that aren’t adding value to the business will be called off. The reporting hierarchies will be shortened and more freelancers will be brought on board. Therefore, except core job profiles, most roles will either be outsourced or assigned to contractual workers.
Next to the sacking of millions of workers, half paid salaries is another immediate reaction that the enterprise sector is facing the criticism for.
When the entire world ushered into lockdown in the last week of March, employees across the industrial facet were shocked to receive emails pertaining to the unfixed amount of salary payouts for the next few months. Since companies are no longer ready to back their employees beyond their capacity, unfixed salary payouts followed by more freelancers on board will change everything. Therefore, variable salaries will now become a mainstream practice wherein employees will have no choice of performing beyond expectations.
Final Word – How long will the job losses continue?
As a business leader, I stand witness to the horrors of job cuts. Having dealt with these circumstances first hand, I believe this is a passing cloud and will soon evade. However, the greater challenge will be to recover the losses within limited means and that’s what the workforce all over the world must get adaptive to.
The MSME sector is on the verge of collapse. After Union Minister Nitin Gadkari cited concern in his last statement and asked industrialists to clear the dues of their vendors, India’s claims to successfully absorb the COVID-19 miseries has been put under the scanner. Are we really in a better position? If yes then why are millions of workers forced to return home on foot? If No, how ready are we to fight the impact?
MSMEs hold undeniable importance in India. 99.5% of MSMEs have been identified as micro employers and are almost equally distributed in urban and semi-urban regions of the country. And the rest are inordinately established in the urban cities. Contributing 30% to the economy’s GDP, the sector is feared to have lost 5 lakh crore of gross value added.
Furthermore, wages account for 80% of the gross value added which means 10 crore jobless workers collectively suffered a wage loss of Rs 4 lakh crores. As the virus outbreak has directly derailed more than 6.3 crore MSME businesses in India, any delay in action to rescue them could produce dangerous results.
What can we expect?
A fund stimulus package of 12 lakh crore on its way
By the end of Lockdown 2.0, the central government finally addressed the needs of the drowning MSME sector. With no official announcement as yet, sources hint at a stimulus package meant for rescuing the lifeblood of the Indian economy. As per reports, the government is looking forward to raising a major percentage of the money from the markets. According to the statement from the Finance Ministry that also controls the Economic Affairs Department, the government plans to raise 12 lakh crore in the fiscal year 2020-21.
With this move, the government foresees a major relief in uplifting the smallest organized sector in the country. Not only will the move ease the disparity between the expenditure and income but will also directly impact the unorganized sector employing millions of labourers.
The government must proactively address the following key points to uplift the sector
Given the severity of the COVID-19 impact on the MSME sector, the government has identified major points to target. And as expected, the inability to pay the salaries has emerged as the main bone of contention. Therefore, the Centre is expected to use the funds towards providing wage support for workers. Furthermore, this will be formally brought under the Employees State Insurance Scheme Corpus.
MSMEs have been out of operations for more than 2 months now. Add to it the pending salaries of 2 months has worsened the circumstances. Thus, the sector looks up for a grant of at least Rs 80,000 crore to seek some relief from the pressures.
Not to miss, the 3-month loan moratorium approved by the RBI, shall be extended for businesses with term loans. It is anticipated that the moratorium period shall be extended up to 9 months.
Despite aid promises from the government, lack of resources stands as a graving challenge among the MSME enterprises. There has been a major communication failure from the authorities that produced a sentiment of confusion among millions of workers. Whether they should leave for home or wait for the government to revive the industries, no one knows. And if left unattended, this could branch out to more complexities in the months to arrive. Hence, deserves immediate action.
Another key concern MSMEs are currently facing involves a lack of working capital. The central government is, reportedly, also planning to provide interest-free working capital to MSMEs. With production coming to a standstill, many businesses have found themselves severely cash-strapped, having not received dues for products they have already supplied.
As the industrial operations including those of FMCG production units has slowed down or completely halted, MSMEs those who were dependent on these units are facing a severe crunch of working capital. The government, therefore, has to address this to.
The million-dollar question is brimming to highlight those responsible – Did India act late in providing economic relief to the small scale industries?
Let’s face it. We shouldn’t be taking any pride over a lesser mortality rate when millions of daily wagers are forced to walk hundreds of miles.
In all honestly, the government did take long to announce the aid. Even though are COVID-19 numbers are less scary than the western countries, we lag behind their readiness to help the small scale industries. Canada, for example, pledged to raise USD 27 billion in direct support to businesses and their employees. While Germany is extending aid of USD 800 billion for the country.
As confirmed by Nitin Gadkari, industries, state governments, central government owe up to 6 lakh crore to allied vendors and other small industries.
There are no second thoughts that comparing our situation with those of developed nations in the west is the sheer covering of facts. As an economy driven by daily wagers, our problems are different and so should be our plan of action. Despite partial relaxation in the lockdown on 4th May, more than half of the economy was shut. And the number of workers losing their jobs is the scariest part – 10 crore.
However, the assurances from government authorities will inject new life in otherwise handicapped businesses. After successfully extending the moratorium facility to millions of people, such an initiative to provide relief package will pull the economy out of the misery.