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Structural changes in the economy slowly but surely alter the relationship between gross domestic product (GDP) and employment, as they slow down job creation relative to economic growth .
HR consultants and economists told DNA Money about this trend.
Anonorup Ghose, Aon Hewitt's partner, cited structural changes such as increased public spending, automation, and weak growth in the real estate sector, among the top three reasons for the real estate market downturn. GDP / employment ratio of recent years.
"In the past, for every percentage of GDP improvement, there was a corresponding improvement in employment, and for a while the GDP-to-employment ratio has fallen dramatically, much of the GDP growth is due to public spending, which does not create a large number of (permanent) jobs.The second reason is that the replacement of the workforce by the technology is very high.The actor is that the most The big job-creating sector – real estate – is in a very slow growth phase right now, it's a structural change that should not be reversed quickly, "he said.
A recent study by the Care Ratings rating agency on employment found that the rate of new job creation by companies last year was 3.8%. below the GDP growth rate of 6.7%. This employment growth rate was also lower than that of 4.2% for fiscal year 17.
"The overall growth in employment was moderate over the course of the year. Exercise 18 vs. Exercise 17. However, employment growth of 3.8% during FY18 for covered samples was much slower than economic growth. 6.7% achieved in FY2010, reflecting the badumption that higher economic growth would translate poorly into higher job creation ", concluded the Care report, Madan Sabnavis, Chief Economist, and Sushant Hede, Associate Economist.
Addressing DNA Money, Sabnavis said that despite the recovery in economic growth over the past few quarters, job creation has not kept pace . 19659002] "The thump rule is at best, the growth rate of GDP and employment should be 1: 1, if the GDP growth rate is 7.5%, the growth rate of employment should also be 7.5% and now, even if employment increases substantially to 3.8% or 4% or 5%, it will remain below 7.5%, "he said.
Economist Care added a warning that companies add a lot of people The figures for employment growth do not reflect the size of the companies.
"It should be noted, however, that many companies do not take people into office, which can not be captured.This trend increases a lot.These roles are treated as administrative or miscellaneous expenses. This is the only discretionary cost that companies can reduce when their turnover does not increase at a sufficient rate, "he said.
In recent years, businesses have struggled to improve their performance over the next few years. face of the demonetization and implementation of the new indirect tax – Goods and Services Tax (GST).
[19659002] "There was the initial problem of your production, pricing and so (companies) were not able to meet it (GST), so their sales were affected, as well as their jobs "said the chief economist of Care Rating.
million. Ghose spoke of the rise in the temporary workforce engaged by companies, while stating that the base of this segment of employees was not "enough." To change the growth figures of the company. # 39; employment.
"Yes, there is a growth in the temporary workforce, but its relative size is so small that even if growth were to be around 50% or 60%, its numbers would remain very low compared to many multiples of the percentage of growth in fixed employment, "he said.
According to him, India would have recorded a temporary workforce of about 1 to 1.5 crore, or even less. small percentage of the total Indian population of about 130 crores; "It's not a relevant base to really start making projections."
Suchitra Dutta, executive director of the Indian Staffing Federation (ISF), reported delays in some projects that were expected to drive growth in the infrastructure and manufacturing sectors could have experienced a decline in number of jobs.
"Overall, some projects have fallen behind, with infrastructure and manufacturing appearing to be picking up pace, but that has not happened." Momentum in infrastructure is a little slow because some projects have been delayed, "she said.
Ghose said that business confidence in the future outlook was weakening, order books remaining stable, but capacity The utilization rate has fluctuated between 71 and 72% over the last 16 quarters. He said that new jobs usually start when a company reaches a level of comfortable capacity utilization.
"A new job means a new generation of capacity, there is still so much underutilized capacity that new capacity will come later, and capacity utilization means that employment is stabilized. it starts to cross 80-85%, new jobs start, "said the human resources expert.
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