Indian exporters shed 1m jobs

New Delhi: Indian exporters have cut as many as 1 million jobs, more than 15 times a December estimate had shown, amid the most protracted decline in overseas sales in a decade, the commerce ministry said.

"The job losses are very substantial and are likely to be of the order of 700,000 to 1 million, including temporary staff," the Commerce Secretary, G.K. Pillai, said in an interview in New Delhi on Wednesday. Exports fell 1 per cent in December and any recovery "is likely only by June," he said.

Governor Duvvuri Subbarao this week lowered the Reserve Bank of India's economic growth forecast to a six-year low of 7 per cent as a global recession pummels Asia's export-dependent nations. Rising unemployment may erode the popularity of Prime Minister Manmohan Singh's government as it prepares to fight general elections due before May.

"Job losses are going to be substantial," said Pillai, the top bureaucrat in India's commerce ministry. "Labour-intensive sectors like gems, jewellery, clothing, textiles and handicrafts are the worst hit."

The ministry had last month estimated exporting companies had shed around 65,500 positions as contractions in the US and Europe, the country's biggest markets, damp overseas demand. Indian exporters currently employ about 150 million workers, according to the Federation of Indian Export Organisations.

Gokaldas Exports Ltd., India's largest exporter of clothes and controlled by Blackstone Group LP, plans to cut a "few thousands jobs in the next two months," said Rajendra Hinduja, managing director of the company. The Bangalore-based company employs about 47,000 workers.

"Profitability is going to be nowhere near what it was last year and we are working just to keep our factories running," Hinduja said. "The situation continues to be grim and our industry needs urgent help from the government."

India's exports tumbled 9.9 per cent to $11.5 billion (Dh42.23 billion) in November from a year earlier after contracting 12.1 per cent in October, the first decline in seven years. Industrial production rose 2.4 per cent in November, after dropping 0.3 per cent in October, the first contraction in 15 years.

Export growth may slow to 17 per cent in the 12 months to March 31, compared with 25 per cent a year ago, Trade Minister Kamal Nath said in an interview in Davos on Wednesday. "There will be job losses due to the global recession, but I think domestic demand is going to help us."

The stock market has declined 7 per cent in January, extending a 53 per cent drop in the share index last year, on concern the demand slowdown will crimp profits of Indian companies. The government is scheduled to release December overseas sales figures on February 2.

"The job losses are going to be much more enormous than what is appearing on the ground," said Shishir Jaipuria, managing director of Ginni Filaments Ltd., a maker of fabric and textiles. Jaipuria says he has fired 50 workers so far.

To help exporters, the central bank in November extended the period for subsidised pre-shipment credit to nine months from six months and increased the export refinance limit for commercial banks.

"The government may roll over credit to ease things for some of the worst-hit export-oriented industries," Pillai said. "But any stimulus package will be of little help unless and until demand revives in the western countries" that are India's biggest export markets, he said.

The International Monetary Fund (IMF) on Wednesday said world growth will be 0.5 per cent this year, the weakest postwar pace. That is down from a November prediction of 2.2 per cent.

Global unemployment may rise by around 11 per cent this year to 210 million people as the financial crisis cripples growth, the International Labour Organisation (ILO) said in a report Wednesday.

The global expansion this year will come to a "virtual standstill," said Olivier Blanchard, the IMF's chief economist.

Demand for made-in-Asia goods has slumped amid the deepening global slowdown. China's exports in December fell 2.8 per cent, the biggest decline in a decade. Singapore's exports posted the biggest contraction since 2002 in the same month.

"The government is engaged in a detailed and comprehensive analysis to figure out which sectors of the industry need help and to what extent," Pillai said. "I don't think we are going to announce any relief package in the next one month."

Measures to spur the economy began on October 6 when the Reserve Bank of India cut the amount of money lenders need to set aside with the central bank. On October 20, Governor Subbarao presided over the first interest-rate reduction in four years and the benchmark repurchase rate is now 5.5 per cent, down from 9 per cent in July.

Prime Minister Singh's government has also announced two fiscal stimulus packages which include tax cuts, the injection of capital into banks and allowing overseas investors to double purchases of debt.

Growth in India's $1.2 trillion economy has weakened for two straight quarters and the government is forecasting 7 per cent growth this fiscal year, the slowest since 2003.

Sluggish exports and domestic demand have forced companies including Tata Motors Ltd., the nation's biggest truck maker, and Hyundai Motor Co. to reduce output and workers in India. Hyundai's unit, India's biggest car exporter, will miss its output target this year, the company said.