New jobs get scarce in India as key sectors such as banking and automotive scale back. Image Credit: AFP

Mumbai: India’s job scene — with unemployment at a 45-year high — is looking gloomy with hiring activity slowing across most sectors.

Banks, insurers, automakers and logistics and infrastructure companies are among those hiring at a slower pace, according to the study by Care Ratings Ltd that relied on annual reports for the year ended March from nearly 1,000 companies. The services sector, which accounts for a bulk of the economy, was the lone sweet spot that displayed robust jobs growth, the study by the credit assessor showed.

The sluggish pace of hiring lends itself to a vicious cycle in an economy already reeling from weak consumption demand, which has dragged growth down to a five-year low in the March quarter. For Prime Minister Narendra Modi, rising joblessness risks stoking social tensions and tarring India’s image as an attractive investment destination.

Rising unemployment burdens economy

Total employment increased from 5.44 million as of March 2017 to 5.78 million in 2018, which is an increase of 6.2 per cent, according to Care. In the year ended March, that increase was lower at 4.3 per cent, with the total number of employed personnel standing at 6.03 million.

Care said that while sectors like hospitality saw increased outsourcing, there was a decline in headcount for iron, steel and mining companies due to lower growth in production and increased bankruptcy related issues. India’s banking sector boasts of one of highest stressed asset ratios, a factor that has also weighed on hiring.

“Banks have resorted to both outsourcing as well as rationalisation — both compulsory and voluntary — to control headcount,” Care said, adding that some weak state-run banks were barred from new hiring because they were ring-fenced while boosting their capital base and bringing down their non-performing loans.