India's Job Crisis Gets Bigger: Tata Motors Lays Off 1,500 Managers

Joining a growing list of Indian companies that are laying off workers, Tata Motors on Tuesday, 23 May, decrease its managerial workforce by 1,500 “as part of an organisational restructuring exercise”. This reportedly marks a 10% reduction in white collar workers for the Mumbai-based automotive manufacturer.

The company said that the move was part of a “holistic fundamental review” of the company and a measure to decrease the number of managerial levels from 14 to 5. The company has stated that it will roll out a new organisational structure soon to reduce costs and increase efficiency, whilst assuring reporters that blue collar workers will not be affected by the exercise.

Speaking to the Press Trust of India, the company’s Group Chief Financial Officer, C Ramakrishnan, said, “We underwent a very detailed exercise in terms of the roles, the requirements and the fitment of the roles etc. It was a very comprehensive exercise which we rolled out over a 6-9 month period which also factored in performance and leadership qualities.”

India’s job crisis

With the recent move, Tata Motors joins many other companies, most of them in the IT sector, that have laid off workers in the past few weeks. Larsen & Toubro, for example, let go of 14,000 jobs while HDFC Bank shed 10,000 jobs. India’s IT sector, which has been the coveted engine of the global IT revolution, has worryingly reported over 60,000 jobs being lost.

India’s job crisis can be attributed to many factors, from automation and renewed US hostility to foreign talent to lack of sufficient job creation and poor training of new graduates.

All these factors have led to what economists have called a “jobless economic growth”, where there is positive economic development while there is decreasing levels of employments.

Automation the main culprit?

According to researchers, 4 out of 10 jobs globally would be lost to automation by 2021. Around the world, and particularly in developed countries, automation has precipitated an unemployment crisis, which has escalated due to economic stagnation and ageing populations. The threats – and opportunities – of automation have become a major component of public debate in these countries. This is perhaps best exemplified in the recent French Presidential election where automation and unemployment was a major campaign issue or the comments by Bill Gates, who proposed taxing robots to slacken the pace of automation so that other forms of employment can be made for human workers.

In India, a country where the pace of job creation is insufficient to keep up with the pace of increase in labour force, automation has added to the woes of the jobs market. However, it may seem to the average Indian that automation is not yet a major threat to Indian jobs. This is a misconception, as increased automation – and the increased need for automation – has led to the increasing disruption of the economy by technology.

In fact, only in October 2016 World Bank President Jim Kim warned that as much as 69% of Indian jobs are threatened by automation. Without a concrete strategy to re-employ blue collar and white collar workers by the government, it will become invariable that the Indian economy will head into an unemployment crisis.

Labour Bureau report

These worrying factors are vindicated by the recent Labour Bureau report, which found that while the Indian economy is growing at around 7% per year, the jobs market grew by just 1.1% last year. Meanwhile, under-employment is at a staggering 35%.

Furthermore, in 2015, India was able to add only 135,000 jobs in eight labour-intensive sectors while the labour force grew by over 10 million in the same period.

The Logical Indian take

The above reports and findings suggest an escalating employment crisis. Practically speaking, with many affluent Indian companies laying off their workers and managers, this employment crisis may already be here.

The government needs to urgently address these issues before the situation blows out of proportion. It is critical that large-scale generation of employment occurs in the near future before more and more youths join the ranks of the jobless, losing their savings and their futures.

To do this, the government should encourage the creation of small- and medium-sized businesses, promote foreign direct investment in the retail sector, address the looming threat of non-performing assets (NPAs), champion more economic decentralisation in the 2017-2018 Budget, and engage in public-private partnerships (PPPs), especially when it comes to infrastructure projects.

At the top of all this, the government must present to the country a clear plan or blueprint on how it will diminish the threat posed by automation whilst bridging the wide gap that already exists between job creation and labour generation. This will be a delicate and crucial challenge, but it must be combated right now as it will only grow worse over time.