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A Challenging Year Ahead for Job Seekers
Tue, 20 Dec Pre-Open

With demonetisation set to reduce India's economic growth by 1% over the next one year, the job market too is heading for yet another gloomy year amid global headwinds and cash crunch back home.

Large sectors like information technology, BPOs, automobile, transport, gems and jewellery, handloom and leather industries had witnessed negative job growth during 2015. Demonetisation would only add to their existing woes.

A lot of unorganized sectors - such as textiles, garments, leather etc have been severely hit. As many as 4 lakh people, mostly daily wagers, may have reportedly either lost their jobs or shunned work temporarily due to the lack of payment so far.

One must note that the informal sector runs mostly on cash and accounts for 48% of India's total output and 80% of employment.

Even E-commerce sector is expected to lose 20% of the headcount in the next few months as over 60% of the deliveries happened through cash on delivery (COD). With short term liquidity gone out of the system, COD has become a big question mark. E-commerce firms currently employ around 1 million people in India.

Meanwhile, Trump's emphasis on bringing jobs back to the US, his anti-immigrant stand and his stated aversion for H-1B Visa is expected to have a negative impact on the Indian IT industry.

As per month-on-month analysis, hiring reportedly saw lower growth this year as compared to 2015, and actual salary increase was lower than the projected figures of 20% on the higher side, and above 10% on average. The number of households getting work in November dropped by 23% compared to the previous month.

According to Willis Towers Watson, going ahead, only 31% companies are confident about their hiring outlook in the next 12 months and employees are likely to see a single digit salary increase for the first time since 2011. The compensation tracker had in its annual salary increase survey last year pegged attrition levels at a five-year low of 16.3%. Any further dip will spell at least a six-year low.

Besides demonetisation, another factor that is likely to keep employees from changing jobs is that the much-anticipated boom didn't quite materialize in the recent past.

In short, the threat to GDP, and job scenario is very real.

Should investors be worried?

This is what Richa Agarwal has said in a recent issue of Research Digest :

  • In our meetings with managements, one of the common challenges these companies tell us about is competition from the unorganised segment. The latter operate locally on a low scale and rely mainly on cash sales.

    With all the changes taking place around us, it is the informal segment and unlisted small businesses that will be worst hit. The cost of doing business for companies in the unorganised segment is likely to go up.

    And demonetisation is just the beginning.

    Accounting norms are likely to become clearer and stricter for all, and tax evasion will be more difficult. Meanwhile, India is expected to take further steps in the direction of a cashless economy.

    With GST close on the heels, the story of India, for listed small companies, has become better at the cost of unorganised segment.

She believes that macro events like demonetisation could in fact help value investors by bringing the valuations well below the intrinsic value:

For most stocks, demonetisation has not changed the long-term fundamentals. Though it indeed has led to short-term uncertainty.

As for our process, demonetisation changes nothing. We are sticking to cardinal rules of investing. For us, buying stocks means having part ownership in the business. We will stick to the businesses we understand and the managements we like. If there is enough value, we will scoop them.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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Jan 22, 2018 (Close)