Hunting for jobs? India Inc FY18 hiring slowest in 3 yrs, more pain ahead

Slowdown in industrial, infrastructure sectors and low volume growth in IT led to only 1.9% YoY rise in hiring

A slower-than-expected economic recovery has hit fresh hiring by corporate India.

The employee count of India Inc was up just 1.9 per cent year-on-year in 2017-18, growing at the slowest pace in at least three years. 

In comparison, the headcount was up 3.5 per cent year-on-year in the previous year and 4.6 per cent in 2015-16 (see chart below).

At the end of March 2018, around 3.5 million people were employed by India's top 171 listed companies that are part of the BSE 200 Index. The sample includes only companies whose headcount is available for the last six years.

The numbers have been sourced from the Capitaline database and companies' annual reports. 

These are largely permanent employees as most companies don’t report contractual workers and those working for their sub-contractors. In most cases, the headcount is largely for the listed parent firm and operating companies and excludes their subsidiaries — domestic as well as foreign ones.

In all 64,380 employees joined the rolls of these companies in the last fiscal year, down sharply from 116,300 a year ago and 146,800 in 2015-16. 

The high point for the job market was 2013-14, when India Inc's headcount was up 6.2 per cent and 183,707 people had joined the rolls of these top 171 listed companies.

Experts attribute this to the continued slowdown in the industrial and infrastructure sectors and low volume growth in the information technology (IT) industry. “Till a few years ago, infrastructure, especially construction, was the main job creator at the lower end while IT services exporters created most of the new jobs at the higher end of the salary bracket. Both are now facing growth headwinds,” says G Chokkalingam, founder and managing director, Equinomics Research & Advisory Services.

Most new jobs were created by retail lenders, especially non-banking finance companies such as Bajaj Finance, Edelweiss Financial Services, Indiabulls Housing Finance and Dewan Housing Finance. They were followed by insurance companies such as HDFC Standard Life and ICICI Prudential Life Insurance.

The headcount in the financial services industry was up 5.6 per cent year-on-year in 2017-18 to 922,000. Companies in this industry added 49,212 people to their rolls in 2017-18, though down from 52,561 people a year earlier. The sector accounted for three-fourths of new jobs created in the last fiscal year, stealing the mantle from the IT services exporters such as Tata Consultancy Services, Infosys and Wipro.

In comparison, top IT exporters added just 6,776 people to their rolls in 2017-18, accounting for only 10 per cent of all fresh hiring by India's top 171 companies in the last fiscal year. This is much lower than the past track record of the IT industry.

Six out of 10 new corporate jobs were created by the industry in the previous three years. 

The headcount in domestic manufacturers (companies ex-banks & financials and IT services exporters) was up 0.5 per cent year-on-year in the last fiscal year, slightly up from the 0.3 per cent growth in the previous year but down from 2.3 per cent in 2015-16. The headcount in the industry was up 8,392 in 2017-18, up from 4,718 new hiring in 2016-17.

Experts, however, doubt the capacity of financial services to fully compensate for the hiring slowdown in the IT industry. Worse, they don’t see any upswing in corporate hiring in FY19 given the headwinds being faced by non-bank lenders currently. “As NBFCs and retail banks were leading job creators in the last three years, the present liquidity crisis will force them to go slow on new business growth and fresh hiring, adversely affecting the overall job creation by corporate sector,” said Madan Sabnavis, head economist at Care Ratings.

Sabnavis expects a pick-up in hiring by consumer companies in FY19, but they are unlikely to move the overall needle given their smaller employee base. 

The financmacroeconomicndustry is also highly cyclical where growth is greatly affected by macro-economic changes such as interest rates, exchange rates and corporate capex. In contrast, the IT services industry is highly stable and is counted as a defensive sector by investors.