Home » Business & Economy News » Decline in global trade may lead to another jobless growth year for India

Decline in global trade may lead to another jobless growth year for India

Neeraj Thakur | Updated on: 8 June 2016, 13:41 IST

The main issue

  • Data indicates that 2016 will be worse than 2015 for global trade
  • Slow global economy also means massive job losses

Affect on India

  • This could be another year of no job growth in India
  • In 2015 exporters laid off 10% of the workforce and 2016 could be worse

More in the story

  • Is another global recession coming?
  • What does this do for PM Modi\'s Acche Din promise?

Is the global economy headed for another recession? Perhaps it's too early for a prognosis. But latest data do indicate 2016 will be worse for global trade than last year. That's bad news for India.

India pipped China to be the fastest growing economy in 2015 largely thanks to domestic consumption.

That growth, however, failed to create jobs; India's exports have been on the decline for 17 months on the trot. If the nosedive continues, it would lead to massive job losses.Also read: India the fastest growing economy? Nope! Guess again

A slowing global economy will lead to shutting down of thousands of export units in India that have somehow survived the last two years.

Figuring it out

JPMorgan Global Composite Purchasing Managers' Index (PMI) was at a three-month low of 50 in May 2016.

Also known as the Global All-Industry Output Index, it's a benchmark for manufacturing and services sectors."The global manufacturing sector maintained its lethargic start to 2016. Rates of expansion in production and new orders also eased to a near-stagnation, while the pace of contraction in new export business was one of the steepest during the past three years," JP Morgan said.The muted performance in manufacturing was also reflected in the labour market, as staffing levels fell for the fourth straight month.Another fear is the chance of 'Brexit' - an abbrevation for 'British exit' from European Union.It refers to the possibility that Britain will withdraw from the European Union. The country will hold an in-out referendum on its EU membership on 23 June.In its latest economic outlook forecast, the Organisation for Economic Co-operation and Development has warned that - "A decision to exit would result in considerable additional volatility in financial markets and an extended period of uncertainty about future policy developments, with substantial negative consequences for the United Kingdom, the European Union and the rest of the world."

The India story

India's merchandise exports as a proportion of the country's GDP accounted for 17%.

In 2015-16, cumulative export from India came down to $261 billion (Rs 17.4 lakh crore at Wednesday's exchange rate). That's about a 15.9% decline from $310 billion from the previous financial year.

SC Ralhan, president of FIEO, expressed his concerns on the issue by saying, "Looking at the global economy growth data, I have a feeling that 2016 would be worst that 2015. Lot of experts who have somehow managed their businesses in the past 17 months may have to shut down."

Ralhan says that in 2015 "most exporters have had to lay off at least 10% of their workforce".

According to official estimates, India's GDP grew by a mere 7.6% in 2015-16

Though India does not have credible unemployment data yet, a survey done by the labour ministry for 2015 shows in the whole year India added only 1.35 lakh jobs compared with 12.56 lakh jobs in 2009 - when economic recession hit the world.

Also read: Why is the IMF afraid of questioning India's GDP numbers?

According to official estimates of the Indian government, the country's GDP grew by 7.6% in 2015-16.

The government has been criticised for giving India a jobless growth year and a major reason for it is the decline in the exports sector.

Most exports from India take place from small and medium enterprise (SME) sector that employs 40% of India's work force.

Given the dismal number of jobs generated by the fastest growing economy in the world, a sluggish outlook for exports in 2016 ad news spells for job creation in the country.

Bad news for NDA

Madan Sabnavis, chief economist at Care Ratings, is of the view that slowdown in the global eonomy would not have any impact on India's GDP, as India's growth story is dependent on global trade.

But Sabnavis accepts that it would have an impact on the government's ability to create jobs.

"A decline in exports effects the SMEs and they employ a huge part of India's workforce," said Sabnavis.

While there is not much that the NDA government can actually do to revive global trade, but if it sees a second consecutive year of jobless growth, soon numbers will lose value and they may face tough questions at the time of elections.

Edited by Jhinuk Sen

Also read: India is misreporting growth data, it's becoming like China: R Nagaraj

First published: 8 June 2016, 13:41 IST
Neeraj Thakur @neerajthakur2

As a financial journalist, his interface with the two dominant 'isms'- Marxism and Capitalism- has made him realise that an ideal economic order of the world would lie somewhere between the two. Associate Editor at Catch, Neeraj writes on everything related to business and the economy. He has been associated with Businessworld, DNA and Business Standard in the past. When not thinking about stories, he is busy playing with his pet dog, watching old Hindi movies or searching through the Vividh Bharti station on his Philips radio transistor.