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August 07, 2019

Auto sales in India slow down, leaving roughly 465,000 people without a job

Auto sales in India slow down, leaving roughly 465,000 people without a job

In India, automotive companies are forced to make job cuts and close down factories due to declining purchases of cars and motorcycles. According to one senior industry source, initial estimates suggest that automakers, part manufacturers and dealers have laid off over 350,000 workers since April 2019. Workers employed on a temporary basis face the greatest risk of becoming unemployed.

IZA World of Labor authors Indraneel Dasgupta and Saibal Kar have looked at the labor market in India since the 1990s. In their article they write: “[…] temporary employment suggests that workers are engaged only for a specific period of time, including fixed-term, project-, or task-based contracts, as well as seasonal or casual work, including day labor.” Regarded as the worst downturn suffered by the Indian auto industry by industry executives, this crisis will also pose a big challenge for the government as the country’s jobless numbers are climbing. Dasgupta and Kar add: “Major reforms are needed in a host of areas before India’s most pressing labor-related issues can be addressed.”

According to a senior industry source, in order to fuel the sector, auto executives are going to demand tax cuts and easier access to financing for dealers and consumers. Given that the sector contributes more than 7% of India’s gross domestic product, Vinnie Mehta, director-general of the Automotive Component Manufacturers Association of India (ACMA), defined the state of the automotive industry as a “recessionary phase”. He added that since manpower is the only variable factor for companies, more workers will likely be in danger of losing their jobs; this poses a threat for the more than 35 million people who are employed in the automotive sector, both directly and indirectly.

Figures from the Centre for Monitoring Indian Economy (CMIE) show India’s jobless rate has risen to 7.51% in July 2019—a significant increase compared to 5.66% in 2018. Dasgupta and Kar also note that labor force participation rates have fallen for women as well as for the younger generation: ”[…] labor force participation rates have fallen sharply, especially for women. In addition, youth unemployment remains stubbornly high, an overwhelming proportion of the labor force continues to work in the informal sector, and there is little evidence of a sustained rise in wages for either unskilled rural or factory workers,” they write.

Read Indraneel Dasgupta and Saibal Kar’s article on the labor market in India since the 1990s.