The startup companies which were promoted as the lions of the “Make in India ” campaign have fired close to 15000 employees giving lockdown as the reason for the retrenchments. The ill-planned lockdown brought the already ailing Indian Economy to a grinding halt.
“In March and April 2020 this fall, of course, has been precipitous, but even if we leave aside these two months which fall within the pandemic period we find that between April 2011 and December 2019 there has been a 38 percent fall in the All Commodity Price Index prepared by the IMF (base 2016),” Prabhat Patnaik – ‘The problem of external Debt.’
The State of Indian Economy: 2012 onwards
The Indian economy was growing at a faster pace between 2012-2016. After which it was hit by the two major blows- demonetization and the GST. This caused great damage to the unorganised sector and led to the shutdown of many smaller businesses and increased the unemployment rate drastically.
Many experts have time and again warned of such shocks to the social and political system. In 2018, Raghuram Rajan also highlighted that Demonetisation and GST held back the Indian economy.
From 2017 onwards, while the global economy was peaking, the Indian economy was seeing a steady decline.
Also read: Unemployment: What Could Be Done But Would Not Be Done
According to data released by the Centre for Monitoring Indian Economy (CMIE), India had an unemployment rate of 7.2% in January 2020 with the Urban unemployment rose to 9.7% in January, up from 9% in December 2019. It stood at 7.8% and 8.6% in June 2019. It shows that job loss is not new for many.
But the numbers skyrocketed during the month of April-May after the announcement of lockdown. The unemployment rate saw a steep rise as April- May 2020 stands at 23.4%, a whopping three-fold increase since January 2020.
The reality of govt initiatives
The GDP growth that was used as the prime indicator of economic growth in the last decade has been in a free-fall since 2011 onwards has become stagnant now. In the year 2019, the GDP was 10.3% is oscillating between 8% to 6.6% in 2019.
BJP with Modi as its prime ministerial candidate came to power in 2014 with big promises of development but failed to deliver on all platforms. Now, with six years under his belt, the 2 Cr job creation promise was also discarded away, declared just a´Jumla´, an election gimmick, rhetoric!
Modi government had started several initiatives under the ‘Make in India’ program. The government initiatives that started with much fanfare have been nothing but dud affairs. Few among them are Accelerating Growth of New India’s Innovation (AGNII), ‘Startup India,’ and ‘Skill India,’ etc.
According to a report by Bloomberg Quint in 2019, the industrial output of the country fell the most in nearly eight years with all three industrial sub-segments showing output contraction. The first quarter of 2019 had already hit a six-year low and the government data further slumped in the second quarter.
“Manufacturing output contracted by 3.9 percent in September as compared to a contraction of 1.2 percent in August. Seventeen of 23 manufacturing industry groups saw a contraction in output in September. Within the manufacturing segment, the segment of ‘motor vehicles, trailers, and semi-trailers’ saw a fall of nearly 25 percent in output,” the report added.
Power generation which is seen as an indicator of broader economic activities saw the steepest fall in the present series.
The GDP is the lowest in the last 12 years and doesn’t paint a rosy picture of the Make in India and similar government initiatives.
Lockdown as an excuse for downsizing of employees
The Government had promoted the “Make in India” campaign as a great example for the youth in India to start their own startup.
The start-up companies did benefit from government initiatives like Startup India and Make in India and had early success claimed to be going into loss due to the lockdown.
Though workforce reduction in many of big corporate companies, MNCs and multinational banks had been going on since 2018 onwards. The start-up companies were being looked up to as the next trendsetters and job providers, which they did for a short period of time, but because of lack of labour laws and protection to the employees, it ended up being quite a risky decision for many employees.
In the wake of COVID-19, many of these companies are firing their employees in thousands giving a loss of business due to lockdown. The big businesses also made several rounds of retrenchment exercise in the last few weeks. Though the lay-off and firing of employees had started pre-COVID-19 itself. Many of these “Make in India” companies have now fired 15,000 employees. ( Figure above) .
Many of these startups have amassed a huge amount of wealth due to government subsidies and support. Some of these startups have donated generously towards the much talked about and controversial PM CARES fund. The PM CARES fund does not come under the ambit of RTI and has not declared the amount of money collected through donations.
OYO has donated INR 2.5 Cr towards the PM-CARES fund. It has fired 5000 of its employees citing loss of business.
OLA group has donated 5 crores towards the PM-CARES fund. It has fired 1400 of its employees citing loss of business.
Paytm has pledged 500Cr to the PM-CARES fund. It has fired 800 of its employees citing loss of business.
Cure.fit donated 5Cr to the PM – CARES fund. It has fired 800 of its employees citing loss of business.
While the lockdown might explain the halt in the economic activities, one is baffled by the increasing number of firings from the companies which are expected to go into full-scale production mode once the lockdown is lifted.
Are the start-up companies that were the prime beneficiaries of the Make in India and Start-Up India government initiatives using lockdown as an excuse for the downsizing?
Readability of this news in-between other text links and advertisment is a problem. Can be better than this.
Very good title.