Indian government took a very bold step when PM Modi announced the demonetization of Rs. 500 and Rs. 1,000 currency notes. It’s a revolutionary step as far as the problems of black money, cross-border terrorism, etc. are concerned but at the same time, it will also have an effect on other aspects of the economy. The economic growth of India will reduce by 1% over the next year and because of this, there may be nearly 400,000 job cuts.
As per the co-founder of Teamlease Services, Rituparna Chakraborty, the e-commerce sector which presently employs one million Indians, will be the worst hit as she said,
“Cash on delivery being almost 70% of the overall e-commerce business, the sector is likely to take a hit and lose almost 20% of their headcount in the next few months.”
She further added,
“Companies manufacturing and selling luxury goods would also be immediately impacted.”
The other sectors which will also bear the brunt of demonetization are Real Estate, construction and infrastructure and if we believe the recruiters, these sectors will cut around 100,000 jobs in next one year.
According to Anandorup Ghose, director of US-based HR consultancy Aon Hewitt,
“For the next six to eight months, we could foresee job losses and freeze on hiring. Moreover, if the government’s objectives (related to demonetisation) are not met, we should expect more challenges. The impact of the move will be felt across sectors dealing with consumer’s discretionary spending, including real estate and auto.”
Other than this, the daily wagers employed in the textiles and garments industry will also feel the heat of demonetization. Nearly 32 million people are working in this sector and around one-fifth of them are daily wagers who are paid in cash. As per ICRA, the rating firm,
“While on one hand, slow sales increase the possibility of stock returns to manufacturers or affect the order book for the next year due to unsold inventory; on the other, slow sales and consequent liquidity pressures on retailers can result in stretched payments to manufacturers.”
In the same manner, 20% of 250,000 employees of leather industry will also be affected.
As per the experts, job market will suffer more if the cash supply in the system doesn’t get normal soon. This is what SBI’s chief economic advisor, Soumya Kanti Ghosh, said,
“The impact on the job market depends on how fast the economy recovers, how fast the money is supplied in the economy, and when the restrictions on cash withdrawals go.”
As per HSBC, one of the largest banking and financial services organization, demonetization is going to bring ‘some benefits and some losses’ in the short phase especially for the sectors that include digital wallet and banking, financial technology, etc.
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