As exports drop, half a million jobs are lost

In many industries workers are being encouraged to take pay cuts and work longer hours to save their jobs. The textiles and garments industry, which employs 35 million people, is especially hurting.

Even the figure of 1.2 million job losses released by the Confederation of Indian Textiles Industry could prove to be an underestimate.

Roughly half the total production of textiles and garments in India is exported, 60 per cent shipped to markets in the United States, Japan and the European Union, all of which have been adversely impacted by the economic downturn.

Adding more headaches, cotton prices rose by 30 per cent the last year, causing textile output to drop 10 per cent in October alone.

India’s junior minister for commerce Jairam Ramesh warned last week that Indian companies might even have to outsource production to countries like Bangladesh, where costs are lower, because of competition from low-cost manufacturers in Bangladesh but also in China, Vietnam and Sri Lanka.

Ludhiana (Punjab) boasted that its textile factories account for 80 per cent of the country’s wool production. But last year its garment factories saw sales drop by 50 per cent, specifically exports.

The crisis is everywhere and if it continues many companies will probably go under. Experts urge the government to cut taxes and offer easy access to credit.

The situation is made worse by the return of thousands of Indian workers who lost their job overseas.

With the economies in Dubai and more generally the Persian Gulf no longer booming, especially in construction, many workers are becoming unemployed. This will affect many of four million Indians who, according to India’s Ministry of Overseas Indians, work in the Gulf area.

In turn this will also affect remittances from overseas workers. Although some academics suggest that remittances figures are inflated by the laundering of “black money”, India’s central bank estimated that US$ 40 billion came into the country in 2008 from Indians working abroad.

The crisis is very likely to dominate this spring’s federal elections. The ruling Congress Party coalition government has pledged to create 58 million new jobs over the next five years. For his part Prime Minister Manmohan Singh has appealed to industrialists not to cut jobs.