Layoffs and Recession

Layoffs and Recession

#GS-03 Economy

For Prelims:

What is Recession?

  • In simple terms recession is when economy stops growing and starts shrinking.
  • Technically recession is when the GDP growth rate of a country is negative for two consecutive quarters or more.
  • A significant fall in spending generally leads to a recession.

For Mains

Cause for concern:

  • In the past two months, multiple U.S. multinational companies including tech giants Amazon, Meta, Intel, Twitter and financial behemoths like Citi and Morgan Stanley, announced massive layoffs.
  • These layoffs have crossed 60,000 in September and October.
  • These developments are bound to have an impact, on India’s export prospects, especially in the information technology (IT) sector.
  • Since inflation soaring in most parts of the world, central banks have been trying since March this year to rein it in.
  • This has been done by increasing interest rates so as to make it more costly to borrow and consume.
  • This will eventually affect economic growth and jobs.

What is causing this trend:

  • The International Monetary Fund (IMF) has cited forecasts for global GDP growth in both 2022 and 2023 as gloomy, giving the pandemic and ongoing RussiaUkraine war as causes.
  • A lesser share of internet users visiting educational websites since the decline of the pandemic is cited as one reason for layoffs in Edtech.

Impact on India:

  • Layoffs in the Indian start-up front is predominantly in Edtech, or the educational technology front.
  • The Indian start-up layoff tracker by Inc42 showed that more than 15,700 employees had been laid off in 2022.
  • The attrition rates, or the number of employees per 100 quitting on their own, of the top two firms, TCS and Infosys, show that these rates are still high.
  • At Infosys, the attrition rate declined marginally to 27.1% in July-September 2022 from 28.4% in the previous April to June quarter.
  • Meanwhile, at TCS the attrition rate crept up to 21.5% in the July-September quarter from 19.7% between April and June.
  • This means that there is enough business for the sector for competitors to draw away employees with promise of higher salaries.

Source “How will global layoffs impact India?