Engineering goods sector expects 400,000 job losses

The engineering goods sector, which accounts for nearly one-fifth of the overseas sale of Indian goods, expects above 400,000 job losses by the end of 2008-09. In addition, engineering goods exporters claim that growth in the export sector will halve in the current fiscal, as orders from overseas markets like the US and Europe have dried up significantly.

"Based on industry inputs and some surveys that we conducted in certain engineering sectors, it is clear that about 400,000 people will lose their jobs by the end of March 2009," said R Maitra, executive director, Engineering Export Promotion Council, a quasi government body of the exporters belonging to the sector.

"This (job losses) is likely to continue in the next financial year as well. We will soon know how bad the situation will be in the coming months. Most job losses are happening in the small and medium enterprises," added Maitra.

According to data available with the council, 13,000 engineering goods exporting companies employ more than four million people. About 50 per cent of these companies are SMEs. The sector was considered to be less impacted by the economic downturn in the overseas markets. According to the Federation of Indian Export Organisations, textiles and handicrafts are expected to contribute significantly to the 10 million job losses in export-related industries in 2008-09.

A sample survey of about 30 SMEs conducted by the council points towards the job losses in the sector. The study found that about 1,900 people lost their jobs in these companies during the period between August to January of 2008-09. "The worst effected is the cycles and hand tools segment," Maitra added.

With orders drying up from the overseas markets, the council projects an export growth of 15 per cent in 2008-09 to nearly $38.8 billion, against the 27.4 per cent rise ($33.72 billion) seen in the previous year. This will be the lowest expansion in engineering goods exports in seven years.

Between 2003-04 and 2007-08, the sector witnessed a compounded annual growth rate of 33.84 per cent in exports.

"The US and Europe account for about 30 to 40 per cent of our total exports. Orders from these countries have gone down drastically," Maitra said.

In the April to September period, exports from the sector have expanded 42.8 per cent ($22.12 billion). But after that period, exports have been going down consistently. "In each of the months between November 2008 and March 2009, engineering exports have contracted about 10 per cent on an average," Maitra said.

Exports have been consistently contracting in the months after September 2008. Initial estimates available with the commerce ministry suggest that in the April to February period of 2008-09, exports stood at $157.3 billion, an increase of 10.11 per cent over the $142.85 billion seen in the same period of the previous year. Final figures for the period will be released on March 1, 2009.

In this backdrop, the commerce ministry has revised the country's export target downwards to $175 billion, from the earlier estimate of $200 billion.