Hundreds layoff from Techo Park and Info Park

Under the pretext of global economic recession many employees from the Info Park and Techno Park have been facing expulsion.  Within 16 days about 80 persons were dismissed from the service in these places. Some of the companies even deprived the employees of even their benefits.

The existence of some of the companies in these places are under serious threats.  The process of expulsion is kept secretly. One person was dismissed when he had gone for treatment at home. One firm had expelled 16 persons at a stretch on the same day. They were  not even given an explanation why they were dismissed.

Most of the employees of the leading IT firms are under the threat of expulsion. New recruitments have been stopped and campus recruitment have come to a standstill.  Many companies had already started curbing the benefits of the employees even before the economic recession.  Under these developments it is estimated that only one third of the  employees will  be surviving in many firms.

Get ready for depression

As the global financial system went into free-fall,my children and I spent a free Wednesday evening playing a board game that was developed during the Great Depression of the 1930s, Monopoly. It is basically a game of buying and hoarding properties, developing monopolies, and forcing your opponents into bankruptcy (obviously a genial family game). It’s an apt game at a moment when the planet is headed for another economic depression.

Many “average” Indians seem nonplussed; they think the current global financial meltdown affects only Americans, Europeans and those Indians who are rich enough to play the stock markets. They appear to hope the crash of stock markets around the world will herald the downfall of Western civilization (such idealists should play Monopoly with my ruthless son).

Even our TV news channels have a strange attitude to the economic crisis: during the day, they go on and on about the Bombay Stock Exchange’s Sensex being in sight of the 10,000-mark; but in the late evening,when it’s time for news analysis, they will go on and on about Sourav Ganguly.

This is even more bizarre considering how often our finance minister is on TV these days, repeating how India’s economy’s fundamentals are strong, and that though there is a liquidity problem there is no reason to panic.Hmm.Whenever someone important starts telling you every day that there’s nothing to worry about, it means there is something to worry about. Especially someone as TV-camera shy as P Chidambaram. Or someone like the US president, George W Bush who, despite being deeply loved by India, had been keeping a low profile (till the crisis went into top gear).

Theirs is a tough job. The Wall Street financial crisis has made money scarce. People and companies are withdrawing money from banks; there isn’t any for businesses, which need cash for their day-to-day operations.

Businesses will soon start failing, and the number of jobs will start falling. Chidambaram and Bush are walking a tightrope: being on TV is necessary to reassure markets and bankers about the light at the end of the tunnel; but being on TV is a reminder to everyone that they are indeed in a tunnel, and that contributes to panic. Panic erodes trust. Look at any currency note on the planet, and you will see that it is trust that makes that note valuable (in India, you trust the RBI governor to keep his promise to pay you the amount of the rupee in your hand).

The disappearance of trust is at the heart of the worldwide economic crisis.

There are some, like the government’s chief economic advisor, Arvind Virmani, who think the crisis may bring India “collateral benefits.” This is wishful thinking, premised on the belief that the world crisis will be short-lived, say, six months or so.

This is also based on the belief that India’s reliance on foreign money is mostly in sectors like realty; we can continue building our infrastructure with our own money, as we have been doing, and keep growth at a relatively high pace.

That would be soothing if it did not finesse certain realities. The rupee is about to touch 50 to a dollar; that’s because the shortage of money in the West is sucking dollars from all corners of the globe, driving the dollar up (and the rupee down). Oil is about to touch $80 a barrel (and should head further south by the time OPEC meets in November) but Indian oil companies are complaining that our banks are not lending them money for the day-to-day operations. And to top it all, Chidambaram says the government will help liquidity by putting money into the market this month for the farm loan waivers and the pay commission awards. This finesses the fact that these electoral bribes add to our current account deficit, which adds to our vulnerability to the financial crisis. A recent Citigroup report says India is among the most vulnerable on this score, and China among the most resilient.

To say the crisis will be short is to be intellectually dishonest. India will not have “collateral benefits” if the commodity prices come down, because the world is entering a deflationary period. (Ironically, just months ago we were worried about inflation, or high prices; now we’re worried about prices dropping endlessly). In a deflationary spiral, prices get lower, but no one buys because they think prices will get even lower.

So prices do fall further. Interest rates drop close to zero, so loans are virtually free, but no one borrows because they do not want to add to their debt. Businesses fail, people lose jobs, governments lose revenue, and economic activity grinds to a halt. This happened at the outset of the Great Depression of the 1930s.

If you are still unsure, look at the seriousness of the crisis (which no one can admit to, because it would worsen the crisis).

The world’s financial system is living in a reality that is day-to-day. Each market, each finance minister and each central banker is somehow praying that each day will end without too much damage. But it does not.

The bailout of the insurance giant, AIG, satisfied the stock market, but for only a day.

The whopping $ 700 billion US bailout to ensure bank liquidity helped the markets for about half a day, before they returned to free-fall. The central banks of the US, some European countries and China coordinated a rate cut, but that did not slow the fall. England set aside 50 billion pounds for its banks, but its citizens were still panic-stricken because three Icelandic banks had failed and Reykjavik was verging on bankruptcy (many Britishers kept money in Iceland’s banks because they kept unnaturally high interest rates to offset inflation).

Clearly, nothing short of decisive and farreaching action will save the world from another depression. Japan had a financial crisis that lasted the full 1990s because they were slow to act. The Swedes had a crisis in the late 1980s that was painless because they swiftly acted. Coincidentally, the G-7 and IMF meet this weekend, and it should be an occasion for finance ministers of the world to coordinate for some decisive action.

Decisive action in the form of government spending, both for public works (in order to create jobs) as well as for helping banks, needs intelligent and decisive leaders. Unfortunately the planet is led by Bush, a man who is deeply unloved by his own Republican party (he couldn’t even convince them to vote for his bailout plan the first time around); a man whose every policy has been a damaging failure; a man who looks intelligent only in comparison to Sarah Palin, who vice-presidential debate revealed to be brainless and incoherent.

At the moment, you can’t help but feel that even if we manage to avoid another Great Depression (whose marker was a big stock market crash 79 Octobers ago), we’re in for a long, deep recession. And far from collecting “collateral benefits”, India faces the possibility of a hard landing ! 

US job cuts accelerate, recession fears rise

U.S. employers cut 159,000 jobs last month, a ninth straight monthly reduction and the deepest in 5-1/2 years, the government said in a report on Friday that suggested the economy may be in recession.

The Labor Department report showed 760,000 jobs lost so far in 2008. The unemployment rate in September held at a five-year high of 6.1 percent as 121,000 people quit the workforce.

The bleak hiring outlook and a separate report showing a sluggish service sector that barely grew last month added to a string of recent negative news, including weak personal income and spending, declines in manufacturing and declining factory orders and shipments.

"The problems of Wall Street have now hit Main Street with full force," the chairman of the Joint Economic Committee, Sen. Charles Schumer of New York, said ahead of the U.S. House of Representatives' vote to approve a $700 billion rescue package for banks and other financial firms.

The proposal, passed earlier this week by the Senate, will enable the Treasury to buy bad assets, including mortgage-related securities from financial firms in hope that will persuade them to resume normal lending and ease a credit market freeze.

Treasury Secretary Henry Paulson praised lawmakers for passing what he called "key and critical" measures to help protect or at least slow losses of U.S. jobs and savings.

The Treasury will use auctions and other measures to take the illiquid assets from banks, holding them until it can resell them and possibly profit. Paulson said the Treasury will spell out how it intends to act in coming days.

Investors clearly remained worried about the economy's prospects, notwithstanding the fact that President George W. Bush swiftly signed the bailout bill into law.

The Dow Jones industrial average shed early gains to end down 157.47 points, or 1.5 percent, at 10,325.38, marking its worst week for losses in seven years. The high tech-laden Nasdaq Composite Index lost 29.33 points, or 1.48 percent, to close at 1,947.39.

Prices of U.S. Treasury debt securities reversed course to turn positive as buyers sought safer haven in the face of falling stock prices. The dollar's value dropped against the euro following the House vote.

House members put the best face on their decision to change their own course -- approving the rescue package on Friday after rejecting an earlier version on Monday -- and appeared to be swayed by the weak jobs and other economic signs.

A BAD HAND DEALT

"We were dealt a bad hand. We made the most of it. I think the American people will benefit from it," House Speaker Nancy Pelosi said after the vote, which cleared the way for the legislation to be signed into law by President George W. Bush.

The economy will remain under strain for a protracted period, analysts said, with all the risks to the downside unless confidence can be restored to markets and to consumers.

White House spokesman Tony Fratto said the job report was disappointing but not surprising. "Everyone should understand that it will take some time for our economy to recover from the housing correction, elevated energy prices and the credit crisis."

September's job losses were much more severe than predicted by Wall Street economists surveyed by Reuters, who had forecast 100,000 jobs would be cut.

Separately, the Institute for Supply Management said its index of non-manufacturing activity eased slightly to 50.2 in September from 50.6 in August. A reading over 50 implies growth, so last month's soft reading showed the sector was virtually stalled.

Some analysts said the economy may be headed into a potentially severe slump, especially with a total of 760,000 jobs having disappeared so far this year.

"We've seen weaker data in history, but these look pretty decisively to be the beginning of something worse," said Pierre Ellis, senior economist with Decision Economics Inc in New York. He added that it might make the Federal Reserve more inclined to cut interest rates despite its concern over inflation.

Roger Kubarych, chief U.S. economist for UniCredit Global research in New York, said Fed action was vital.

LOOKING TO THE FED

"As a result of a series of ugly economic reports and a worrying widening of the financial crisis, we conclude that the Federal Reserve will move quickly to buttress the emergency financial assistance program with a reduction of the federal funds rate by 50 basis points to 1-1/2 percent this month," Kubarych said.

The Fed's policy-setting Federal Open Market Committee is next scheduled to meet October 28-29 but there has been speculation that central bankers could coordinate a global rate cut if financial markets continue to be wracked by turmoil.

The September job cuts follow revised losses of 73,000 jobs in August and 67,000 in July and show the decline in employment is accelerating. Some 51,000 manufacturing jobs were lost last month on top of 56,000 cut in August, the 27th straight month in which manufacturers slashed their payrolls.

Job cuts were nearly across the board in September in every major category with the exception of government, which added 9,000 jobs.

The average work week in manufacturing industries was the lowest in three years at 40.7 hours.

Overall hours of work in all industries slipped to 33.6 a week in September from 33.7 in August -- the lowest since November 2004.

Hurricane Ike, which hit the Gulf coast, and a strike at aircraft maker Boeing Co. did not impact the data because the employees affected were on payrolls for at least part of the Labor Department's survey period.

IT professionals worried as industry downsizes

India has emerged in the last decade as a major player in the information technology business sector. Exports alone generate billions of dollars in annual revenue. But this economic mainstay is having a lot of trouble under the weight of a global economic slump.

Twenty-five-year-old Arun Dahiya is one of the many young Indian IT professionals who will go on to become the backbone of one of India's signature industries.

Arun recalls the day he got his IT job, "I felt very proud, I felt I have done justice to my parents who have spent a lot of money on my education," he says..

However, the financial crisis has sent ripples through India's famed industry - where the top IT companies get roughly 30 per cent of their revenue from banking, insurance and financial services. All industries at the core of the crisis.

Arun and his friends - IT professionals - discuss the downturn in the industry - and are bracing themselves for bad news. Twenty six-year-old, IT professional Kapil Bajaj says the financial crisis has costs his friends their jobs.

"They got news on Friday that their employment is terminated. So it becomes a kind of chaos like situation and people get nervous," says Kapil.

A company that claims it trains one out of every three IT professionals in India - says India will have to specialise and sharpen it's skills to stay ahead in the industry.

"I think what we have to continuously do is upgrade the overall skills quotient of the Indian IT industry," says CEO NIIT, Vijay Thandani.

Industry experts say junior level employees like Arun shouldn't expect to see the rapid rise in salaries they once had. And Arun says the crisis has made him more realistic about his prospects.

"I think my career is at stake right now and I have to be very cautious about it. I'm just keeping my fingers crossed," says Arun.

Meanwhile, like Arun, tens of thousands of other young Indians share the same hope.