Significant decline in job growth in FY24, IT and Textile sector labelled 'job destroyers', notes recent BoB report

India Inc. saw a significant slowdown in employment growth, with an increase of just 1.5 % in FY24, compared to a 5.7 % rise in FY23, according to a report by Bank of Baroda.

The report highlighted that only 90,840 jobs were added in FY24, a sharp decline from the 3.33 lakh jobs created in the previous year. By March 2024, the total employment across 1,196 companies reached 62,51,808, showing that businesses are now taking a cautious approach, due to changing economic conditions.

The report stated that there has been a slowdown in growth in headcount in the sample companies to 1.5% from 5.7% in March 2023. In absolute terms, the accretion in headcount was under 1 lakh in FY24 while it was 3.33 lakhs in FY23.

The report categorized sectors into 'job accelerators,' 'job creators,' and 'job stabilizers.' Sectors like retailing and trading stood out as job accelerators, with growth rates of 19.4% and 16.2%, respectively. On the other hand, the IT and textiles sectors were labelled as 'job destroyers,' experiencing significant workforce reductions due to downsizing and restructuring.

The report noted, "The 'job destroyers' is a significant group where there was fall in headcounts in FY24. IT and textiles are the significant players here, which have considerable share in the total headcount in the corporate sector."

Interestingly, the connection between sales growth and employment creation appears unclear. Despite a strong economic growth rate of 8.2% in FY24, many companies focused on efficiency rather than expanding their workforce. For example, the IT sector reported a modest sales growth of 5.6% but still reduced its workforce, suggesting that long-term business goals are now more influential in employment decisions than immediate sales figures.

The mixed picture across industries shows the challenges some sectors face that lead to downsizing, while others continue to grow and add jobs. The report added that the employment growth scene in India Inc. was quite lacklustre when looked at the aggregate level. Higher growth in FY23, the base effect, can only partly explain low growth of 1.5%.

As companies continue to adapt to the uncertain market environment, the focus on technology and efficiency is likely to play a key role in shaping future employment trends. Overall, employment growth in India Inc. remains slow, reflecting a cautious approach as businesses respond to changing market conditions.