India's economy in trouble: Middle class stare at job losses

Manufacturing sector is said to the best hope to absorb the growing educated youth looking for jobs. With Ford Motors deciding to shut shop, joblessness threatens to become more acute

India's economy in trouble: Middle class stare at job losses
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Sanjukta Basu

“Economy is in trouble, youth want jobs. Devote more time to economics not petty politics. Chidambaram ji, please focus on the job at hand,” said Narendra Modi on Twitter on November 30, 2013.

The same week he also promised one crore jobs to India’s youth at an election rally. BJP’s 2014 election manifesto promised 2 Crore new jobs every year if it came to power. But as former RBI Governor Dr Raghuram Rajan pointed out this week, manufacturing in India was hit by Demonetisation in 2016 and has never quite recovered.

Business analysts have put the onus on Ford’s faulty strategy, it is poor consolation to workers who are about to lose their job. Ford, they say, made the mistake of putting a premium on engine power and performance over price and mileage.

India's economy in trouble: Middle class stare at job losses

Reports suggest Ford Motors will wind down manufacturing at the Sanand assembly plant by October-December 2021, and at the Chennai plants by April-June 2022. Around 170 dealers with 391 outlets and their investment of around Rs 2,000 crore in setting up dealerships also stand to lose.

When Ford entered Gujarat, Modi had tweeted in July, 2011, “Gujarat is proud to host the biggest facility of Ford outside America worth $1bn which will provide a total of 36000 jobs.” In June 2012 he tweeted, “The journey started with Nano then Ford & Peugeot came and now Maruti has driven into Gujarat. Glad we are emerging as a global auto hub.” The shutdown announcement however did not elicit any reaction from Modi.

Ford joins a growing list of foreign automobile companies to shut shop in last 5 years, namely, namely MAN Trucks, General Motors, Harley Davidson, UM Motorcycles and Honda cars. Decline of the economy, the pandemic and loss of jobs and income have not yet affected the passenger vehicles segment much but two-wheeler sales have been impacted, which reflects the skewed nature of the Indian economy.


In a video report on Newsclick, Aunindyo Chakrabarty blamed the shrinking Indian middle class for the low demand for cars. Only 23 million Indian households, he pointed out, earn over Rs five lakhs a year, the minimum income to enable them to pay an EMI for the cheapest car. In the last 10 years 24 million cars were produced in the country.

With the automobile sector staring at an uncertain future, unemployment looks certain to grow. A recent report jointly published by the Centre for Monitoring Indian Economy (CMIE) and Centre for Economic Data and Analysis or CEDA at Ashoka University states that employment in the manufacturing sector has gone down by 46 percent. As per the report, manufacturing sector accounts for almost 17% of the country’s GDP, but employment in the sector has fallen from 5.1 crore Indians in 2016-17 to 2.73 crore in 2020-21 — down by 46%.

Manufacturing sector is said to the best hope to absorb the growing educated youth looking for jobs compared to services sector which often requires better education and skill levels.

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