Placement scenario - A forecast - 6 Months in advance
It is old news that the economy is in poor shape. We have already seen a very tough and painful year of campus recruitment across business schools. However, 2014 could be even more painful.
InsideIIM.com conducted a survey with 20 companies. 85% of the HR professionals reported an outlook of negative or no change for next year's recruitment plans. Only 15% reported a positive outlook. 70% also reported that Summer Placements will be better than Final Placements. We also got a sense that many more companies plan to cut down on recruitment during final placements and prefer to hire using the PPO route by experimenting with interns.
The PPO offers' news in mainstream media could be misleading. More PPOs do not necessarily mean upswing in the recruitment scenario. Moreover, the PPO numbers are good for a select few schools only.
Following points need to be considered :
1) Old IIMs will do better than last year in terms of numbers although overall recruitment scene will deteriorate further. There are 2 reasons for this. Top IIMs will be better prepared than last year. Top schools learn from their mistakes and also engage deeper with alumni in times of stress. They will reach out to many more companies than in times of relative buoyancy and many small companies may opt for schools with bigger brands to recruit as fresh talent would be available cheap. The second reason is - Moderation of expectations. Having seen the pain their seniors have gone through, graduates of the Class of 2014 will settle earlier and for roles they wouldn't have during the good times.
2) 2nd tier business schools with big batch sizes may be in big trouble. A lot of roles offered at these campuses will be eaten up by schools with bigger brand names. It will be a case of just not enough jobs available. As per our estimate, more than 10% of graduates from 2nd tier business schools may remain unplaced by 31st March 2014.
3) The class of 2014 will graduate with even more student loan debt. They will also compete with far more people as batches have only expanded. Recipe for more pain.
Now the questions is, why is the outlook so negative? We try answering the question below :
- Deceleration of growth. Almost every industry has shown deceleration in growth for successive quarters. Even FMCG, a sector that is affected last in a slowdown is showing low single digit growth figures for successive quarters now. Costs have gone up due to high interest rates and depreciation of the rupee. Most companies' profitability has been severely hit.
- Lack of investment. Most companies have put their expansion plans on hold or have curtailed their outlay for the next 12-18 months. This is one of the main reasons why we may see not only hundreds of MBAs being unemployed but also thousands of engineers and fresh commerce,science and arts graduates without any jobs.
- Election year with extreme uncertainty. The overall economic scene is bad and the political situation is volatile. Reforms have been slow and approvals for projects have been stuck. Populist policies may have adverse effect on economy and hence indirectly on corporate India and their hiring plans.
- Fear of a liquidity crisis. The prospect of Quantitative Easing tapering is keeping markets on the tenterhooks. Bond yields in the US have risen and there is a flight of foreign money from Indian bond markets to the US. All of this affects the overall economy and the sentiment in a big way. Negative sentiment means lesser investment, slower roll out of projects and hence lesser jobs.
- Defaulting companies. Combined with above point on liquidity, NPAs in the banking sector are rising. Companies are not being able to service their loans. Depreciating rupee is punishing companies with dollar loans and a lot of companies are not going to be able to repay their loans. In such circumstances, people are the first resource to be let go.
Please read this interview of Jim Rogers - Why I'm shorting India. Few foreign investors have assessed and articulated India's problems better.
(Also read : Why Engineering graduates could be in deep trouble.)
As per the 68th NSSO, unemployment in India has risen by over 10% for Urban men and over 15% for Urban women in the 2 years from 2010-12. This was supposed to be a relatively better period for India! The entire survey is available here ( You must note that this data is for the entire labor force and not just managerial jobs. 2011 was a great year for one to graduate from any of the top 25 schools in India)
1) Start ups : Not all is lost though. The start-up culture in India has grown well over the last 3 years and funded start-ups could come to the rescue of business schools and fresh undergrads. If graduates temper their expectations in terms of compensation, they could find challenging opportunities to build companies and with far more responsibilities than in big corporate houses. However, one must mention here that even the number of start-ups getting funded is slowing down and the e-commerce start-up scene is already in trouble.
2) IT Companies - Surprisingly, yes. A depreciating rupee is generally good news for the IT sector. Indian resources now become even cheaper. It is possible that the IT sector (which is still the biggest employer) may save us all! Economy of the US is improving and Europe has shown some strength in recent times. All the news has been very positive for IT.
3) Consulting : In general, we expect the consulting sector to be stable and though they may not increase their hiring numbers, they will also not scale back sharply.
One needs to understand that bad news and analysis is priced in the financial markets immediately but there is a time lag before you experience the effects in the real economy. A lot of people do not seem to have priced in the fundamental issues in the Indian economy and that the effect of this could last for many quarters in the future. Even if a miracle changes things around, it may be too late to help the batch that graduates in 6 months time.
It's time to put one's head down and prepare rigorously.
Or maybe, it is time to start a new company ;-)
(Update : 4th September - Slowdown hits CA recruitment - Of the 4,800 fresh CAs enrolled for placements, only 112 have got job offers in the last 1 month)