Global Economic News

Globalization Backfiring on India

Nov. 15 (EIRNS)—Some 1 million jobs have been cut this year in India's industrial and corporate sector, and many more cuts are coming soon, India Today, one of the most widely read magazines in the country, reported in its cover story published today. While India's economy is officially only about 20% dependent upon goods exports, it has become very dependent on the IT and service sectors for "growth," especially of internal private consumption, and these sectors are on the chopping block with the world financial meltdown. India's IT and software sector is dependent upon the U.S. and EU for 66% of its business—and 60% of that is concentrated in the evaporating financial sector, India Today reported on Nov. 5.

Some 9 million people enter the Indian workforce every year, so the reported slashing of new job creation means more unemployment in the near term—on top of the current level of about 10%. The India Today report is focussed on the "organized" sector of the labor force, which is only 10% of the total. The "organized" sector is typified by factories, and the "unorganized" sector by home labor. "And for every organized sector job lost, three to four jobs will be lost in the unorganized sector as vendors/suppliers who are largely from the small- and medium-scale sectors are impacted by loss of orders from big companies," India Today reported.

So far, the textile industry has been hardest hit, as 700,000 jobs have been lost so far, and planned new job creation is already down by 51%. Exports—in which textiles play a big role—were down 15% in October. D.K. Nair, secretary-general of the Confederation of Indian Textile Industry, told India Today that "Mills are running three-four days a week only and are operating at 75% or have reduced shifts." Gems and jewelry production is also dependent upon exports, and 100,000 daily workers are estimated to have lost their work already.

The IT, private airlines, auto, and other industries are facing big trouble, India Today reported. All sectors of "India, Inc." have cut job creation by 30-50% already, with some "bubble" sectors—retail and real estate—cutting new job creation by almost 80%. Layoffs are a daily occurrence in construction.

India's annual growth in industrial output through September—before the worst phase of the crisis hit—was already down by almost half. The growth of the Index of Industrial Production was 4.9% compared to 9.5% a year ago, with manufacturing, 80% of the index, growing by 4.8% rather than 7.4% a year ago. The automobile sector is reporting negative growth in some sectors, and engineering and transport are also slashing job creation. The Economic Times on Nov. 15 reported that India's airline companies are expected to make a combined loss of $2 billion (10,000 crore rupees).

GM Korea Plans Temporary Closings over Christmas

Nov. 12 (EIRNS)—About 220,000 South Korean workers will get unscheduled time off this Christmas.

GM Daewoo announced that it will close all plants for 10 days starting Dec. 22, as the global financial crisis creates a glut of vehicles.

The auto manufacturer has never before shut its plants since its founding in October 2002, when GM purchased the Korean Daewoo auto company. It has now scaled back production by 20,000 units per month, by ceasing to offer weekday overtime work. When the automaker's plants are shut next month, approximately 20,000 employees at vehicle plants and 200,000 employees at first, second, and third subcontractors will be forced to stop working altogether.

Other Korean automakers have also announced production cuts. Ssangyong Motors it will cut production to 90,000 next year from 130,000 this year. Renault Samsung will scale back production by decreasing the speed of assembly lines.

Drastic Drop in Japanese Machinery Orders

Nov. 10 (EIRNS)—Data released today shows that Japan's private-sector machinery orders dropped 10.4% in the third quarter. This matches the drop after the 1998 Asian crisis, and is the biggest on record.

Falling exports and reduced business investment, reflecting the Japanese economic slowdown, were behind the falling machinery orders. The Japanese economy as a whole shrank in the second quarter and is certain to show additional shrinkage when figures for the third quarter are released next week, putting Japan officially into a recession.

Also, the value of investment trusts in Japan that incorporate stocks and bonds of emerging economies fell dramatically in October, from $40 billion to $29 billion, or 28%. This is more than 40% lower than the peak of $50 billion last year. The most important emerging economies in these trusts are India, China, and Brazil. In addition to the fall in the stock markets of these countries, there has been a significant rise in the value of the yen, which has devalued Japanese investments in those markets.