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India's Slowing Economy Takes Toll on Jobs, Investors

After five years of runaway growth, India's economy is slowing down, as the global financial crisis begins to take a toll on emerging economies.  The economic meltdown is affecting everyone - from young people waiting to enter the work force, to investors hit hard by the huge decline in stock market. 

When 18-year-old Anmol decided to enroll in an institute which trains air hostesses, she was confident she would easily pick up a job in India's booming aviation industry.  In recent years, new airlines mushroomed, snapped up jets and offered bargain flights to cater to a growing middle class.

But her optimism vanished when the aviation sector began piling up huge losses because of falling demand.  In recent months, many airlines have cut operations, stopped recruiting and trimmed wages. 

For Anmol, her goal of becoming an air hostess suddenly seems difficult to achieve.  

"Worrying matter is that they are already removing their staff, then how can they recruit new staff(s)?  Then there will be no new vacancies and there will be no replacements.  What will happen I don't know," she said.

The drying up of job opportunities has come as a rude shock in a country where industries were on an aggressive hiring spree for the last three years. 

From the booming information technology sector to a nascent retail sector, skilled employees were in huge demand. Companies handed out massive pay hikes to prevent employees walking off to rival companies, as tens of thousands of new jobs were created.

But, as the chill winds from the global financial crisis begin to blow across India, profits of many sectors - from financial to real estate - have dipped, prompting them to lay off staff.  There are worries that more jobs may be lost, as industries downsize or halt plans to expand.

Economist Saumitra Chaudhuri, a member of the prime minister's Economic Advisory Council, says such concerns are triggered by fears that the high growth witnessed in recent years has been hit by the global economic crisis.           

"I think the government has some concerns that the cumulative effects of slowdown elsewhere and the depressed market sentiment will adversely affect investors and consumers in a way where growth may actually tank [collapse]," Chaudhuri said.

India has virtually no exposure to the mortgage-backed securities that spawned the current financial crisis, but its economy has not been spared.  Credit has become tight, the local currency has plunged and stocks have lost more than half their value in the last year, as foreign investors have pulled their money out.    

The stock market crash has hit hard tens of thousands of middle class investors.  

Three years ago, 68-year-old Varun Mehta diverted much of his savings to the market, as stocks went up headily.  Domestic industries were expanding, multinational giants were investing millions of dollars and economic growth was close to nine percent.  But, now, much of Mehta's savings have evaporated.  

"For a retired person, specially, it has come has a very serious blow in the sense that while the capital values have come down, the incomes from dividends, et cetera, has also come down very rapidly.  So it has really affected your income in a large way," Mehta said.

The government is reassuring people that the problems will be temporary.   Former Finance Minister P. Chidambaram says the economy may not grow as rapidly as in recent years, but it will still expand at a faster rate than in Western nations.

"While we will be affected by the global meltdown, in the case of India, it will only amount to a slowdown and not a recession," he explained.  "Given what is happening in the rest of the world, a growth rate of between seven and eight percent should be satisfactory."

The government has taken several measures to revive consumer and investor confidence, to ensure that growth stays on track.  It has cut taxes, lowered interest rates and fuel prices and announced big spending on infrastructure projects.

Economist Saumitra Chaudhuri says India's economy is still strong and unaffected by problems which beset the developed world.

"If you look at our corporates, they are not very stressed," Chaudhuri said.  "If you look at banks there are few with non-performing loans, if you look at individual household balance sheets, they don't have too much debt…most of the sectors are reasonably strong."

Analysts say these factors will ensure that high economic growth in India will revive sooner, rather than later.  Both 18-year-old Anmol and 68-year-old Mehta are hoping such forecasts come true.   

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