Layoffs and Recession

#GS-03 Economy

What is Recession?

In simple terms recession is when economy stops growing and starts shrinking.
Technically recession is when the GDP growth rate of a country is negative for two consecutive quarters or more.
A significant fall in spending generally leads to a recession.

In the past two months, multiple U.S. multinational companies including tech giants Amazon, Meta, Intel, Twitter and financial behemoths like Citi and Morgan Stanley, announced massive layoffs.
These layoffs have crossed 60,000 in September and October.
These developments are bound to have an impact, on India’s export prospects, especially in the information technology (IT) sector.
Since inflation soaring in most parts of the world, central banks have been trying since March this year to rein it in.
This has been done by increasing interest rates so as to make it more costly to borrow and consume.
This will eventually affect economic growth and jobs.

The International Monetary Fund (IMF) has cited forecasts for global GDP growth in both 2022 and 2023 as gloomy, giving the pandemic and ongoing Russia–Ukraine war as causes.
A lesser share of internet users visiting educational websites since the decline of the pandemic is cited as one reason for layoffs in Edtech.

Layoffs in the Indian start-up front is predominantly in Edtech, or the educational technology front.
The Indian start-up layoff tracker by Inc42 showed that more than 15,700 employees had been laid off in 2022.
The attrition rates, or the number of employees per 100 quitting on their own, of the top two firms, TCS and Infosys, show that these rates are still high.
At Infosys, the attrition rate declined marginally to 27.1% in July-September 2022 from 28.4% in the previous April to June quarter.
Meanwhile, at TCS the attrition rate crept up to 21.5% in the July-September quarter from 19.7% between April and June.
This means that there is enough business for the sector for competitors to draw away employees with promise of higher salaries.