Ongoing IIT placements portend an economic slowdown in India in 2017

On November 24, 2016, I had written that the real question related do demonetization is what happens after the lines end at the banks and ATMs. I had posed these questions as commonsense ways to judge whether the economy is slowing down.

  1. What happens to demand for luxury goods after Dec 15?
  2. Will there be fewer Indian tourists in Rajasthan, Goa and Kerala? Or, even if the numbers are the same, will they spend less money?
  3. What will happen to expenditures for weddings?
  4. What will happen to purchases of expensive saris and jewelry?
  5. What will happen to purchases of expensive cars?
  6. Does construction of new homes and office buildings stall or slow down?
  7. Does informal credit (from moneylenders, not banks) in cities and villages become much less available and much more expensive?
  8. Have the salary offers to fresh MBA and engineering graduates come down?
  9. Does the output of agricultural products come down?

Today (December 14, 2016), the lines have not ended at banks and ATMs. So, perhaps it is a bit early to look for answers. Still, we do have some answers to question 8. And, it is not good news — the early signals show an economic slowdown in 2017.

Here are the key news reports.

December 12, 2016 IIT Bombay Gets Just 150 Job Offers On First Day Of Placements, Lowest In 5 Years

· The first day of recruitment at IIT-Bombay saw just 150 job offers from companies — the lowest number in half a decade.

· IIT Kharagpur also saw offers fall from 500 to 450 in the first 5 days.

· IIT Kanpur campus fared a little better than the Mumbai campus, with 315 offers being made in the first three days of placement as opposed to 280 last years.

· IIT Roorkee also claimed that there has not been a decline in offers since last year.

· IIT Guwahati saw 200 offers instead of 150 last year.

December 8, 2016 Job offers down 10% at IIT placements this year but average packages are up

· the number of offers per recruiter has come down by anywhere between 10% and 20% at different IITs

· “The number of IITs has gone up to 23 now. Most of the major recruiters are now also going to newer IITs. At the same time, the general economic condition in the market is not so rosy. All these reasons have collectively led to fall in number of offers it seems,” said Debasish Deb, Chairman, Career Development Centre, IIT Kharagpur, which has seen a fall of 10% in number of offers.

December 14, 2016 Domestic offers take a hit at IIT-Bombay placements

· Not all is hunky-dory at IIT-Bombay placements on the Powai campus this year.

· The highest domestic offer fell by 15%. Last year, World Quant offered an annual package of Rs 41.1 lakh and this time its yearly compensation package fell to Rs 25.2 lakh. The highest domestic salary to date at IIT-B has been made by Blackstone which offered Rs 35 lakh a year.

· Compensation from the Japanese firms have been similar as compared to last year.

In short, the placement offers are mostly lower than last year’s offers. This is not a catastrophic situation for the students. They will do well in their careers.

The problem is that the offers are down. Why is this the case? No doubt, there could be many reasons. And, it is too early to really understand this fall. Yet, it is easy to see that the companies are not confident of India’s economic conditions in 2017. As the IIT-Kharagpur professor notes “the general economic condition in the market is not so rosy.”

Not so rosy. We are not talking about the disruptions because people have to stand in line at banks and ATMs. This is for the future, when these lines will be gone. And, anyhow, these firms and students are already in the digital world.

So, the fact that their world is not so rosy is a portend that they are afraid that the economy will not do well in the coming year — or even longer. This is exactly the opposite of what the Indian government promises — economic gains after a few days of economic disruption.

No doubt this is not conclusive. But, it is an early negative sign.

Read my complete series on demonetization of currency in India:

India’s demonetization may lead to a recession

India’s demonetization will hurt poor borrowers and micro/small enterprises

How to reduce the risk of recession and help the poor after demonetization

India’s Demonetization: What will happen when the lines end at banks and ATMs?

Ongoing IIT placements portend an economic slowdown in India in 2017

Don’t blame civil servants for India’s demonetization problems

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