Clipped from: https://www.thehindubusinessline.com/opinion/editorial/it-may-not-provide-enough-white-collar-jobs/article67438182.ece
India’s tech sector seems to be in rationalisation mode, after an over-hiring binge between FY20 and FY22
After downplaying risks from the global slowdown and exuding optimism about deal wins until recently, India’s IT majors are reporting a distinct slowdown. With revenue growth of just 2-4 per cent in the latest quarter, they are expected to close FY24 with a topline growth of just 3-5 per cent. With the firms tightening their belts to maintain margins, hiring has been a key casualty.
The headcount of the top three IT companies contracted by about 16,000 in the July-September quarter, with some of them planning to stay off campus hiring for now. A report from staffing firm Teamlease estimated that the IT sector is expected to recruit only 1.55 lakh of the 15 lakh freshers passing out in FY24, compared to 3.9 lakh just two years ago. This is bound to deal a blow to the morale and prospects for young engineers, apart from creating fresh challenges for India’s demographic dividend and consumption story.
India’s tech sector seems to be in rationalisation mode, after an over-hiring binge between FY20 and FY22. As the demand for digitisation, cloud and other new-age services took off unexpectedly during Covid, companies aggressively added headcount in the belief that this was a structural trend. With the IT services behemoths forced to compete with start-ups and Indian arms of Big Tech for talent, there was a scramble to hire freshers and lateral recruits at high compensation. In the past year, with global clients spooked by the slowdown and slashing of discretionary spends, these firms are finding that they have a surfeit of staff with bloated wage bills. Once the dust settles, the pace of revenue and profit growth for the IT majors will likely revert to pre-Covid levels. But this means fresher hiring by IT companies may never go back to 2.8-3.9 lakh annual placements seen during the pandemic. Pay growth in the sector may revert to low single-digits. The recent FY23 Periodic Labour Force Survey highlighted that only a fifth of India’s workforce is employed in salaried jobs, with this segment seeing annual wage growth of just 3.4 per cent in the last five years. Belt-tightening in the IT sector is bound to worsen these numbers.
It now appears imperative for policymakers to look beyond IT to provide white-collar employment for India’s aspirational youth. While IT has been hit by the global slowdown, sectors such as hospitality and BFSI are on a hiring spree due to a take-off in domestic spending. Policy nudges can be devised to ensure that India’s higher education institutions pivot from churning out hordes of hard-to-employ software engineers, to training professionals in sectors such as hospitality and financial services. Manufacturing is the bedrock of job creation. PLI schemes can be tweaked to incorporate employment targets. The government can expand coverage of schemes such as the Rozgar Protsahan Yojana, where it encourages small enterprises to add to their workforce, by subsidising EPF for new employees for the first three years.
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