IT jobs crisis: Hiring deceleration bodes ill even for the broader economy

In what must be considered deeply worrying news for both the sector and the Indian economy overall, the four largest information technology-enabled services (ITeS) companies have reduced hiring in the just completed financial year by as much as three-fourths. Tata Consultancy Services, Wipro, Infosys and HCL Technologies added 13,972 employees in the year ending March 2018, as opposed to 59,427 in 2016-17. This is in spite of the fact that the companies showed solid revenue growth in the same year. One optimistic way of looking at this is that Indian ITeS companies are finally succeeding in altering their legacy manpower-heavy business models. The IT world has entered an age of digital business, artificial intelligence and automation, and the big four would have been remiss if they did not do so as well. Revenue growth accompanied by hiring reductions suggests that they are on a route of increasing productivity, which is the broader industry trend.

 
On the other hand, the forward implications of this trend are not entirely good news for the Indian economy, however overdue the shift may appear from the point of view of the companies’ shareholders. One implication is for hiring; thanks to increasingly restrictive visa conditions in the countries in which these companies do business, it is possible that future additions to the Indian ITeS companies’ workforce will happen in developed countries. Infosys, for example, has announced that it will hire 10,000 American professionals. At the recent ceremony to open its technology and innovation hub in Indianapolis — the capital of a state that Donald Trump won by a nearly 20-point margin in 2016 — Infosys had re-announced its hiring of 2,500 US engineers in 2017, and pledged to continue that process. Some industry experts have suggested that every American that Infosys hires will cost four Indians their jobs. Thus the implications of this on-shoring process for the workforce in Indian ITeS are massive. Some estimates of the number of Indian ITeS jobs lost in total over 2017 are in excess of 50,000.

 
Yet there are implications beyond the sector as well. Every IT job in India creates other jobs, and revenue growth in allied or associated sectors. For one, reduced employment prospects in the ITeS sector has impacted the supply chain of engineers – which means that there is now an over-supply of engineering colleges. Many have already shut down, and more will in the coming years. Meanwhile, the commercial real estate sector has grown on the notion that IT companies will have a massive workforce that must be accommodated. That is no longer as likely. The consequences for growth prospects in realty, as well as for the profitability of office and commercial parks overall, will be significant. Services sectors geared to providing for those in ITeS jobs will also shrink — worse, perhaps, this negative growth may be as regionally concentrated as was the original boom, in the new exurbs and suburbs of Gurugram, Hyderabad’s Cybercity, and near Bengaluru. The government should not be caught unawares by this trend, and should have contingency plans to deal with the overcapacity and unemployment that lies just around the corner.