How will global layoffs impact India?
Why did numerous American tech companies fire their staff members? What are the current trends for IT companies like TCS, Infosys, and Wipro in terms of hiring, attrition, and operational profit margins? Why is the startup industry suffering already? What will occur if a global recession starts?
Numerous American multinational corporations, including internet conglomerates like Amazon, Meta, Intel, and Twitter as well as financial mega corporations like Citi and Morgan Stanley, announced significant layoffs during the past two months. A multinational placement and coaching company claims that in September and October, there were over 60,000 layoffs. India’s export potential would undoubtedly be impacted by these developments, particularly in the information technology (IT) sector.
Why are layoffs becoming common?
Sundar Pichai, the CEO of Alphabet, predicted a tech industry winter early this year. He stated, in answer to a staff member’s question about budget cuts during an all-hands meeting in September of this year, “We don’t always get to control the macroeconomic conditions.” A probable economic downturn is a major warning sign. Since March of this year, central banks have been frantically trying to contain the global inflation crisis by raising interest rates to make borrowing and spending more expensive. This will eventually have an impact on job growth and the economy. Given the pandemic and ongoing Russia-Ukraine war, the International Monetary Fund (IMF) described the predictions for global GDP growth in 2022 and 2023 as negative.
What is the outlook for the Indian IT industry?
Being among the top employers in the organised sector, Indian IT services companies are inevitably going to be impacted by any changes in the global economy. Because they are responsible to investors, management carefully considers staff levels when trying to reduce expenses and maintain profit margins. Although there isn’t yet a clear trend, there are a few indicators that could indicate what to anticipate over the coming few months. Except for Wipro, all leading businesses experienced an increase in revenue and net profit. For the September quarter, Wipro’s net profit decreased 9% from the same period last year.
The top two companies, TCS and Infosys, have attrition rates that are still high, or the number of workers per 100 resigning on their own. This indicates that there is still enough demand in the market for rival companies to lure workers away with the promise of greater compensation. The attrition rate at TCS slowly increased to 21.5% in the July-September quarter from 19.7% in the April-June quarter, while it decreased somewhat at Infosys to 27.1% in the July-September 2022 quarter from 28.4% in the prior quarter.
What happened in India during earlier global recessions?
While businesses rarely made public announcements of layoffs during prior global recessions, they all sought to gradually remove employees who were performing below averagely. Businesses in exceptionally difficult times reduced bench strength. On the other hand, if a person had only been on the bench for approximately a month (i.e., had no projects), they might have been requested to enrol in some training programmes, etc. The system would ease the professional out if they sat on the bench for longer than three months without receiving a project. In the years following the 2008 financial crisis, which lasted for at least two to three years, businesses began to cut down hiring.
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