A combination of new technologies, changing business models and a tighter visa regime in the United States has forced IT companies to go for large-scale layoffs. No matter how much we talk about diversifying the global spread of Indian IT workers, the US market remains the biggest determinant of the performance on the Indian IT sector(AP)
A combination of new technologies, changing business models and a tighter visa regime in the United States has forced IT companies to go for large-scale layoffs. No matter how much we talk about diversifying the global spread of Indian IT workers, the US market remains the biggest determinant of the performance on the Indian IT sector(AP)

PM Modi’s maths is weak on logic: IT+IT may not equal a brighter India Tomorrow

A review of surveys and news reports on hiring by Indian companies shows that services continue to generate more new jobs than manufacturing, but hiring activities in both segments have slowed through the past year, dropping sharply after demonetisation
By Rajesh Mahapatra | Hindustan Times
UPDATED ON JUL 19, 2017 03:42 PM IST

A friend who analyses conversations on social media tells me that expressions of economic anxiety have become as frequent as they used to be in 2013. Back then, India had fallen off a high growth trajectory — amid rising global uncertainties and lingering political differences that stalled policy making at home. The nation’s aspirational journey had paused, triggering a clamour for change. In the elections that followed in 2014, Prime Minister Narendra Modi stormed to power, riding on popular hope that he will turn things around. Three years on, it appears the challenges remain as daunting as they were then.

A review of surveys and news reports on hiring by Indian companies shows that services continue to generate more new jobs than manufacturing, but hiring activities in both segments have slowed through the past year, dropping sharply after demonetisation.

ManpowerGroup, a leading global headhunter that regularly monitors the hiring activities of Indian businesses, sees job prospects hitting a four-year low in the current quarter. It estimates the net employment outlook — the difference between the percentage of companies planning to offer new jobs and the percentage of companies planning to cut jobs — will decline to 18% in April-June from 23% a quarter ago and 38% a year earlier. The outlook has seen a 14 percentage point drop since demonetisation. About 68% of the 4,389 employers surveyed said they had no plans to hire through April-June.

Data from other recruitment firms and hiring agencies present a similar outlook, which explains my friend’s observation about social conversations. Google search results for words or phrases such as job cuts and layoffs have seen a steady spike in recent months.

At this point, the grim scenario relating to jobs is most pronounced in the information technology (IT) sector. A combination of new technologies, changing business models and a tighter visa regime in the United States has forced IT companies to go for large-scale layoffs. No matter how much we talk about diversifying the global spread of Indian IT workers, the US market remains the biggest determiner for the Indian IT sector. When the going was good, most of our IT firms did little to climb up the value chain or prepare themselves to face adversities such as they do now.

A strategy that leans heavily on wage-arbitrage offers little cushion against risks associated with increasing automation and adoption of new technologies such as cloud computing. It is unlikely that the trend will reverse, even though many of the affected companies continue to be in denial. The top seven IT firms in the country plan to lay off 56,000 engineers this year. In their defence, they attribute a good share of this number to non-performers, which should take us to another issue that has been crying for attention: The quality of our workforce and the talent coming out of our educational institutions.

Read | L&T laid off 14,000 employees between April-September this year

About a million students graduate from engineering colleges, but less than a quarter of them are found to be employable, according to industry surveys. Some relatively more quality-conscious reviewers offer a much lower estimate, which deems 90% of them to be not employable. In the past, companies didn’t mind hiring suboptimal resources in the hope they can be trained on the job. But such optimism takes a backseat when times get harder and the room for manoeuvre is limited.

As an HT analysis shows, placement rates at IITs dropped to 66% this year from 79% a year earlier, meaning every third IITian didn’t get placed because he/she either didn’t get a suitable job or wasn’t found to be suitable for a job. If this is the state of what are showcased as institutions of excellence, imagine how hopeless the condition would be at the other 4,000-odd colleges of engineering and technical institutions across the country.

Indeed, neither the information technology sector nor the nation’s talent pool is in a state to win a brighter tomorrow for India. Perhaps, that is also a message Prime Minister Modi was trying to underscore when he said: IT+IT = India Tomorrow.

@RajeshMahapatra

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