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Abu Dhabi, UAESunday 23 September 2018

The fading glory of India's IT industry

The industry has been a beacon for fresh graduates looking for white-collar jobs in the last 20 years, but with successive waves of layoffs, that beacon of light is dimming

Information technology is the largest employer in India's private sector, providing a livelihood to nearly 4 million, and contributes about 9 per cent of GDP but IT jobs in the country are drying up.
Information technology is the largest employer in India's private sector, providing a livelihood to nearly 4 million, and contributes about 9 per cent of GDP but IT jobs in the country are drying up.

CHENNAI // Tens of thousands of employees are being laid off from India’s IT industry, once a global powerhouse of services, in a sign that the country’s demographic dividend might turn into a demographic disaster.

A million Indians enter the workforce every month, on the lookout for well-paying jobs. But prime minister Narendra Modi’s government is struggling to boost employment to match.

According to the most recent data available, only 10,000 jobs in the formal economy were created each month in 2015.

Among the few sectors that have developed over the past two decades, the IT industry became a beacon for fresh graduates looking for white-collar jobs. But successive waves of layoffs — attributed to rising automation, shrinking margins, and a changing business model — are dimming the beacon’s light.

In May, the Mint newspaper reported that the top seven IT companies in India would lay off 56,000 employees this year — double last year’s number, and representing roughly 4.5 per cent of the companies’ combined workforce.

In all, the US$150-billion (Dh551bn) industry employs about 4 million people.

Among those who were laid off this year was Sunil Kumar, who had worked for nearly 11 years at an IT giant in Bengaluru.

Mr Kumar grew up in a small village in northern Karnataka and was the first college graduate in his family. He found a job that involved back-end work in computerised design for western aircraft manufacturers.

Buoyed by his success, Mr Kumar moved his parents from their village to Bengaluru, to live with his wife and child. He earned about 1.1 million rupees (Dh62,600) a year, so he was able to take a bank loan to purchase a small apartment.

Two months ago, however, Mr Kumar's company asked him to resign. When he refused, he said, he was fired. “All these companies say that automation is the reason, but it isn’t like my job is easy to automate,” Mr Kumar told The National. “I have so many years of experience doing this. There isn’t any sort of machine or computer program that can replicate that.”

In the world of Indian IT, opinions are divided over how great an impact automation will have on companies and their workforce.

Somak Roy, an analyst at Forrester Research, believes that companies can, at the present level of technology, automate about a quarter of the most basic functions their employees perform.

“Eventually, the labour force will be cut in a big way because of automation,” Mr Roy said. “You won’t need a lot of entry-level people if you have programs doing their jobs. It’s quite possible that the industry will cease to be a large-scale employment generator in India.”

But Vasumathi, a Chennai-based official with a union called Forum for IT Employees, believes that talk of automation is exaggerated.

“We believe companies are only using it as an excuse, to make it seem as if they’re becoming more technologically efficient,” said Ms Vasumathi, who uses only one name. In truth, she said, the firms are firing employees because they have been unable to adjust to deeper shifts in the business.

When the Indian IT industry started to boom in the early 2000s, it was able to leverage a vast difference in labour and capital costs between India and the US. Companies persuaded their American clients to outsource IT work to them in India, so that it could be completed cheaply.

The costs of labour and capital in India have gone up over the past decade, however. In the Chennai suburb of Siruseri, home to several tech parks and IT companies, a patch of land measuring roughly 435 square feet cost 5,000 rupees in the 1990s. By 2014, the price had shot up to 3 million rupees.

The rapid advance of technology has also left behind employees trained in older programming languages or software suites. In 2015, a study by the National Association of Software and Services Companies, a trade body, calculated that 50-70 per cent of Indian IT workers’ skills would be redundant by 2020.

President Donald Trump’s emphasis on protectionism has also unsettled Indian companies that rely on outsourcing from the US. In May, the Indian IT giant Infosys announced that it would create 10,000 jobs in the US to serve its customers there, rather than rely upon back-office workers in India or employees sent to the US on guest-worker visas.

In relative terms, the IT industry is not a mass employer, but “it has an outsized hold on the national imagination, since relatively few other formal white-collar jobs have been created over the past decades”, said Mihir Sharma, a fellow at the New Delhi-based Observer Research Foundation.

“The political impact of a decline in hiring will be far greater than the real economic impact,” Mr Sharma said. “First, because Indian politics tends to respond in an exaggerated fashion to middle-class or white-collar concerns, and second, because closing off a career option, even a low-probability option, might give rise to anger and concern that times are becoming tougher, and not better, for young Indians.”

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