The massive layoffs at U.S. tech companies have sparked a new layoff wave in India's IT industry, with a hiring freeze on fresh recruitments being reported in local software companies as a cost-cutting exercise over the past couple of months.
by Pankaj Yadav
NEW DELHI, Nov. 25 (Xinhua) -- The recent layoffs in companies like Facebook and Twitter may cast a shadow on the information technology (IT) or software firms in India, particularly those which cater to outsourced works from foreign-based companies.
Over the past couple of weeks, while Meta, the parent company of Facebook, announced a layoff of around 11,000 employees, Twitter's new owner Elon Musk too shed nearly 75 percent of the workforce over the past month. Though, a day ago Musk was learned to have announced keeping the layoff drill on the back burner.
As a result of the recession in some of the world's major economies, and layoffs in companies like Facebook and Twitter, some of the leading Indian IT companies have been observing a freeze on fresh hiring as a cost-cutting exercise over the past couple of months.
Earlier this month The Economic Times quoted sources as saying that the announcement of layoffs "may not be very significant" for Meta India's 400-odd employees in the country.
The report, however, also stated that Elon Musk's announcement wiped out almost the entire Twitter team in India, which had roughly 230 members in the first week of November.
Though IT experts hope it would not be a long freezing period, Gurugram, a city adjacent to New Delhi and one of the IT hubs in India, too have reported freezes and layoffs in software firms over the past couple of weeks.
"Immediately after the COVID-19 outbreak in India in early 2020 the IT companies had opted for layoffs. But, as soon as the concept of work from home settled in, huge recruitments were carried out," said Rajiv Mehrotra, an IT consultant in Gurugram.
The freshly recruited staff continued working for over two years. Ever since offices began to reopen as the pandemic receded, an overflow of software hands was felt a couple of months ago, according to Mehrotra.
"Now, the global recession has spelled further doom for the IT industry. Yes, there have been layoffs in the IT industry in recent weeks," he said, though not very significantly.
Tata Consultancy Services (TCS), one of India's biggest IT firms, has announced a freeze on fresh recruitment since September. The company boasts over 600,000 employees worldwide, and a market cap of over 200 billion U.S. dollars.
On the condition of anonymity, a senior software professional working with TCS confirmed to Xinhua over phone about a freeze on fresh recruitments.
"Since October our company in Gurugram has been observing a freeze on intake of fresh hands. This is a result of the general global recession. We are one of the largest employers as far as India's software industry is concerned. We hope it's a temporary phase, and the freeze will be withdrawn soon," she added.
A couple of months ago, Money Control, a leading financial and business portal, stated that the outlook for the United States and Europe plays a key role for Indian IT companies as the bulk of their revenues comes from these markets.
Quoting the rating agency CRISIL (an Indian analytical company) figures, it said that the United States and Europe together contributed around 86 percent to Indian IT firms' revenues in the financial year 2021-22.
"Higher-than-anticipated inflation print has stoked recession fears which would mean a cutting back on IT spending by American and European corporates, which in turn would hit earnings growth of Indian IT companies," said the Money Control report.
According to the National Association of Software and Service Companies (NASSCOM), an Indian non-governmental trade association and advocacy group focusing mainly on the technology industry of India, the Indian IT industry's revenue touched 227 billion dollars in the Financial Year 2021-22 (April 2021-March 2022), a 15.5 percent year-on-year growth.
According to NASSCOM figures, the Indian IT industry added 445,000 new employees in the financial year 2021-22, bringing the total employment in the technology sector to 5 million employees.
U.S.-based technological research and consulting firm Gartner's estimates put IT spending in India to rise to 101.8 billion dollars in 2022 from an estimated 81.89 billion dollars in 2021.
The Indian software product industry is expected to reach 100 billion dollars by 2025, even as IT companies here are focusing on investing internationally to expand their global footprint and enhance their global delivery centers.