The United States and many countries in Europe are experiencing a recession, and this is affecting the technology sector in a big way. The year 2022 witnessed US tech firms cutting their headcount by 136,000 workers, with 42,000 people getting pink slips in November itself.
Given that the world has now become a global village, a global economic crisis is inevitable, and India is no exception.
The Indian tech sector underwent a major overhaul with behemoth tech companies like Meta, Amazon, Twitter and even startups like Byju’s and Unacademy laying off their workers. Nearly 66% of the Indian CEOs expect this trend to prolong through 2023 thanks to the economic regression.
Delayed Recovery
Indian Gross Domestic Product (GDP) peaked at 8.7% in 2021-22. This post-pandemic rise is petering out, and inflation is at an all-time high. The Russian invasion of Ukraine has rubbed salt into this injury, and the consequent economic downturn is ailing India. Goldman Sachs recently slashed India’s GDP growth prospects to 5.9% this year.
India’s population is burgeoning beyond bounds, and an employment crisis is imminent. Reports state that by 2050, India will need to generate 280 million jobs, which is easier said than done. The large young population will need employment to be engaged productively.
Not All Is Bleak
Indian GDP, which is slowing down in the first semester of 2023, is predicted to revive in the year’s second half in tandem with the global economy. India needs to take the bench until export markets and investments gather momentum. In fact, the World Bank raised India’s FY 2023-24 GDP growth forecast to 6.9%.
Headline retail inflation is likely to drop to 6.1% next year from 6.8% this year. According to the Indian Staffing Federation, which represents more than 100 recruitment and flexi-staffing companies, the domestic IT and ITes industry is set to hire close to 1 million people by the end of 2023, though one is not sure at what seniority or level.
Despite the chances of the economy recovering, there is no denying that the global tech sector is in a state of flux right now.
The pandemic was shot in the arm for the digital economy, and most tech companies scaled up rapidly and, in fact, hired indiscriminately. Now that normal life is resuming, they are unable to sustain their expanded human resources and operating budgets.
Indian IT Industry Conclusion
In India, however, most layoffs are taking place within startups and companies that scaled up rapidly during the pandemic. These organisations are not only witnessing a slowdown in demand but are also under pressure from investors for better profit margins.
Large, traditional software companies with the biggest workforces are stable and have been conducting routine performance-related separations only. The mid-sized IT sector, particularly those who have been in business for two or three decades, have solid balance sheets that are able to weather the storm.
Summarily, the stage is set for a ‘reset’ for the Indian tech sector. Though the economy may consolidate late in 2023, the disruption caused by the pandemic will continue, say, experts. Inflation may not abate suddenly. The severe energy crisis that ensued by the Ukraine war will also take its toll. Daunting market conditions are expected to prevail through FY 2023.
