IT sector job cuts: Are Infosys, Wipro, TCS really cutting jobs, or is it just fear-mongering?

IT sector job cuts: Are Infosys, Wipro, TCS really cutting jobs, or is it just fear-mongering?

In the midst of the filibuster about widespread job losses in India, here are some facts to ponder over…

India is in the grip of the great jobs fear-mongering. At the core of this is the mis-informed impression that jobs in India have shrunk/are shrinking. That's far from truth. Yes, there's a neighbour here and a cousin there who has either lost her job or hasn't found a suitable job for a prolonged period of time but the truth is that the job scenario-though challenging--isn't as gloomy as it is being made out of be. Comprehensive data on jobs is notoriously patchy. But anything that is available points to the fact that India is still producing jobs, even though at a slower pace than 2 years ago. That effectively means that the overall job market in the country continues to grow, rather than shrink.

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IT sector job cuts

Let's start with the IT/ITeS sector that has so often been showcased as the flagbearer of job losses in the country. For the record, the industry which employs 39 lakh directly and 100 lakh indirectly ADDED-not lost-1.70 lakh jobs as a whole in 2016, according to Nasscom, the industry body. Yes, it was projected to add over 2 lakh new jobs in the year;  and, yes, it was adding nearly 4 lakh new jobs 4-5 years ago, but let's not forget that the world economy is in the midst of a slowdown. Even at 1.70 lakh new jobs, at a ratio of 1:1.5, the industry would have employed another 2.5 lakh indirectly in the form of logistics, catering, security and other allied industries.

Typically, almost all major companies in the industry shed between 5-7 pc of their poorest performing staff each year to hire superior talent. That's 2 lakh jobs shed every year, but another 2 lakh people replace them. Besides, the IT/ITeS sector has a natural attrition of around 15-16 per cent. That's nearly 6 lakh of the 39 lakh people leaving their jobs voluntarily for better options. Hence, nearly 8 lakh jobs change hands in the sector every year-a vast majority of them around the annual appraisal season of Feb-June. The numbers being talked about (approximately 55,000) is merely a fraction of the 8 lakh jobs that change hands every year in the IT/ITeS sector while another 1.5-2 lakh get added.

Besides, do we even know whether those are not performance related ousters? Especially, since they come bang in the middle of the annual appraisal season. Not to forget that every company, including TCS, Wipro and Infosys, has denied it is shedding people, except for poor performance.

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Lack of employment data

The reason why India can't say for sure how many jobs it created-or shed-is because the comprehensive, reliable data doesn't exist anywhere. The Labour Bureau covers only 8 sectors. Last year it claimed 1.38 lakh new jobs were created in those 8 sectors. In contrast, just the ministry of skill development claimed it placed nearly 6.5 lakh last year. This is just one case of how one arm of the government doesn't know what the other is doing. Interestingly, the Labour Bureau doesn't cover the two sectors-e-commerce/e-tail and logistics/warehousing-which have created the most jobs in the past 4-5 years.

Employment data in corporate balance sheets-which should ideally be a mandatory declaration every quarter-is scarce to find in the annual reports. Companies declare them at will-sometimes, none at all.

My analysis of 1950 companies which had declared their employee strength in fiscal 2014-15 and 2015-16 (fiscal 2016-17 annual reports are still not submitted by most companies) shows that their net job additions grew at the rate of 2 pc despite the fact that their topline degrew by over 4 pc while net profit fell over 21 pc.  This is, by no means, the best representation of the economy as a whole but a sample size of nearly 2000 from among 5000-plus listed companies is large enough to be indicative of the industry's overall trend. True, SAIL has shed 4697, BHEL 2707 and MTNL 2700, but at the same time TCS added a net of 36187 new employees during  2015-16, Wipro 14695, HDFC Bank 11269, ICICI Bank 6239 and SBI 9571.

Threat of automation

The other job loss fear stems from the advent of automation and artificial intelligence which are widely believed to be the biggest job eliminators of the future. But developing countries where per capita consumption is still low, will continue to be at an advantage over the developed world. Especially, in the manufacturing sector.  Even though automation will ensure that the same job is being done by fewer humans, as technology takes over, but growing consumption will create demand for more factories, thereby creating more jobs.

Lastly, one needs to rely on evidence on the ground. If India's 700 universities and 35,000 odd colleges indeed produce 10 million graduates every year, our social fabric would have been torn apart if at least a vast majority of them didn't get absorbed gainfully, even if it was for self-employment. And sectors such as banking and financial services, IT/ITeS, automobiles, pharma, durables and FMCG have somewhat compensated for the loss of jobs in sectors such as real estate, construction and engineering.

Clearly, India is producing a significant number of jobs or self-employment opportunities but those numbers are not being captured entirely. Yet, India's prevailing and future job scenario is far from perfect. And unless the economy shows signs of revival, we need to be beware of the storm building up at our doorsteps.

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