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Riding with the tide in IT sector

| | in Oped
Riding with the tide in IT sector

After doing exceptionally well in becoming the most preferred sourcing destinations for services, the growth story of the IT sector is at a tipping point. We must set our priorities as our youth has immense potential

The information technology (IT) sector has successfully positioned itself on the global map of the world for its high quality, low-cost  technically sound manpower, and its propitious accomplishment of off-shore models. While in the off-shore model, a large number of companies administered temporary work visas to their technical manpower working at client sites in the US, the UK and other countries, the Indian IT sector has emerged as one of the key industries that has been driving growth.

India soared as the world’s most preferred outsourcing destination for IT services, globally. It accounted for  more than half (56 per cent) of the total global outsourcing business. Total revenue in 2017-18 from this sector was $167 billion, contributing more than nine per cent to the Gross Domestic Product (GDP). The sector also ranked third in India’s total Foreign Direct Investment  (FDI) share worth $29.83 billion between April 2000 and December 2017. Most importantly, the IT sector has generated direct jobs for 40 lakh youths in the country. These are the reasons why India’s services sector ranked among the world’s top five economies. This sector was also tagged as the sunrise industry of the country.

The IT sector is also the one that continues to be among the largest private sector employer in the country, creating both direct and indirect employment. In particular, this sector has created direct employment for educated and skilled youths in urban areas, and indirect jobs in several associated sectors such as transportation, real estate, catering, security, housekeeping, among others.

In 2017-18, this sector provided direct employment to 39.7 lakh people — up from just about 5.3 lakh in 2001-02, 13.1 lakh in 2005-06 and 25.4 lakh in 2010-11. The annual growth rate of jobs declined from double-digit during 2000-2010 to single digit after it. In particular, from 2015-16, the annual growth of jobs reduced from 6.2 per cent in 2015-16 to sheer 2.6 per cent in 2017-18. It was estimated that one direct job in the IT sector creates four additional jobs in rest of the economy.

Furthermore, this sector offers easier access to jobs for women than any other sector. Women occupied more than 34 per cent of the jobs in the IT sector in 2016-17 — this is much higher than any other sector in the Indian economy. 

A dipping graph: Of all the figures above, the IT sector that was crooning the hymns of the country’s past grandeur, is now in complete shambles. The altering landscape in the past few years; more so in the last two-three years. has found its reflection in poor performance, slumping revenues, a fall in hiring of employees, existing employees have been layed-off by both small as well as large IT companies. These are illustrations enough to gauge the dipping graph of the sector.

Delving into the annual reports of the last three fiscal years of some of the top IT firms in India, such as Wipro, Infosys, Cognizant, Tech Mahindra, Tata Consultancy Services (TCS) and Capgemini, it was found that these companies have been laying-off their employees in hundreds and thousands due to recent upheavals and emerging challenges. They were of the opinion that the lay-off is an annual process to weed out bottom performers and this year was no different.

The fairer sex, which constituted almost one-third of the new recruits in the IT sector, too were refrained from being inducted as the Maternity Benefit (Amendment) Act, 2017 increased the duration of paid maternity leave available for women employees from the existing 12 weeks to 26 weeks. “This provision is a dampener from the point of view of resource management and thus we are avoiding recruiting newly wedded women in the current circumstances”, described a senior HR official of a top IT company.

Some of the top job-search websites point out that lately there has been a surge in the number of profiles of experienced IT professionals being posted and a rise in number of hits on the profiles of recruitment professionals on professional website like LinkedIn in the recent period, which were earlier not the case.

Further, these worrisome issues are far-reaching as these are shattering the dreams and aspirations of millions of technically-skilled Indian youths who wish to join these IT companies hoping for a lucrative salary package.

The unfolding: With a market worth $165 billion that employs over four million people directly and 10 million people indirectly, the Indian IT sector has had substancial impact on the Indian economy.

To start with, more than three-quarter (76 per cent) of the revenue comes from export. This leaves the share from domestic income at only 24 per cent. The increasing use of IT technologies in domestic market, particularly in areas of telemedicine, health, remote monitoring solutions and clinical information systems, will continue to boost demand for IT service.

While the industry must focus on domestic market, it is for the Government to provide them with more tax benefits and other concessions. Tier II and tier III cities are emerging as the new Information and Communication Technology destinations. The Government must  encourage them by easing regulations, providing tax benefits and other concessions so as to tap local skilled youth and provide them with employment opportunities.

Second, high dependence on a few countries like the US, the UK and the EU have meant that these countries remain the major overseas players for Indian IT services, thereby accounting for nearly 90 per cent of the total IT exports. Further, there is an increasingly protectionist nature of the US, the UK, Australia and Singapore that have already tightened their visa norms and have also indicated that they would reduce jobs for Indian professionals to hire more local people.  India must look beyond the US and the UK to accelerate growth opportunities and tap new markets in Asia, Africa, South America and Europe.

Third, companies are moving to newer technologies such as artificial intelligence, 3D printing, Internet of Things, robotic process automation and cloud computing. Automation is increasingly taking over low-end maintenance work, forcing companies to shift workers to other projects and reduce hiring from campuses.

A McKinsey report said that half of the IT workforce would be redundant in the near one or two years. The ICT sector is expected to be impacted the most by emerging technologies and lack of new skill sets, both among existing workforce and new entrants. Those, who are unable to retrain themselves, will be left behind or lose their jobs.  Every year, about six million graduates are estimated to join the labour force; they can grab the opportunities in high-end IT service segments if trained properly with these new skill sets.

Fourth, the share of ICT in total services exports for India declined during the recent decade (2006-2016), while the ICT share in total services exports increased in other economies like China, Brazil, Russia, Philippines, Israel and Ukraine, indicating increasing competition for India from these countries.

We need to focus on emerging technologies and train/re-train a large pool of available engineering graduates who could be trained to be employable through quality training institutes or courses. The Government as also the corporate sector must help train/re-train these youth with new skill sets demanded in the IT industry and also assist educational institutions in upgrading their courses in accordance with market demand.

With TCS as the first Indian IT company to reach a valuation of $100 billion, the internal requirement of information technology will be another growth area. Moreover, the Indian bureaucracy needs to cope up with the new initiatives in terms of Digital India, Smart City, automation in Government departments, et al.   Now with bated breath, let’s be in a buoyant mood that a new wave of change is round the corner and the IT sector is primed to get bolstered towards the fourth Industrial Revolution.

( Pravin K Singh is senior consultant and Balwant S Mehta is a Fellow with Institute for Human Development, New Delhi )

 
 
 
 
 
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