News & Analysis

Global Cues Take a Toll on IT

Global economic cues are taking a toll on the Indian IT sector with revenue growth likely to take a hit with a consequent impact on new hiring during the year

A new research report says that the global economic headwinds could take a toll on the domestic IT companies during the financial year 2024, which could have an adverse impact on hiring by the industry. Crisil Ratings says the revenue growth could decline by between 9 to 12% as against the estimated 20% growth estimated in FY23. 

The biggest challenge is likely across the BFSI segment in the US and Europe, the agency believes, especially in the aftermath of the Silicon Valley Bank collapse. The agency expects revenue growth rates to halve during the current financial year (FY24), though the negative pull could be offset somewhat by a 12 to 14% growth in manufacturing. 

How good was 2023 – We need to wait for results

Since the IT apex body Nasscom stopped its revenue projections, we may have to wait for companies to declare their fourth quarter and annual revenues that are likely over the next month to 45 days. The Indian IT industry supports more than five million people directly, but the developing scenario in the West could take a toll due to decline in head count.

The basis for Crisil’s call was an analysis that it conducted across 17 companies that account for more than 70% of the Rs.10 lakh crore IT industry revenues. The report says the last two fiscal years have been among the best for the industry as it grew 19% in FY22 and is expected to beat that number in FY23.  

Revenues slump also means job decline

These macroeconomic headwinds have already taken a toll on the hiring as the job offers made by India’s top IT majors have declined by a third compared to the last year. This slump comes on top of the backlog of about 5% that were given offer letters during placements but haven’t yet been fulfilled till date. 

A report published in the ET quotes officials of placement cells to suggest that offers given out were between 10 to 30% lower this year (for the 2023 batch). Most companies that were on the panel attributed the decline to the overall slowing down of the business that has necessitated a cut in human resource requirements as well as overheads. 

Most companies are also suggesting that the high inflation rates and its impact on the global financial markets in the US and Europe have also made the job market unsteady in India’s $245 billion IT industry. Most companies are on a wait-and-watch mode for now to see how things pan out from now till post the April-June quarter. 

However, there are a few stray silver linings on the job front as the demand for niche skills from product-based companies have shown some growth. Data science and consulting services are two such examples where demand is high and so is the package on offer, says multiple sources that we spoke with. 

On the flip side, the mass recruitment scenario looks bleak as the packages being offered are between 20 to 30% lower than last year. On another note, the sluggishness from IT services companies in hiring this year has been made use of by other businesses that include product and engineering companies, especially in the mid-size companies. 

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