India is staring at an imminent jobs crisis as three leading service sectors — which have been engines of job creation for two decades now — get ready to shed jobs by the tens of thousands, each driven by its own dynamic.
The job losses would exacerbate a trend of jobless growth in the country and hit consumer spending at a time when the central bank seems to be moving away from cutting interest rates due to worries over inflation.
Contraction in blue collar jobs has become an established trend ever since Indian economic growth started to cool. The sharp contraction in exports — both services and goods — over the last two years have impacted jobs creation in several key sectors.
The next wave of job losses is expected to happen in services: Experts expect the three key services sectors — software services, telecom and BFSI (banking and financial services) — to shed nearly 1.5 million white collar jobs in the 12-18 months. This trend has already begun: in the period July-September last year, the information technology/BPO sector lost 16,000 jobs, according to the Quarterly Employment Survey.
Saurabh Mukherjea, CEO of Institutional Equities at Ambit Capital said: “White collar job creation now seems about to conk off comprehensively as financial services, IT services and telecom — three sectors which, with total employment of 6 million people, have been the mainstays of white collar job creation — get ready to shed staff.”
A number of factors are coming together to result in what could be India’s largest shedding of white collar jobs. While software services are faced with a secular slowdown and technology obsolescence, jobs in telecom and BFSI will go because of consolidation and slowing growth.
“Absence of new jobs is India’s biggest problem today. We produce 12 million graduates in a year and there just aren’t enough jobs for them. While consolidation in some sectors like telecom and BFSI will result in shedding of jobs, slowing growth will also lead to some sectors like insurance shedding jobs in times to come,” said R Suresh, Managing Director of RGF Executive Search.
The slowdown is clearly visible in the GDP data. Export of goods and services grew at 6.7 percent FY13 and 7.8 percent in FY14. But this has sharply contracted by -5.2 percent in FY16. The Economic Survey expects India to exit FY17 with a modest 2.2 percent growth in export of goods and services.
India’s software services exports have created over a million jobs over the last two decades. Services exports have been a key element of India’s trade and globalisation in recent years and its exports have grown from USD 16.8 billion in 2001 to USD 155.6 billion in 2014, which constitutes 7.5 percent of the GDP making the country the eighth-largest services exporter in the world.
But with automation becoming a reality, more than half these jobs could be gone if Vishal Sikka, CEO of Infosys , proves right.
India’s army of a million software engineers and coders need to desperately acquire new skills if they want to stay relevant in the employment market. Nasscom is working with 20 software companies to reskill the workforce over the next two years. Sangeeta Gupta, Senior Vice-President at NASSCOM, believes the problem of job losses will arise if people are not able to reskill and that the IT industry will remain a net recruiter even in future.
The creation of new jobs has also slowed on a year-on-year basis software services exports look at single-digit growth rates. Increased usage of technology will create new jobs for engineers, but they will be more specialised jobs and will require more than basic coding skills.
What makes the situation worse is that other sectors have also not created adequate opportunities or jobs for the vast number of engineers (800,000 a year) and graduates (12 million a year) that India’s colleges churn out every year.