Job Losses in India "Trickle Down" from US

I've been in touch recently with Sharon Colaco, a well-known IT business writer from Pune, India.

Working with Sharon over the years, I've found that she takes a detached view of the IT business in India, ie, she's neither a cheerleader nor someone who is overly critical, in a country where emotions can run very hot whether one is defending the country's reputation or picking it apart.

I asked her about how much job loss has there been in India in the wake of the global financial crisis, and how much of it has been directly related to the US and Europe. Now seemed like a good time to elicit this opinion, as we're several months out from the initial economic shock and have had enough time to see how all this is playing out.

This was her response in a recent email to me:

This is a worldwide downturn, and Indian firms realize that the first three quarters of 2009 need to be tided over before things will even start to look up.

The industries that faced the highest job cuts were Textiles, BPO, Automotive, Steel Production, (local) IT, Jewellery, Construction, and Mining.

Most of the the BPO and IT losses are directly related to the loss of business from US or European clients, but there is also a homegrown recession within India. Even though housing loans are cheaper, and homes have become cheaper, the construction industry is going through a very tough phase in India currently. Not enough people are buying homes, fearing layoffs and salary cuts.

Yet companies are resorting to job cuts as only the last measure. Most companies are tightening their purse strings – recruiting few or no new employees, cutting salaries, perks and incentives, telling employees pitch in by putting in longer hours – the emphasis is to carry on with the same team sizes, but cut costs on the teams drastically.

Employees too prefer these measures to actual job cuts. This is the “salary correction” that you and I discussed last year, Roger.

With no or very few new recruitments, the country’s fresh graduates are facing a very tough time. B-schools have seen a decrease in their campus placements this year. Companies who do come to hire, offer much lower pay packages than the previous year.

Despite all this, India is not facing a “full-blown” recession. Spends on infrastructure have not reduced. Indian manufacturing, banking and government sectors are doing quite well. This is a key indicator that the country is doing well, but is spending cautiously.

To conclude, the impact from the US is only a trickle down effect, and most of India thinks that things will look up after the next quarter.

In the meantime there is a lot of internal retrospection, improving of services, tightening of spends. When I look at this situation objectively, I would say this is a very important phase for India. I am glad its happening because companies are looking at themselves objectively, making themselves lean and mean, and when the recession is over, you are sure to see a new India emerge – stronger and all set to take on the world’s business once again!