Prospects dim for IT-BPM sector hiring: Economic Survey

World Bank says automation threatens 69% jobs in India; Nasscom categorically rejects this.
The Survey says there has been a gentle deceleration in net hiring growth rates in India’s information technology and business process management (IT-BPM) sector, which faces a slowdown challenges and political uncertainty.

Quoting from a report by executive search firm Head Hunters India, it said job cuts in IT will be between 175,000 and 200,000 annually for the next three years, due to lack of preparedness in adapting to newer technologies. 

Quoting another report, from the World Bank, it said automation threatened 69 per cent of jobs in India. A McKinsey & Company report said, nearly half the workforce in IT services firms would be “irrelevant” over the next three to four years. The bigger challenge ahead would be to retrain 50-60 per cent of the latter’s workforce, with the significant shift in technologies. 

However, according to the IT-BPM sector’s apex association, Nasscom, the IT sector added a little over 600,000 employees in the past three years and was expected to add 2.5-3 million jobs by 2025. “However, the skills profile is set to undergo a rapid change, as demand for skills around digital technologies grows exponentially,” the Survey said.

Labour Bureau of India data says the change in sectoral employment during April to December 2016 was only 22,000. “Thus, there is a gentle deceleration in net hiring growth rate, as also indicated by Nasscom,” the Survey said.

Listing key challenges for Indian IT-BPM, it mentioned increased oversight and enforcement actions on the work visa regime in the US, competition from new players in Eastern Europe and lack of skilled personnel in digital technologies. The IT-BPM industry is also feeling the pinch of global slowdown and political uncertainties, with clients going slow on decisions and investment processes.

“Misconstruing mobility of skilled people as an immigration issue is a deterrent to the growth of this global business, resulting in many barriers to free movement of skill and data in the major markets,” the Survey said. It gave examples of the US, the UK and Australia undertaking various changes in their work visa programmes to protect the interest of local workers.

The Survey also highlighted the increasing competition that India faces from new “digital only entrants” from Eastern Europe and Latin American countries, including newer companies like Globant, EPAM, and Luxoft.

“Indian service companies gained scale over the past decade as the disrupters, creating the modern offshoring industry. But, they are now the incumbents, challenged by a slew of specialised and niche start-ups bred in this new environment.”

It also pointed to domestic challenges like shortage of skilled digital talent, underdeveloped infrastructure in Tier-II and Tier-III cities, and some restrictive regulations for product start-ups.

The Survey also raised a point about lack of reliable estimates on employment in recent years that impede its measurement and creates problems for the government in appropriate policy intervention.

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