Massive Layoffs and recent trends in Top tech firms
In recent days, you might receive a feed in all social media and news apps on k+ layoffs from several companies. Many feared losing their job at the top of their mind in the anticipation of a recession in future due to global chaos.
According to a global placement and coaching firm, the layoffs crossed 60,000 in September and October, it will have an impact on India’s export prospects, especially in the information technology (IT) sector.
Why are layoffs in Multinational companies becoming common?
US Multinational companies including tech giants Amazon, Meta, Intel, and Twitter and financial behemoths like Citi and Morgan Stanley announced massive layoffs.
The International Monetary Fund (IMF) has cited forecasts for global GDP growth in both 2022 and 2023 as dark, given the pandemic and ongoing Russia-Ukraine War.
Inflation is soaring in most parts of the world including the US, UK, Germany and India have increased up to 23 per cent since September 2021. According to an SBI Ecowrap report, if the household budget or cost of living was Rs 100 in September 2021 across all countries, it has now increased by Rs 12 in both the US and India. Meanwhile, it has increased by Rs 20 in Germany and Rs 23 in the UK.
The Central Banks have been raising rates to contain the rising inflation. Increasing rates make it more costly to borrow and consume which eventually affects economic growth and jobs. Factually, 10 big developed economies have raised rates by a combined 2,365 basis points (bps) in this cycle to date. This action has a potential economic recession underway which causes a big red flag.
Outlook for the Indian IT industry
The Indian IT service firms are among the largest employers in the organised sector. Any global economic trend is bound to have an impact on the growth projections of IT services firms. The Companies will look into headcount numbers if they want to cut costs and protect profit margins.
The attrition rate, or the number of employees per 100 quitting on their own are still high. All top IT companies except Wipro saw a rise in revenue and net profit.
Both these two factors in favourable note, there is no visible sign of impact yet but it is to be expected in the next few months.
These developments are bound to have an impact on India’s export prospects, especially in the Information technology (IT) sector.
Status of start-ups
News of layoffs in the Indian startup front is predominantly in EDtech, or the educational technology front.
The Indian startup layoff tracker by Inc42 showed that more than 15,700 employees had been laid off in 2022.
Byju’s, Cars24, Ola, Innovaccer, Udaan, Unacademy and Vedantu are names that have been in the news for layoffs, according to Inc42.
The reason cited is that fewer internet users are visiting educational websites and tightening funding conditions.
To be concluded, the deployment of next-generation technologies including Artificial intelligence and robotics in the Top tech companies will be aggressively utilized and massive layoffs will be continued and the top talented resources will be again best utilized by new-age startups.
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