The Latest Round of Indian IT Layoffs Comes at a Troubling Time

Serious consumer spending hinges on job stability. Indian authorities would do well to fortify existing employment ecosystems as well.

Recent steps by major IT companies to let go of a certain quantum of employees across the globe could not have come at a more inopportune time. Economic growth is on a deceleration glide, and even the finance minister has ruled out a quick recovery. 

Two outsourcing biggies – Cognizant and Infosys – have a substantial number of Indian on their rolls. And, they have a significant presence in Chennai and across South India, a region in which most young Indians have looked for employment over the past two decades. 

While Cognizant has said it would get rid of 10,000 to 12,000 mid-to-senior level associates world-wide, Infosys reportedly plans to purge 2,200 non-performers.

Not surprisingly, the Tamil Nadu Labour Department has decided to take up the issue with the IT firms and the National Association of Software and Services Companies (Nasscom). The department is reported to have sought certain details (such as data on their contribution to Employee Provident Fund and the like) from these firms.

Also Read: IT Companies May Shed up to 40,000 Mid-Level Employees: Mohandas Pai

The Tamil Nadu government’s action comes even as the Union of IT and ITeS employees (UNITE) and All-India Forum for IT/ITeS Employees (AIFITE) have complained about illegal retrenchment in the IT sector. 

It is another matter though that the membership of these ‘labour forums’ is insignificant when compared to the total Indian headcount in the IT sector. And, these two outfits aren’t really recognised by the IT firms. 

Downfall of unions

Ever since liberalisation was set in motion in the early 1990s, the mechanism of collective bargaining has slowly receded into the pages of history. The reforms and the boom since the 90s have ensured that hiring and firing has become a routine and new normal in the country’s growth journey. The institution of the trade union, which proved an effective watchdog and offered necessary checks and balances in the running of an enterprise, has virtually collapsed.

Over the past three decades, and even today, the focus has been on reforms with a clear bias in favour of the industry. Successive governments – both at the Centre and in states – have gone on a competition-spree to woo investment, especially of the foreign direct kind. They have liberally rolled out the red carpet with friendly overtures in terms of making available cheap land and providing tax concessions of assorted kinds. In this competitive quest, they have conveniently pushed aside the need to fortify the support system for labour/employee. 

Tata Consultancy Services (TCS), Infosys, Wipro, and HCL Technologies — made net additions of 13,972 employees (taking into consideration the number of people exited in the year), compared to 59,427 in 2016-17.

Over the past three decades, and even today, the focus has been on reforms with a clear bias in favour of the industry. Photo: PTI

It worked fine when the economy was on an upswing. In good times, job-hopping is a routine and considered a legitimate right of an individual. In fact, time was when the IT industry just hired anybody and everybody. So much so, the manufacturing industry found it tough to get the right talent at the right price. Notwithstanding quiet murmurs from constrained bigwigs in the manufacturing field, the unbridled job-hopping was passed as an unavoidable concomitant of a strengthening economy. 

Unfortunately, the so-called growth phase also saw the virtual extinction of trade unionism in the country. Trade union leaders who could neither fathom the coming events nor quickly reconfigure their relevance in the changed context are also partly to be blamed.

Lessons to be learned

Television visuals of agitating young pilots of Jet Airways who were served with pink slips many summers ago are still fresh in public memory. That proved a national headline for a few days in the Indian television media. Did that Jet episode teach any lesson to anybody? One is not sure.

In a slowdown, the ‘hire and fire’ freedom returns to hurt heavily all stakeholders. By definition, the “hire and fire” play satiates only the near-term needs of players across the canvass. It has, however, an inherent capacity to play spoilsport over a long-run. From IT to airlines and newspapers, examples are aplenty. 

In a country with over a billion population, jobs per se aren’t going to provide sustenance for economic growth. A stable job is indeed a sine qua non for sustained growth. This cannot be simply wished away by policy planners and industry at large.

Also Read: 9 Million Jobs Lost in 6 Years, a First in Indian History

Consumer spending – especially on long-gestation aspirations such as owning a house and having a car – hinges largely on the stability factor. If stability is conspicuous by its absence, consumer confidence is unlikely to be in the positive terrain. Perhaps, the country is currently experiencing a confidence shortage. As authorities – both at fiscal and monetary levels – break their heads to crack the logjam with largely supply-side initiatives, they will do well to retrain their focus on fortifying the job ecosystem and usher in a sense of stability. 

And, the downturn is a tailor-made opportunity for union leaders of caring kind to reinvent their relevance. The onus is equally on India Inc to facilitate a stable job environment. It is not enough if they seek a stable policy environment. India Inc should also foster stability in the workplace.

K.T. Jagannathan is a senior business journalist.