HOME > BUSINESS > INFORMATION TECH > Indian IT industry facing layoffs as conditions worsen, warns Assocham

Indian IT industry facing layoffs as conditions worsen, warns Assocham

Trump unveiled his ‘Buy American, Hire American’ program yesterday

Indian IT companies are bound to see “some laying off” of their work force back home due to various negative forces impacting the industry, Assocham — an association of various industries — warned.

“With the US tightening the norms for H-1B visas under the President Donald Trump’s ‘Buy American, Hire American’ campaign, the Indian IT companies are bound to face disruptions by way of higher costs and even some laying off work force back home, as the rising rupee is aggravating the situation further for the technology export firms,” Assocham said in a ‘paper’.

“Nearly 86% of the H-1B visas issued for workers in the computer space go to Indians and this figure is now sure to be scaled down to about 60 % or even less,” it said, reacting to the order signed by President Donald Trump of the US yesterday.

Donald Trump unveiled his ‘Buy American, Hire American’ program yesterday, asking his officials to put an end to the practice of companies using lower-paid Indian IT engineers to replace higher cost professionals in the US.

As the cost pressure would increase, aggravated by rising rupee leading to lower realizations, the Indian IT firms may be forced to displace work force.

“In that case, the chances of layoffs are real,” the ASSOCHAM Secretary General Mr D S Rawat cautioned, while impressing upon the IT industry apex bodies and the government to work out a joint strategy to deal with the unfolding situation. In the last three months, the Indian currency has gained by at least five per cent against US dollar, reducing net realizations for software exporters, among other export –oriented sectors.

The warning has also come as reports suggest that Wipro, one of the largest outsourcing companies in India, is likely to accelerate its employee right-sizing efforts in the coming days.

Trump’s move would also impact India’s economy as remittances from US would decline hurting the balance of payment, the association warned.

“World bank data showed the U.S was the second largest source of remittance for India in 2015, behind Saudi Arabia, and about $10.96 billion-nearly 16 percent of the total inflows were sent to India. ASSOCHAM expects it to disturb the balance by 8-10%,” it said.

“After all, our stakes are quite high. It is a question of USD 100 billion software export industry that employs over four million people and reservations for H1B visa for start-ups with less than 50 employee will decrease the number of visa available for Indian firms.

According to the ASSOCHAM paper, the reverses resulting from the tightening of the H1B visas would force IT giants to create fundamental changes in their strategies in terms of hiring, salaries, jobs, impacting employees in India too.

The move would also have an adverse macro impact for the Indian external sector economy. Remittances from US would decline hurting the balance of payment. World Bank data showed the U.S. was the second largest source of remittance for India in 2015 with USD 11 billion – nearly 16 percent of the total inflows. “We expect disturbances in remittances by 8-10%”, the paper said, adding there would be fewer opportunities for individuals to work on offshore location.

With the UK already hiking the minimum wage requirement to £35,000 for tier-2 visa immigrants, this latest move by the US will act as a definitive dampener to the Indian outsourcing industry.

The alternate solutions for the Indian outsourcing industry are: investing in “near shore centres” – facilities close to the US, focus on local hiring in America and to work virtually, which is becoming easier with the wider adoption of cloud services and greater digitization.

Follow ULTRA.news
TCS to help UK’s Marks & Spencer become ‘digital first’ Tata Consultancy Services said it has entered into a five-year deal with long-time customer and retail chain Marks and Spencer to transform its customer experience and make it a 'digital first' business. "TCS will be Marks & Spencer's principal technology partner and drive ag...
Infosys to bring down on-site employee numbers going forward IT services provider Infosys Ltd said it has largely exhausted the possibility of improving its profit margins by increasing employee utilization levels and will focus on bringing down on-site employee numbers to boost margins. The company reported an employee utilization leve...
Infosys reports in-line quarter, revenue up 5.8% YoY in constant currency Infosys reported a quarter that was largely in line with expectations and said it retains its full-year revenue growth guidance at 5.5-6.5%, excluding the impact of currency movements. With nine months gone, the company has grown at 5.6% in constant currency terms so far. F...
TCS reports 1.2% sales growth QoQ, PAT up 1.3% TCS CEO, Tata Group Chairman & Maharashtra CM Tata Consultancy Services reported a 1.3% improvement in revenue in constant currency terms, which is less than the 1.7% improvement reported in the previous quarter, but largely in line with expectations for a tame quarter. R...
India PSU employment declining 4.3% per year The total number of people employed by various undertakings and companies controlled by the central government has been showing a decline of 4%-5% per year in recent years. According to numbers from the ministry of heavy industry and public enterprises, the total number of p...
Manufacturing sentiment steady in Q3; Auto, Cap Goods, Metals bullish FICCI’s latest quarterly survey on Manufacturing indicates a pause in the steady improvement seen in optimism on quarterly production levels. The percentage of respondents expecting production in the current quarter (Oct-Dec) to be higher than last quarter fell to 47% from 50...
NDTV to lay off 25% of workforce in one month NDTV said it has decided to fire up to 25% of its workforce over the next one month to focus more and more on its core news business. The fired employees are currently engaged with the company's non-core operations. "As intimated earlier to the exchanges, NDTV Group had in...
GST complaints coming mainly from tax-evaders – Adi Godrej Adi Godrej, chairman of one of India's largest manufacturing and real estate groups, said most of the complaints about the new Goods and Services Tax is coming from businesses that have been built on a model of tax evasion. "The complaints about the GST are mainly coming from ...
Zensar Tech CFO resigns with immediate effect Zensar Technologies, the IT services company from the RPG Group, said its chief financial officer Manoj Jaiswal resigned with immediate effect. "He will be relieved from his duties with effect from the closing of business hours on Dec 4," the company said. It was not clear...
Bangalore, ‘cultural fit’ swung it for Salil Parekh – Search Committee Head Two crucial factors that swung the decision in favor of hiring Capgemini veteran Salil Parekh as the new CEO of Infosys were his familiarity with working in the IT sector in Bangalore and his overall 'cultural fit' with the Indian IT industry, said Kiran Mazumdar-Shaw, who heads...
Boosted by Jio’s success, Mukesh Ambani unveils his future plans Mukesh Ambani, India's richest man, said telecom was the first of his big bet, and he will now use his resources to solve problems in three other difficult areas -- agriculture, education and healthcare. Speaking at the HT Leadership Summit, Ambani said his primary motivation...
TCS sets up new delivery center in Hyderabad for US-based Zebra Technologies Tata Consultancy Services, India's biggest foreign exchange generator, said it has set up a Global Development Center in Hyderabad to cater to Zebra Technologies, a billion-dollar US corporation that specializes in tracking technologies such as bar codes and RFID. The new cen...
Oracle Financial Services has yet another stellar quarter, sales up 12% Banking software maker Oracle Financial Services Software, formerly known as iflex, reported strong year-on-year numbers characterized by robust revenue growth and strict control over costs, however revenue slipped on a sequential basis. Consolidated revenue for the quarter w...
TCS inaugurates mega campus in Thane, to eventually relocate most Mumbai employees Tata Consultancy Services said it inaugurated the first phase of Thane delivery center that will have the capacity to seat 30,000 employees when fully developed, which will make it the largest in Mumbai. The company, which has a huge operation in Vikhroli in the city, said it...
TeamLease buys 40% of education technology start-up Schoolguru TeamLease Services, one of India’s largest staffing companies, said it has agreed to acquire 40% of Schoolguru Eduserve Private Limited, an Online Learning company that works with 18 Universities. Established in 2012, Schoolguru provides services to Indian Universities to help...
Cognizant raises lower-end of 2017 guidance again IT services provider Cognizant seemed all set to clock the upper end of its full-year guidance for calendar year 2017, raising the lower-end of its forecast once again. The company, which had changed its revenue growth forecast for 2017 to 9-10% from 8-10% last quarter, furth...
HCL, Red Hat to jointly offer cloud infrastructure leasing service HCL Technologies, one of the top five Indian IT services companies, said it has tied up with Red Hat -- the biggest open source software company -- to offer Linux-based virtual infrastructure for companies. A thematic by Red Hat Under the product, clients will be able to ...
Indian IT sector margins to fall to 21.2% from 23.5% by 2020 – ICRA Indian IT companies will continue to struggle to maintain growth rates and their margins will continue to fall in line with the trend seen in the last few quarters, credit rating agency ICRA said. The rating agency predicted a sharp decline in revenue growth rate from about 1...
Wipro increases stake in Oracle cloud specialist Drivestream to 44% IT company Wipro Ltd said it increased its stake Drivestream, which focuses on implementing Oracle's cloud solutions, to 43.7% from 26.1% by investing around Rs 26 cr. Wipro had first invested in the company about four months ago, and seems to have liked what it saw. It made ...
Ramco wins multi-million managed services deal from British MNC Bank Cloud-based enterprise software provider Ramco Systems said it won a multi-million dollar order from a big British MNC financial group to provide managed payroll services. Ramco will help the company, part of the FTSE 100 index, to consolidate its payroll operations in 14 co...