Just a couple of years ago, placement-season jokes went something like this: Joggers near information technology campuses are in risk of getting recruited. The jokes are have been long forgotten as college campuses, particularly the Tier 2 ones, are teeming with anxious graduating students waiting for a call from these companies.
There is a reason for the anxiety. IT companies have been one of the biggest hirers in India’s services sector since the 1990s. But according to data from TeamLease, the industry will hire 40% fewer freshers compared with FY23, when they onboarded 250,000 engineers. Quite a few IT companies have said they would be absent from campuses this placement season. The last time this happened was during the financial crisis of 2008. Though TCS and HCL Tech are planning to go ahead with their campus hirings, the concern is that recruitment of freshers by IT companies this year will be less than half of last year’s.
Even if companies are showing up, they are hiring a much smaller number of candidates as compared to earlier. For example, HCLTech’s investor release reveals that in the first half of FY24, the company added about 5,227 freshers, just one third of the number last financial year.
Among big companies, Infosys and Wipro, which together hired over 200,000 engineering graduates in the past three years, have said they don’t plan to go to the campuses this year. The reasons are obvious. Weighed down by fears of a looming recession in the US and Europe, the IT sector has seen a sharp slowdown in revenue and profit growth. The combined net sales of the IT services companies, which have declared their results so far for the second quarter of FY 24, are the lowest in the past 11 quarters and less than a third of the growth a year ago. Similarly, their combined net profit is the lowest in the past five quarters.
It’s a big concern for several reasons, especially as it comes on top of large-scale departures—some voluntary, some forced. India’s top three IT companies saw more than 25,000 net employee exits in the six months to September, driven by cost-saving measures, unfilled job openings, and hiring curbs. Besides, IT accounts for about 8% of India’s gross domestic product versus less than 1% about 30 years back. Overall, the Indian tech sector employs over 5.4 million people, and the number is dominated by the IT sector. Any pullback by IT giants could weigh on the economy and affect engineering students who have seen IT as the sector of choice for decades, creating fresh challenges for India’s demographic dividend and consumption story.
Weak IT hiring could be for two different reasons: short-term negative demand shock or a long-term displacement resulting from labour-saving technologies. The point is that fresher hiring by IT companies is unlikely to ever go back to the high levels seen during the pandemic. The time has therefore come for India’s policymakers to look beyond IT and train India’s aspirational youth to make them employable for other industries. India’s education system needs to be reformed to include practical and hands-on learning at an early age. Theoretical learning models along with rote learning leave students stunted in their academic growth and widen the skill gap. There needs to be a collaborative understanding between the industry and academia to ensure that the education system is aligned according to the needs of the current job market.