MODI’S DIGITAL INDIA IS A LONG WAY TO GO IN JOB CREATIONNergal Scott
MODI’S DIGITAL INDIA IS A LONG WAY TO GO IN JOB CREATION
The global economic crisis and increased competition have led to a situation where Indian IT companies have been forced to improve productivity and quote lower prices to win deals. This week, Infosys rubbished reports that it was laying-off 3,500 workers, after losing a key project to implement technology solutions for the Royal Bank of Scotland. While the debacle was triggered by Britain’s exit from the European Union, it is important for India to prepare for a scenario where the IT and BPO industries will no more be the major job creators that they were in the past. New recruitment in the IT industry has fallen consistently from 2.35 lakh in 2013, and could be significantly less this fiscal compared to the 2 lakh jobs created in 2015-16. When India was at the cusp of the IT boom, the considerable labour arbitrage was an attractive draw for big companies to shift their back-end operations and low-grade coding, maintenance and testing functions to India. India’s abundant supply of manpower, which also came cheap, and the mushrooming of a large number of IT companies gave wings to this process. A knock-on effect of India assuming this role as a back office for the developed world was the proliferation of engineering colleges churning out nearly 15 lakh graduates every year to meet the IT industry’s needs. Despite complaints that most engineering graduates are unemployable, the rigorous training processes at the IT companies did help in bridging the skills gap. But the prolonged economic slowdown had forced the foreign clients to demand more cost savings by cutting down on billed manhours through automation.
A parallel can be drawn with the US software industry which lost out on the labour arbitrage opportunities by not relocating to India, which ended up benefiting our homegrown software companies. Similarly, adopting automation is key to the Indian IT industry’s plans to stay competitive even if it drives down project revenues and profits. According to NASSCOM data, the IT industry required 16,055 engineers to generate every additional $1 billion of export revenue in 2015-16, compared to 31,846 engineers in 2009-10. This near doubling of productivity has been achieved by automating repetitive tasks in testing, maintenance and production support. All of India’s leading software companies are building artificial intelligence platforms that can both automate and undertake self-learning which will lead to lesser human involvement in IT operations. IT companies have played down fears of job losses, and pointed out that the changes will require current and future employees to learn new skills in domains like automation, design, artificial intelligence and machine learning.
But it is clear as daylight that the gains in high-skill jobs will not offset the net job loss in the IT sector. It is estimated that as many as 4.7 lakh low-skilled jobs could be lost in the next five years. The services sector, and within it IT, has been credited for driving India’s GDP growth in recent decades. So even if the IT sector is able to stay ahead of the technological curve and remain profitable and attractive, its inability to absorb new and educated entrants to the workforce is a cause for worry, with other sunrise sectors not showing much promise. It is important that the higher education sector also takes note of these changes. Faculty in engineering institutes are clearly not equipped to train students in any of these relatively new areas of focus. The declining recruitments by IT companies are already impacting admissions in engineering colleges. Market forces are at play and while the IT companies seem geared to meet the challenges of a slowing economy and changing technologies, the same cannot be said of our education system and a predominant section of the workforce without the requisite skills.