The last few years have seen massive upheavals in the talent market. After witnessing a slowing economy in 2019, 2020 saw an abrupt halt in hiring right after the first lockdown. While most industries paused or significantly reduced pay increases, and some companies even headcount, the technology industry went on a tear. In many ways, 2020 was perhaps the first time in the last few decades that we saw such a massive divergence in the talent market.
The technology industry (initially product companies and then even IT services) went on a massive hiring spree and salaries started shooting up for anyone who had the right technology and digital skills, while manufacturing and service industries completely clamped down on hiring. While this largely continued in 2021, the second half of the year saw a stark shift in the traditional industries as the economy opened up a lot more.
But 2022 has been the most interesting so far. Inflation spiked above the RBI’s as well as employees’ comfort zone in the first quarter followed by a pan-industry trend of higher salary increases and attrition levels. The global sentiment started shifting soon after and companies in India started to feel the global pinch of contractionary monetary policies and geo-political events.
We are today, in many ways, seeing the exact reversal of the trend we saw in 2020. Sectors aligned to greater digital interactions are seeing a slowing down of business (and perhaps more importantly, availability of capital), while industries that are based on more physical interactions (e.g., travel, hospitality, retail, auto) are doing much better. Attrition levels have come down by 200–300 bps in the last six months further easing the pressure on companies.
The conundrum before us is what happens in 2023 – so let’s look at a few fundamentals. Firstly, while the spike in inflation has been tempered, partly due to higher interest rates, it continues to remain high. This is a global phenomenon. Secondly, while the definition of a recession may be debated, it is hard to ignore the accentuated volume of talk about an impending global recession. The Indian economy however is still expected to expand at a slightly moderated but enviable rate of 6.0 – 6.5 percent in the next financial year.