As the Indian IT services sector grapples with a slowdown in the United States, as well as global macroeconomic uncertainty, industry experts predict that hiring will remain subdued, despite a strong pipeline of deals.
According to ICRA, hiring is expected to remain slow over the next two to three quarters. This means that hiring will be slow even in the first quarter of FY25. While the sector has reported a hiring slowdown, recruiters were hoping that companies would visit campuses for off-campus recruitment.
“Between Q2 FY2023 to Q2 FY2024, ICRA’s sample set companies recorded a net decrease of 49,606 employees (compared to a net increase of 245,248 during Q2 FY2022 to Q2 FY2023). This is because the companies have not completely backfilled the attrition and have focused on improving employee utilisation amidst a weakened demand environment,” said ICRA.
The top five IT firms hired a record 273,000 employees in FY2022 and another 94,400 in H1 FY2023.
Because of the uncertain macroeconomic environment in key markets such as the United States and Europe, ICRA expects revenue growth in the Indian IT services industry to moderate to 3-5 percent in FY2024 in USD terms, down from 10 per cent in FY2023. The slowdown is expected to continue for a few more quarters, resulting in a general slowdown in hiring in the industry.
“Employee cost as a percentage of operating income for Indian IT services companies has increased steadily in the recent years from around 54 per cent in FY2021 to almost 58 per cent in H1 FY2024. While this has exerted some pressure on profit margins, major IT services companies have been able to mitigate the impact to some extent through increased operating efficiencies,” said the ICRA report.