Economic Crisis: Signs of slowdown

There are worrying signs of a slowdown in IT industry, a survey by the Confederation of Indian Industry (CII) has warned. According to the survey, the Information Technology industry here witnessed a 2-3 per cent dip in billing during the first half of the current financial year as against the previous six months. Manpower utilisation levels fell by 5 per cent during the same period, while employment levels dipped by 3-5 per cent. Profit margins for the April-September 2008 period are expected to fall too. The slowdown has been blamed on the recession in the US and the weak rupee. The IT industry’s reading of the impact of the US recession on them was mixed, with some analysts pointing out that the recession held out greater opportunity for India’s BPO business. US companies reeling under cost pressures were expected step up their outsourcing to India in a bid to cut back their costs. In fact, companies that were earlier not outsourcing were now taking up this option, they claimed. But many have been expressing fear that India’s IT industry would not escape the impact of the US recession, tied as it is so closely to the health of the US economy. The figures in the CII survey seem to confirm that these fears are not unfounded.As the CII survey indicates the negative impact of the recession on IT and BPO companies is being felt most seriously on employment.Until recently, India’s top IT companies were saying that they do not plan to layoff employees or go slow on recruitment, now the word is out that jobs in IT sector will reduce for the next two years. More and more IT employees can expect to receive the pink slip. And employment prospects for fresh engineering graduates are not too bright.
The CII survey is not all bad news for the IT industry. It points out that revenue and overseas billing increased by five per cent in the first quarter of the current financial year. And these are likely to grow in the coming months, with revenue going up by three-five per cent and overseas billing increasing by three per cent.