Moneycontrol
Aug 11, 2017 06:36 PM IST | Source: Moneycontrol.com

Economic Survey II flags job loss challenges as concern for IT industry in India

The Survey said a major challenge faced by the IT industry include protectionist policies of in the US and the UK, two of its biggest markets, which account for 62% and 17% of revenues respectively

Economic Survey II flags job loss challenges as concern for IT industry in India

Moneycontrol News

The Indian information technology industry is grappling with “job loss challenges,” and other factors that are contributing to slowing down growth in the sector, according to the Economic Survey Volume 2, released on Friday.

Enumerating the challenges faced by the IT industry, the Survey noted: “In 2016-17 around 1.7 lakh jobs were created and in Q4 (fourth quarter) of 2016-17 alone, there was a gross hiring of over 50,000 by top 5 companies. However, Labour Bureau of India data indicates that changes in employment in IT-BPO sector during April to December 2016 was only 0.22 lakhs.”

The Survey said there was a “gentle deceleration in net hiring growth rate,” which has also been corroborated by industry body National Association of Software and Services Companies (Nasscom).

As growth slows and automation replaces the lower skill or repetitive jobs, the industry is going through a shake up leading to several reports of job losses at most large IT companies that earlier hired in large numbers.

The Survey also said that while the industry has consistently denied laying off or firing people in the IT services sector, a World Bank report last year said that automation threatens 69 percent of the jobs in India, compared with 77 percent in China and 85 percent in Ethiopia.

The industry provided employment for over 3.9 million people in 2016-17 and also created employment in supporting sectors like transportation, hotels, infrastructure and security services.

The growth in digital technologies like cloud-based services is happening at a much faster pace and the companies have to learn the new technologies and re-skill, the Survey said.

“The fall in exports of India’s computer services exports by 0.2 percent in 2016 (as per WTO data) is happening even when the World computer services exports are growing at 5.8 percent in 2016,” the document reviewing developments in the Indian economy said.

India’s software exports were growing at 27 to 38 percent during 2002-03 to 2007-08 but have fallen by 0.7 percent in 2016-17 according to RBI’s balance of payments (BoP) data.

IT-BPM (business process management) exports are expected to reach USD 117 billion, with a growth of 7.6 percent according to Nasscom.

The Survey said a major challenge faced by the IT industry include protectionist policies of in the United States and the United Kingdom, two of its biggest markets, which account for 62 percent and 17 percent of revenues respectively.

Among the factors listed in the US is President Donald Trump’s “Buy American, Hire American” executive order which seeks to collect data, increase oversight and enforce more actions, in order to  develop administration plans to reform and curtail the high skill visa programmes such as H-1B, which are used extensively by the Indian IT industry.

Several other Bills proposing changes in the H-1B visa regime, as well as a recent memo from the agency that looks at lawful immigration in the US saying a computer programmer will not be eligible for H-1B visas by default would also have an impact on the Indian IT industry.

The European Union’s new data protection and privacy rules will also prevent Indian companies from providing services from India, while in Australia, the Government has announced that it would eliminate the 457 visa category and replace it with two new visa streams to protect the interests of Australian workers. Singapore and New Zealand also have visa issues that are preventing workers from travelling to these countries.

Other major challenges include competition from new entrants that provide more niche services, shortage of skilled digital talent, underdeveloped infrastructure in tier 2 and 3 cities and some restrictive regulations for product startups.
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