IANS | 04 Dec, 2023
Hiring in the Indian IT services industry is expected to remain muted
over the next two-three quarters amid slowdown in demand, with
companies focusing on maintaining their profitability in the backdrop of
lower revenue growth, a new report showed on Monday.
The Indian
IT services companies hired extensively over the second quarter of
FY2021 to the second quarter of FY2023, as demand for digitalisation
accelerated following the Covid-19 pandemic, according to the report by
credit rating agency ICRA.
Simultaneously, the attrition rate in
the industry also intensified to 22-23 per cent due to the increased
demand for talent. This led to a record hiring of 273,000 employees in
FY2022 and another 94,400 employees in H1 FY2023 by the top five
companies in the industry.
“However, from Q3 FY2023 onwards, the
overall demand environment for IT services weakened due to uncertainty
in the global macroeconomic environment,” according to the report.
This
led to negative employee net addition during this period, as companies
reduced hiring and focused on improving overall utilisation levels.
This has helped companies maintain their employee cost and profit margins in the recent quarters.
ICRA
expects the revenue growth of the Indian IT services industry to
moderate to 3-5 per cent in FY2024 in USD terms versus 10 per cent in
FY2023 owing to the uncertain macroeconomic environment in key markets
i.e the US and Europe.
“The slowdown is expected to persist for
another couple of quarters, leading to overall slowdown in hiring in the
industry,” said the report.
The attrition rate has declined in
recent quarters, which has helped reduce the demand-supply mismatch in
the industry, it added.
“Indian IT services companies continue to
utilise the excess capacity added in FY2022 and H1 FY2023. The freshers
recruited then are now getting utilised, leading the company to not
backfill the attrition to an extent,” the report added.
