We buy three newspapers at home everyday and a few more on Sundays alone. Out of the regulars is The Economic Times. I was prompted to read an article on the IT sector in India by my dad and it has proved to be quite an eye opener. You can read it here. It presents a slightly shocking picture. IT majors have stepped down the aggression with respect to recruitments. It is expected that campus recruitment can go down by as much as 15-20% from current levels. This is generally attributed to two main factors, the hike in value of the Rupee and the Sub-Prime economic breakdown in the US.
The hike in the value of the Rupee is due to several reasons. Exports in all sectors (actually, most of the important sectors) from India have gone up in this FY. Of course, it is also attributed to the weak economic situation in the US that is pulling the value of the Dollar down.
The Sub Prime breakdown is a very interesting one. The story starts with the September 11 attacks and the IT recession in the US then. The Government had no way to improve the economy because everyone was apprehensive about spending every dime from the pocket. It’s pretty obvious that only a positive cash flow can improve an economy. So, the Government decided to do something that it considered ingenious then. Now, however, it’s feeling the pinch. ‘Prime’ is generally something with paramount importance and quality. Sub-Prime is something that is not of paramount quality. Hence, ‘Prime’ loans are loans given to people with good financial soundness. Sub-Prime loans are loans given to people without proper collateral and repayment capabilities. The Government decided to give loans to all kinds of people from all facets of society to encourage them to shop and spend and thereby improve the economic situation of the country by creating a positive cash flow all round. This was where the Government got carried away and even instructed private banks to give loans to every Tom, Dick and Harry around! The problem here, again, is that the private banks in turn borrowed from top banks from all over the World (for loans that might never be repaid). Banks like ICICI had to write off a part of this money in their results QoQ. All this made sure that the Dollar doesn’t go up in value at all. The Government of US has to find a suitable way/ways to plug the loans and re-direct the US from it’s path towards economic insolvency.
As a direct result of these factors, the margin of profit for the IT majors has gone down. They wouldn’t increase their bill to the clients because of the fear that the contract might get shifted to other alternate firms from growing markets all over Asia. Thinner margins, lower reserves, high employee base. This is something that no company would love to encounter.
If you’re planning to look at IT in India as a career option, I strongly advice you to keep yourself up-to-date with trends in IT and remain competitive and aggressive throughout your career. Otherwise, chances are that you might get chucked out at any time.
Yours Skeptically,
uleadin
P.S. I would say that the healthy lifetime of the Indian IT industry would be another 5-8 years maximum after which it’s certain downslide would begin.
uleadin 
being inside IT, I have a feeling the downslide has already started. There is still some gravity holding it though; don’t know for how much longer. I agree with the 5+ yrs margin.
And its not just less aggressive recruitment, but lesser hikes in salary. (Source: ET again!)
@LVS:
think I missed that article. but the fact is almost well known.
u know this the USA is supposed to go into a recession in another 1 year and leading US companies had already fired about 800000 employees 2 months back.
@csrinath:
US of A has been in recession for more than a year da! and they fired 8 lac employees “Worldwide”. That’s an ordinary figure for them da. They did it during the previous recession in 2001-2003 also.
We are doomed.
Very nice blog.Keep up with the good work!
@Loan Holder:
Thanks!