By K Raveendran
It is increasingly becoming clear that the crisis in global banking has not played out even a small part. While the immediate fallouts leading to bankruptcies and similar consequences appear to have been contained somewhat, fears are lingering. The prospects of a recession in the global economy stand more pronounced than before. In simple terms, when people fear trouble ahead, they stop spending money, which sets off a chain reaction that affects every economic activity. And this gets reflected at every level of the economy, including credit, capital and investment, which have an overbearing impact on the full economy.
Recession has not cast its shadows on the Indian economy as much as it has done elsewhere, as it has shown typical resilience due to inherent strengths by virtue of a market that is large enough to be a world by itself. But there are sectors this world merges with the larger world to the extent that the boundaries are hardly recognizable. The integration is complete when it comes to areas such as technology, e-commerce, service etc. So, any development that has implications for global companies has a fallout on India as well.
For instance, 40 percent of all staff of consultancy giant Accenture are based in India and the company has just announced plans to trim its workforce and this is true of almost every other giant, including Google, Microsoft, Amazon, Twitter and Meta. The US banking crisis can add another layer of companies to the process, as most major players have outsourced their backend operations to India.
According to the latest data about job cuts, layoffs in just three months of 2023 have crossed that in the entire 2022. A total of 518 tech companies have laid off 1,71,858 employees between January 1 and March 23 this year, compared with the 1,61,411 employees sacked in 2022. In 2023 so far, Amazon has laid off the highest number of employees — 27,000, in three tranches. It was followed by Meta, laying off 21,000 in two tranches and Accenture which sacked 19,000 employees. Similarly, Google cut 12,000 jobs, Microsoft 10,00), Ericsson 8,500, Salesforce 8,000), Dell 6,650 and Philips 6,000.On a quarterly basis, the March 2023 quarter recorded the highest number of layoffs since the Covid pandemic, with 522 companies laying off 1,52,858 employees. This was in addition to the reduction by Accenture.
The full impact of the banking crisis on the job scene is not clear as yet. The crisis has seen the share prices of global banks tumbling by a sixth. Falling share prices have been found to have a key bearing on the operations of the banks, including credit and deposits as loan disbursals come down on one hand and depositors pull back their money to be deployed in safer havens. According to a study by Goldman Sachs, the setback to bank lending implies a growth drag of around 0.4 percentage points in both America and the euro area.
Goldman Sachs group itself has announced plans to cut thousands of employees to navigate a difficult economic environment as Investment banking revenues have plunged amid a slowdown in mergers and share offerings, marking a stark reversal from a blockbuster 2021 when bankers received big pay bumps. The group is also weighing a sharp cut to the annual bonus pool this year. This contrasts with increases of 40 percent to 50 percent for top-performing investment bankers in 2021, according to a Reuters report.
Trade unions have questioned the layoffs by the giants, saying the companies are acting as if they are above the Indian laws. As per the provisions of Industrial Disputes Act the employer cannot, without prior permission from the appropriate government, lay off any employee. This means that employees who have served for at least a year of continuous service cannot be laid off unless served a notice three months in advance and prior permission from the appropriate government, the unions have argued.
Perhaps the only silver lining in the otherwise gloomy scenario is the possibility to new job opportunities for techies emerging in the online gaming space. The gaming industry in India currently employs nearly 50,000 people, with programmers and developers accounting for 30 percent of the workforce. According to a new report from staffing firm TeamLease Digital, the industry is expected to grow by 20-30 percent and create one lakh new direct and indirect jobs by the end of this financial year. The report pointed out that the new job opportunities are expected to be available across all domains, including programming, testing, animation and design.
India’s gaming industry has seen the greatest adoption in the mobile gaming segment. According to experts, India has seen great smartphone-based growth, while good gaming computers or consoles are still unaffordable for most gamers. (IPA Service)