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2nd December 2022 (7 Topics)

How will global layoffs impact India?


According to a global placement and coaching firm, a slew of U.S. multinational companies including tech giants Amazon, Meta, Intel, and Twitter have been observed as they announced massive layoffs, which can have an impact, on India’s export prospects, especially in the information technology (IT) sector.


What does Layoff mean?

  • It refers to a temporary or permanent discharge of a worker or workers.
  • Aside from the obvious disadvantage of having a smaller workforce, here are three downsides of layoffs:
    • Terminating, recruiting, and hiring employees is expensive. Firing and hiring employees can cost your business a lot of time and money.
    • You may permanently lose valuable employees.
    • Layoffs can lower company morale.

Why are layoffs becoming common?

  • Due to the economic recession since the Pandemic.
  • With inflation soaring in most parts of the world, central banks have been scrambling since March this year to rein it in by increasing rates so as to make it more costly to borrow and consume.
  • Due to Russia-Ukraine War: The International Monetary Fund (IMF) has cited forecasts for global GDP growth in both 2022 and 2023 as gloomy, given the pandemic and ongoing Russia-Ukraine war.

What is the outlook for the Indian IT industry?

  • The Indian IT services firms are among the largest employers in the organized sector and any global economic trend is bound to have an impact on their growth projections.
  • The attrition rates, (the number of employees per 100 quitting on their own) of the top two firms, TCS and Infosys, show that these rates are still high, which means that there is enough business for the sector for competitors to draw away employees with the promise of higher salaries.

How will global layoffs impact India?

  • On start-ups: The Indian start-up layoff tracker by Inc42 showed that more than 15,700 employees had been laid off in 2022 given tightening funding conditions.
  • Declining online content consumption: A lesser share of internet users visiting educational websites since the decline of the pandemic is cited as one reason.
  • For cost cutting: Managements look at headcount numbers critically when they want to cut costs and protect profit margins as they are accountable to investors.
  • On Big tech firms: This will eventually affect economic growth and jobs in Indian firms too.

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