Mint Primer: Could FY24 turn out to be a bleak year for IT hiring?

livemint.com:

Mint explains. The headcount in India’s IT sector this fiscal year is expected to grow only 2.4%, as per recruitment firm Xpheno. This is in sharp contrast to the years just after the pandemic when it saw the phenomenon of the ‘Great Resignation’—engineers resigning in huge numbers, sending firms into a hiring frenzy as demand shot up.

Organizations globally pivoted to the digital, leading to more work for the IT services industry. The manpower growth in FY22 over FY21 was at 20%. But this paradigm has changed as the global economy has cooled.

Many enterprises are capping their spending on discretionary IT. Leading Indian IT exporters Infosys Ltd, and Wipro Ltd, which together hired 208,000 engineering graduates in the last three years, have said they don’t plan to go to the campuses at all this year. However, rivals TCS and HCL Technologies have said that they will hire from colleges.

Even so, industry analysts believe that the hiring numbers would be small, given the weak demand scenario. There is also lower demand for basic skill sets freshers come in with. IT firms have to retrain the freshers they hire to be project-ready but due to pressure on costs, they may not be too keen to make that effort.

Manpower is more than 60% of an IT firm’s expense and cutting back on hiring helps. Kotak Institutional Equities says costs are being aligned to demand as the anticipated quick recovery did not materialize. Firms deployed levers to defend margins: “These include raising utilization rates, increasing productivity measures, lowering average cost of resources," it said in a report.

Since supply of talent outstrips demand, it could theoretically lead to lower salaries. There won’t be any uptick in campus offers. Accenture has