IT sector job woes may pull down consumer demand

A reduction in headcount and subpar salary increments by information technology (IT) service exporters, including Tata Consultancy Services (TCS), Infosys, and HCL Technologies, could negatively impact overall consumer demand in India.

- KRISHNA KANT

The IT sector is the largest employer in the corporate sector, accounting for nearly a third of the salary and wage expenses of listed companies in FY23, up from a 22 per cent share a decade ago.

Historically, there is a strong positive correlation between the growth of compensation (salary, wages, etc) in the IT sector and the growth of private final consumption expenditure (PFCE) in the economy.

For instance, the year-on-year (Y-o-Y) growth rate in PFCE at current prices slowed to 10 per cent in FY18 from a high of 17.5 per cent in FY12. During the same period, Y-o-Y growth in IT companies' salary and wage expenses decelerated to 6.2 per cent in FY18 from 24.8 per cent in FY12. 

Similarly, the post-Covid boom on private consumption was accompanied by a record surge in hiring and compensation growth in the IT sector.