What does job loss in the IT industry portend?

Asoke K. Laha
President & MD
nterra IT

If you were to ask me what is the high point of India-US partnership in recent times, I would say it is ICT. Our engagement in the sector brought about a new bonhomie and direction. We started considering each other as partners since there is a greater understanding and appreciation of each other’s skills and capabilities. The US investments in India paid off in terms of creating employment and income to the Indians in diverse fields, inasmuch as Indian investments in the US created durable assets and much-coveted employment. 

Yet, undeniably, of late, there have been lone and concerted voices emanating to whittle down what we have achieved over the years, and more than that, for denying our countries the chance to reach our true potentials. Fears are being expressed in the open and in closed doors about the loss of employment in the IT sector globally and specific to our two countries. Fearing that, there are speculations about retrenchment even by large Indian corporations in anticipation of loss of business. Some of them are seemingly speculations and yet there is a lurking fear that it could be true if the situation is allowed to drift. 

Manufacturing has taken a toll more than any other sector in the U.S. America has lost some seven million manufacturing jobs. It is easier to increase productivity in manufacturing than it is in services. Earlier, it was agriculture versus manufacturing. The proportion of the workforce engaged in agriculture fell on account of mechanization. Now, the same plight had visited manufacturing. The same reasons cannot be attributed. Most of the jobs have travelled from the U.S. to countries like Japan and China, which had specialized in manufacturing technologies, achieved economies of scale and perfected the art of manufacturing at the lowest cost, outsmarting destinations where labour and capital had become costly. Automobiles, chemicals, pharmaceuticals, electronics, and textiles are some of the sectors that have travelled from the U.S. to other destinations. 

There is a long list of countries which have lost jobs in manufacturing due to automation. These include Britain, Germany, France, and Australia. It will be instructive to see why automaton is taking place in a more aggressive way than ever before. Shortage of manpower could be one reason. Two, constant innovation, technological breakthroughs and cost optimization can be others. 

The services sector, which includes tourism, IT and IT-enabled services, hospitality and healthcare, have registered impressive growth in terms of employment.  Of late, there is a fear that job losses have started affecting these sectors on account of automation. Artificial intelligence, chip technology, drones, robotics, and Internet of Things are scripting a productivity transformation in the services sector. These technologies can replace human interventions. For instance, several millions of banking jobs can be replaced by technology. That is also true in every segment. Take for instance online booking of rail or air tickets. Earlier, we had a number of counters in the booking stations to manually book either train or airline tickets. Now with the use of technology, these jobs can be done online. What will happen to a number of people engaged in these professions? Will they become redundant?

The industry association NASSCOM in a recent statement said that it is taking care of the future needs of IT professionals. The training curricula should undergo a change to make the present and future supply of manpower relevant to the industry needs. That is quite a challenge, given the fact that the pace of automation will gather momentum in the coming years worldwide and if India has to maintain the headstart in IT, it has to be more focussed on training them in superior and complex levels. 

Obviously, IT and IT-enabled services is the largest segment in the services sector. The IT sector is unique in many ways. It is distance neutral and is not confined to geographies. It cannot function in seclusion unlike manufacturing or agriculture, which are more dependent on local availability of resources, polices and comparative advantages. A message that we send through e-mail, WhatsApp or any other digital platform can be accessed wherever you have the connectivity. When a new IT product is developed, it is meant for the whole world and the demand is not confined to a particular country or region. This means that IT and IT-enabled services, belong to a different league and at the same set of rules and regulations that are applicable to other segments should not be imposed on this sector. That will kill the very spirit of IT, its global reach, creative appeal and its brain power. Its canvass is broad and all- encompassing.  

Against this backdrop, assuming that there is a rupture in the chain, it will upset the whole system. Let us take, for example, any law enacted to make outsourcing of IT works difficult by imposing artificial barriers. The home country industry will then be forced to do things domestically. That will not be cost-effective and against the tenets of a free economy and a liberal approach to the growth of business. This will adversely affect the bottom lines of the companies. The profit is hit and gradually the entire investments in the sector become non-functional. Such a phenomenon has happened worldwide. 

A digitally strong India needs IT platforms on a regular basis, be they satellites, drones, chips, medical devices and what have you. These things are being imported from the developed world, particularly from the U.S. What I am trying to drive home is that economic engagement is not a zero-sum game. It benefits all stakeholders. Let us evolve policies based on advantages and inherent strengths and not based on emotions, pent-up ire and  feelings other than economics. No country or region in the present day is self-reliant. Interdependence and engagement are the rules of the game. Let us not vitiate that age-old dictum. Playing to the gallery can at best help in whipping up passions and emotions. Business is not the one based on these sentiments. At the end of the day, people look at the tangible results that they have achieved and not how many people are packed off from a country to save jobs for the locals. Let not IT or California meet the same plight as automobiles and Detroit!