India Market Watch: IT Industry Slows Hiring Rate and Prospects in the Fast-Growing Food Service Sector

July 26, 2016 Posted by India Briefing Reading Time: 5 minutes

Dip in Hiring in the IT Industry

The National Association of Software and Services Companies (NASSCOM) predicts a decline in hiring figures in the IT industry due to pressures to reach higher margins and the trend towards automation of services in the sector. In fact, the past two years have witnessed a more or less static hiring policy – just 200,000 were hired last year, a minor dip from 220,000 from the year before. Further, a premium is placed on skills in cloud and big data analytics corresponding to the slump in hiring for Program Managers and IT support roles.

Growth in the IT industry has additionally been impacted by the general global economic slowdown. Leading companies such as Infosys and Wipro have cut their annual earnings forecast; Infosys has publicly stated that it cut its earnings projection from 11.8 – 13. 8 percent to around 11.5 percent, while Wipro’s IT sales growth could move below one percent. Nonetheless, NASSCOM remains optimistic, citing India’s overall strong fundamentals, and projects a 10-12 percent growth rate for the IT sector. IT services heavyweight Tata Consultancy Services (TCS) reflects this cautious optimism with its first quarter results meeting company expectations at a profit of 9.9 percent (US$ 937.94 million).

NASSCOM has said that the impact of Brexit and the impending U.S. elections on India’s IT sector will be seen only after Quarter 3 (October-December) of financial year 2016-2017.

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Food Service Sector a Key Part of the Indian Economy

The National Restaurant Association of India (NRAI) released a report on the state of India’s food service market last week, estimating it to be valued at around US$ 45.88 billion (Rs 3.09 lakh crore) in the ongoing financial year. NRAI expects the sector to grow at a compounded annual growth rate (CAGR) of 10 percent to reach a potential US$ 73.94 billion (Rs 4.98 lakh crore) by financial year 2021. Underlining these projections, however, is the need for India to maintain a strong macroeconomic performance – consistent jobs growth, inflation under control, fair balance of trade, and other economic efficiencies that could boost the growth rate.

Breaking down the food services market size in this financial year, the unorganized sector holds a 67 percent share, with an estimated size of US$ 30.73 billion (Rs 2.07 lakh crore). Growth in this sector is expected to plateau and reach US$ 43.5 billion (Rs 2.93 lakh crore) by 2021. On the other hand, the organized food services sector, which includes chain outlets, standalone outlets, and restaurants in hotels, is currently estimated to be at US$ 15 billion (Rs 1.01 lakh crore), with a projected CAGR of 15 percent to reach US$ 30.29 billion (Rs 2.04 lakh crore) by 2021.

Its growing importance in the Indian economy is further relayed by the fact that the food services sector boosts a range of ancillary industries, such as the real estate industry. Moreover, it is a major jobs creator, generating direct employment for about 5.5 to 6 million people, which is to grow to 8.5 to 9 million by 2021. Finally, the sector contributes massively in terms of tax revenues – at an estimated US$ 3.27 to 3.33 billion (Rs 22,000-22,400 crore) this year and US$ 6.24 to US$ 6.68 billion (Rs 42,000-45,000 crore) by 2021.

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Coastal Economic Zones Planned to Drive Port-led Industrialization

The government recently announced 14 new coastal economic zones (CEZs) in the country, which will serve as spatial economic regions, extending along 300-500 km of coastline and around 200-300 km inland from the shore. In turn, these CEZs will facilitate port-led industrialization in the country, boosting the Make in India initiative.

According to the Ministry of Shipping, the CEZs will be aligned with the “relevant ports in maritime states and will house Coastal Economic Units for setting up manufacturing facilities”. Further, each CEZ will be an agglomeration of coastal districts within a state. The CEZs will also intersect with or take advantage of the planned industrial corridors like the Vizag Chennai Industrial Corridor and the Delhi Mumbai Industrial Corridor.

The conceptualization towards the development and modernization of India’s ports comes under the larger Sagarmala initiative, which is a holistic and integrated program to transform the way logistics is handled in the country. All in all, a total of 173 projects have been identified in the National Perspective Plan for the Sagarmala program, and were approved by the Prime Minister’s Office in April.

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