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Will IT get worse?
K.G. Kumar
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As the global economic and financial crisis begins to export its impacts on to the Indian economy, Kerala's IT sector ought to remain alert to the real danger of recession and pink slips..
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As the global financial and economic crisis shows no signs of an immediate letup, and the world seems set to battle a widespread downslope in prices and a monumental slump in aggregate demand, globalised economies like that of Kerala are bound to be affected more than other more insulated ones.
It looks like the world is set to become enveloped in a shroud of stagnation, rising unemployment and inflation.
The effect could be double-edged. On the one hand, the weakening rupee has boosted the value of foreign remittances into Kerala.
Remember, nearly a third of the $26 billion flowing into India as inward foreign remittances , or about $8 billion, comes from Kerala expatriates, mainly in the Middle East. They, their families and their bankers will surely not be too displeased with the current turn of events.
Exporters' worry
On the other hand, rubber planters and seafood exporters are worried about decreased demand and falling prices. The price of a kilo of natural rubber has dropped from Rs 140 to around Rs 80. Players in the State's spices and cashew export sector as well as in tourism are also reasonably apprehensive about the global economic contraction.
And the prospects are not exactly cheery. In its World Economic Outlook Update released recently, the International Monetary Fund (IMF) projected that the growth in world economic output for next year will fall by 0.8 per cent at 2.2 per cent. IMF also revised India's economic growth forecast for next year to 6.3 per cent - 0.6 per cent less than what it had projected last month.
India is likely to record an economic growth of 6.6 per cent during October-December as against 8.9 per cent in the corresponding period in 2007, says IMF.
The effects of the global financial and economic crisis has already had its toll on the information technology (IT) sector in Kerala. Last fortnight. IBS Software Services, a leading IT company which employs around 2,200 in its facility in Technopark, the State's first information technology park, showed the door to 27 employees.
Though the company was quick to explain that the action was part of a routine human resources (HR) exercise to rationalize staff by weeding out the under-performers, the links with the global economic panic cannot be wished away.
Job rationalisation
The founding chief executive of Technopark forecast in a recent television discussion that if the global economic crisis were to continue for another three months or so, Kerala could expect to see a loss of at least 1,500 jobs in the IT sector.
However, he also added that if the government were to prevent job rationalisation by IT companies through pink slips, the long-term effect could be the prevention of thousands more job opportunities in the State through future expansion of IT companies.
Over the past 10 years the Indian IT industry has witnessed an exponential growth of 30 per cent per annum, providing employment to over 1.6 million people across the country, and grossing total revenue of over Rs. 160,000 crores per year, from exports and domestic sales put together.
With the industry reporting a healthy compound annual growth rate (CAGR) of about 25 per cent, Kerala was hoping to more than cash in on the growing IT-enabled services (ITES) business.
IT policy mission
The IT Policy 2007 of the Government of Kerala promised to evolve the State into a knowledge society built on sustainable economic growth with equity, social harmony and a high quality of life. To spread the IT industry across the 14 districts of the State, the government plans to set up quality IT parks in all the districts on the State on a "hub-and-spoke model.
It is expected that the three major cities of Thiruvananthapuram, Kochi and Kozhikode would emerge as major IT hubs with spokes spilling over to the districts neighbouring these cities.
Such a distributed growth would ease the pressure on the urban infrastructure and prevent the problems befalling metros like Bangalore and Chennai, says the Kerala government.
In many ways, Technopark is the public face of the Kerala government's IT enterprise. It boasts of several firsts: the first electronics technology park of its kind in the world; the first technology park initiated with 100 per cent government equity; the first park in the world to bag CMMI Level
4 certification with ISO 9001:2000; the first Indian park to start a Business Incubation Centre; the first to start technology business incubation in the country; and the first park for developing in-house entrepreneurship talents and training activities by through the National Centre for Innovation Incubation and Entrepreneurship.
Investment
Technopark is home to 120 IT and ITES companies (like Infosys, TCS, Allianz Cornhill, Ernst &Young, Tata Elxsi, Alamy Images and Toonz Animation), including 32 start-ups, employing about 15,000 IT professionals. The total investment in the campus is around Rs 1,000 crore and the park's annual turnover crossed Rs 800 crore in the year 2006-07.
Technopark has created 20, 62,000 sq. ft area for industrial modules, and 146.07 acres have been given on long lease to the companies, most of which have constructed their own buildings in the campus in a 49, 61,700 sq. ft area.
Apart from the industrial buildings, Technopark has also created 1,41,500 sq. ft of built-up space for other purposes.
Clearly, all this investment cannot be allowed to go to seed. As the global economic and financial crisis begins to export its impacts on to the Indian economy, Kerala's IT sector ought to spruce up, remain alert and tighten its belt.
The writer can be contacted at kgkumar@gmail.com
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