Nearly six per cent of outsourced contract workers lost jobs in India’s information technology sector in the January-March period compared to the previous quarter following the impact of the global slowdown and Russia-Ukraine war, a recruitment body said.

The Indian Staffing Federation, a body of 120 recruitment agencies that provided about 60,000 outsourced workers, said nearly 6 per cent or about 3,600 of these workers lost jobs in the March quarter.

India’s IT sector employed nearly 5.1 million workers in the year ending March 2022, according to government estimates, and companies have fired thousands of contract employees while holding on to hiring.

"The drop in new employment generation within the IT flexi staffing sector mirrored the global slowdown in IT hiring," said Lohit Bhatia, president of the Indian Staffing Federation.

However, the hiring in the manufacturing, logistics, and retail sectors remained strong, helped by domestic consumer demand, he said.

The $194-billion sector whose software services helped businesses adopt pandemic-era practices of online shopping and remote working is facing a slowdown this year as employees return to offices and the Russia-Ukraine war weighs on spending from clients in Europe.

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A report by JP Morgan analysts warned last week that soaring inflation, supply chain issues and the hit from the Ukraine war will bring an end to the growth boom that India's IT services enjoyed during the pandemic.

The hiring of flexi workers in the IT sector shrank 6 per cent quarter-on-quarter in the March quarter, Bhatia said, noting that hiring of contract workers through a third-party may remain weak for the next few quarters in the software industry.

India's unemployment rate in April rose for the fourth month in a row to 8.11 per cent, from 7.8 per cent in the previous month, according to the Centre for Monitoring Indian Economy, (CMIE), a Mumbai-based think tank.

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The Federation said overall demand for flexi workers slowed down in other sectors as well, adding 1,77,000 jobs through vendors in FY23, compared with 2,30,000 workers in the previous year.

The number of flexi workers, hired through vendors by Indian companies has increased to 1.4 million, including one-fourth of women workers.

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