Impact of Global Financial Crisis on Employment in it Industry and Employment Multiplier
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Date
2012
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Abstract
The Indian economy looked to be relatively insulated from the global Jinancial crisis that
started in August 2007 when the 'sub-prime mortgage ' crisis first surfaced in the US. In fact
the RBI was raising interest rates until July 2008 with the view to cooling the growth rate
and contain infationary pressures. But as the financial meltdown, morphed in to a global
economic downturn with the collapse of Lehman Brothers on 23 September 2008. the impact
on the Indian economy was almost immediate. Credit fow s suddenly dried-up and. overnight,
money market interest rate spiked to above 20 percent and remained high for the next month.
It is. perhaps, judicious to assume that the impacts of the global econpmic downturn, the first
in the center of global capitalism since the Great Depression, on the Indian economy are still
unfolding. The severity and suddenness of the crisis can be Judged from the IMF's forecast
for the global economy. For the first time in 60 years, the IMF is now forecasting a global
recession with negative growth for world GDP in 2009-10. The IMF has revised its foreca.sis
downwards thrice since July 2008, and it is not yet certain that this will be the last revision.
The WTO has predicted that world trade, which has virtually collapsed Jn the second half of
2008 is likely to decline by as much as nine percent in 2009-HJ. !Ve have already seen
exports from worlds major exporters, like Germany, Japan and China,' plummeting by more
than 35 percent in the last cpiarter of 2008. The sharp decline in economic activity is despite
ihe large stiinuius. esnmaied ai more titan USDs trillion, that ULCD economies have niu in
place. Yei the bad news does nut stop. To conclude, total employment by rop-iO IT
services firms has slightly decreased in the first half of 2009 compared with 2008, but
definitely not as strongly as in 2002. where employment dropped by up to 13%. In the first
half of 2009, top-10 IT services frm employed more than 638 000 people, which is almost -I
000 employees less than in 2008 A/% of total workforce). Compared to 2007. however,
employment figure still show a 4%j growth. Accenture. Cap Gemini, and Alos Origin, who
together account for more than half of total employmeni in 2008 among top-10 IT service
companies, have significant!)’ reduced die number of their emjiloyees in the first half of 2009
(.Accenture: -9 000, -5%: Cap Gemini: -2 000. -2%j: .-Itos Origin: -I 500. -3%,). Meanwhiie.
some IT services firms such as .Affiliated Computer Services and Comptiler .Sciences
Corporation continued hiring in the first half of 2009. preventing a deeper decrease in
employment.