Business process outsourcing providers and call centres are among industry sectors in India that are likely to cut more than 25 percent of their staffing in the next 10 days, according to a report by a trade body.
The Associated Chambers of Commerce and Industry of India (ASSOCHAM) said on Wednesday that companies in those sectors were faced with shrinking margins.
Earlier this month, top Indian outsourcers like Wipro, Infosys and Tata Consultancy Services reported slower revenue and profit growth in the quarter to 30 September. These companies get most of their revenue from the U.S. and Europe, with a large number of their customers in the troubled banking and financial services sectors.
India's economy is also slowing down. The country's central bank, the Reserve Bank of India, last week cut its estimate for the country's GDP (gross domestic product) growth for the fiscal year ending next March 31 to a range of 7.5 per cent to eight per cent, from an earlier forecast of eight per cent.
New hiring by India's IT and services outsourcing industry has slowed down, but companies are not yet considering large-scale cuts, according to analysts.
The outsourcing industry is in "uncharted waters," said Siddharth Pai, a partner at outsourcing consultancy firm Technology Partners International (TPI). Once the bottom of the cycle is reached, business will improve for outsourcers as clients look to outsourcing as a way to cut costs, he added.
"The issue is that we have thought the bottom of the cycle was near quite often in the past few months, only to realise it is not really in sight just yet," Pai said. Outsourcing during the third quarter has been the weakest in 10 years, according to TPI.