Decline in revenue, direct and indirect job losses and a recovery scenario mired in uncertainty stare at the Information Technology (IT) sector in Kerala which is reeling under the global economic fallout of the pandemic, a recent study by GTech, the organisation of IT and Information Technology Enabled Services (ITES) companies across Kerala, reveals.
By the end of 2020, the IT sector in Kerala is expected to suffer an overall revenue decline of $594 million (₹4,500 crore). This revenue loss would translate into over 26,000 jobs of IT engineers lost in the State, the study reveals. A further 80,000 people are likely to lose their livelihoods due to the indirect job losses in support services. Predictably, the impact would be harder on the smaller and medium IT companies, which contribute 45% of the State’s IT revenue.
Existential challenge
The current scenario poses an “existential challenge” for many IT companies in the State, GTech chairman Alexander Varghese was quoted in a statement.
“It is fair to expect that once the COVID-19 situation starts to ease and businesses resume, our primary markets of U.S., Europe and the GCC will look to a significantly higher order of outsourcing to India. But the period until then will remain critical for many start-ups, small- and medium-sized IT companies,” he said.
An initial survey had already indicated that the sector was heading towards a slump. It had also revealed that the smaller companies were in for hard times.
“IT companies in the SME sector typically maintain low cash reserves as they reinvest profits to funnel growth. The drastic drop in revenues along with the earlier levels of expenditures on salaries, infrastructure etc., are moving these smaller companies into the red,” Mr. Varghese said. GTech had submitted recommendations to the State government seeking immediate support measures. The intervention of State and Central government would prove critical in preserving jobs and helping companies overcome the business slump, GTech secretary (Hon.) Dinesh Thampi said.
