Tech me not: Consumption cos wary of IT pain hurting fragile recovery
Mumbai: Layoffs in India's IT sector is bad news for consumption. After IT giant TCS announced cutting more than 12,000 jobs, a spectre of uncertainty looms over the sector with industry body Nasscom hinting at more layoffs - this could have a bearing on discretionary consumption, squeezing demand for apparel to and electronics, say experts, as during periods of downturn, people tend to save more.
A slowdown in the tech industry, which employs thousands of engineers every year, many of whom are millennials and Gen Zs who drive a significant share of household spending.
Company earnings show that consumption growth in India is uneven - it seems to be on a gradual path to recovery after several sluggish quarters, but it certainly isn't galloping with firms such as Colgate-Palmolive calling out "tough" operating conditions in its Q1FY26 earnings.
Slow Hiring, Job Cut Hit
Economic sentiments and job uncertainties in the IT sector can have a "cascading" effect on consumption, Joy Alukkas, CMD at Joyalukkas Group told TOI, adding that "sustained consumption growth will depend on economic stability and job security". Alukkas, however, expects the impact on jewellery segment to be somewhat limited given the emotional and investment value Indians attach to gold.
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Even at a slower rate of hiring growth, IT added some 120,000 jobs in the previous fiscal, said Nitin Bhatt, technology sector leader at EY India.
The FY26 hiring outlook remains bleak, Bhatt said.
Not Out Of The Woods Yet
Low inflation, reduced interest rates and tax breaks (which kicked in from April) had set the pitch for consumption to take off across the board with companies hoping that the benefits would soon start to trickle in.
Not everyone has seen the full benefit yet and uncertainty in the job market risks impeding any potential macro gains.
Akhil Jain, CEO & MD at fashion brand Madame said that despite some tailwinds from easing inflation and tax reforms, the broader recovery in full-price retail demand remains patchy. "Job uncertainty in sectors like IT does impact consumption, particularly in categories like fashion," said Jain.
Sunil Agarwal, chairman at RSH Global, which makes personal care brand Joy, said that the company is seeing signs of cautious spending. "The IT layoff trend has created some unease in consumer sentiment," Agarwal said, adding that the festive season sales will be the real indicator of the impact on demand.
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