May 9, 2013
In the past six months, 30-year-old Rajesh Prabhu has gone from considering buying a new flat to mulling the idea of moving back in with his retired parents. In that time, the software engineer by training has seen his testing job, which paid him nearly Rs 25 lakh annually, disappear, replaced by a BPO job that pays him Rs 15 lakh a year.
May 9, 2013
In the past six months, 30-year-old Rajesh Prabhu has gone from considering buying a new flat to mulling the idea of moving back in with his retired parents. In that time, the software engineer by training has seen his testing job, which paid him nearly Rs 25 lakh annually, disappear, replaced by a BPO job that pays him Rs 15 lakh a year.
The Forum Value Mall in Bangalore has slipped as a preferred shopping destination for the hordes of increasingly tight-fisted techies living in and around the suburb of Whitefield in Bangalore. Despite housing around 100 brands, this mall has seen a drop in footfalls, due to worsening sentiment from these drivers of consumer consumption
Burdened by loan payments for his car and a weighty credit card bill, Prabhu is looking to cut corners. In the past three months, he has passed up countless offers for parties, a holiday to Southeast Asia with friends and has almost given up eating out.
The global economy is sluggish and the $110-billion Indian IT industry is in the throes of an upheaval. There is little chance that the likes of Prabhu will have it easy anytime soon. A pall of gloom hangs over many of India's three million IT executives. Better paid than their peers in less glamorous industries, IT workers were once big and easy spenders, contributing to a substantial chunk of India's multi-billion dollar consumption story. But now, they are ruthlessly cutting back on discretionary spending.
Their pain is also felt by a range of consumer facing industries that had profited from IT-driven consumption. "People in the IT industry had managed to couple desirability with affordability," says Ankur Bisen, head of consumer and retail for Technopak, a management consulting firm. Now, some of this desirability has come unstuck. Faced with single digit pay hikes – at best – these employees are cutting back spends.
Consumers Trade Down
Arindam Chakraborty, 31, project manager with a Gurgaon-based technology services and consulting company, is an avid gamer. He has a collection of about 90 PlayStation 3 (PS3) games, with titles ranging from Madness Returns, Army of Two to Alone in the Dark. Each game sets him back by about Rs 3,000 and, till recently, he bought about three new games a month. Now, it's one game in three months.
"It's tough to cut corners on what you like, but that's the reality today," says Chakraborty. "The mood is sombre. Job portals are running dry and the fear of pink slips hangs like the Damocles Sword." It's a far cry from the times he got a 70% increment back in 2004 and an average of 12%-15% in recent years. "Now, it's down to 6%-8% a year."
The bigger fear is ending up on the 'bench' – the term used by IT companies to describe employees on their rolls, but without project work. "You can't be longer than two months on the bench unless you are an exceptional talent," says Chakraborty, recalling how a friend of his was asked to go as he was on the bench for two months. "Naturally, I've become conservative in spending. I bought a Honda City a couple of years back. Now, whenever I'm behind the wheel, I kick myself for not having bought a cheaper, smaller car," he says.
Like Chakraborty, there are many others feeling the pinch. Ravi R is a 26-year-old IT professional at a mid-tier firm in Bangalore. Ravi, like any other well-paid IT employee, bought a car six months ago, for which he pays an EMI (equated monthly instalment) of Rs 15,000. His wife is earning too, but without annual increments of 25%-30%, their finances are struggling to keep pace with their lifestyle.
For the past few months, the couple have wanted to move out of their current locality, Marathahalli, because of a spurt in crime, but hesitated after poor hikes. "I want to move into a gated community… (but) we have to shell out Rs 25,000 (compared with Rs 15,000 now) as rent and another Rs 1 lakh as deposit," he says. And now, there is also the fear of a job loss.
Courtesy: ET
