“We have 5 million people and generate $180 billion in exports. We are going to 10 million which will generate $300 billion. Why has the US replaced the UAE as our biggest source of remittances last year? We crossed $100 billion for the first time but the biggest shift is that in the last five years, the golf has come down from $46 billion to $23 billion. The digitisation super cycle is not suffering from a sugar withdrawal it is just getting started, says Manish Sabharwal, Vice-Chairman, Teamlease. What are your thoughts on the job market? It is literally the best of times than worst of times now because the structural factors are really moving in India’s favour. We have got a bunch of luck because of China; we have got a bunch of luck because of the Covid digitisation. A bunch of skills – formalization, industrialization and capital may be getting to their critical mass. But obviously the cyclical fact is that this is the first time I have seen the IT industry foreseeing a global recession and holding back hiring. Everybody keeps saying that their order books are strong but their hiring is put on in an anticipatory freeze rather than a real freeze. In some sense, this may be the first sort of real time recession where we are anticipating a recession. There is a funding slowdown for start-ups and there is a little bit of short-term problem in the cyclical factors on the job market. India has brought factories forward by 10 years. Some of our customers are planning warehouses, distribution and planning to import are actually looking at factories and we do not need to fix the whole of India. The remittances crossed $100 billion for the first time with just 20 million people out there, IT exports will probably reach $300 billion. So 20 big factories around Chennai, Hyderabad or Mumbai could really shift this manufacturing anorexia or pain that we have had for the last 20 years of reforms, where manufacturing has not joined the party. That is one real action on the ground. PLI obviously is working but the hiring for manufacturing has just begun. Post Covid, there was a real sugar rush. Everything that could be digitized, got digitized and anything and everybody who had understanding of coding suddenly from a software engineer became a techie. Given that the manufacturing renaissance is about to arrive in 2023, which end of the job market could be the stand out feature? In IT because in IT, now there are five distinct sectors; Domestic service companies, international service companies, Indian SAS companies operating globally, the unicorns and domestic. All five engines have obviously worked but I would be careful about blaming the sugar rush on digitisation. The sugar rush was fiscal and monetary policy is still history. It will tell us whether monetary policy is a placebo, a pain killer or a steroid. It is definitely not a medicine. So the sugar rush of the economy is what affects interest rates. We mispriced the raises but I would say the digitization super cycle is valid. We have 5 million people and generate $180 billion in exports. We are going to 10 million which will generate $300 billion. Why has the US replaced the UAE as our biggest source of remittances last year? Obviously we crossed $100 billion for the first time but the biggest shift is that in the last five years, the golf has come down from $46 billion to $23 billion. I would say the digitisation super cycle is not suffering from a sugar withdrawal it is just getting started. In the US, the great resignation trend turned into the great layoffs. Fortunately, that has not quite crept up into India and going by the latest data, it does not seem like that is going to be the case. Do you worry that we could also see a wave of mass layoffs? First of all, the great resignation was a fraud. People were not resigning to hanging out at home, they were hanging out because there was a labor market shortage and they were getting better jobs at higher salaries. So if there is one sort of fraud trend that we had over the last one year it was the great resignation. Second, I am not sure yet if there is a great layoff trend because there was $2.3 trillion excess savings in the US because of the fiscal and monetary stimulus. That may have come down to $1 trillion but the US economy is still being held up by excess savings that happened during Covid. But any layoffs in the US are good for India. This week here for the 10,000 headline number, there were 30 people in Twitter, Facebook, Meta who got laid off in India. The cost arbitrage and now with skill improving a little bit, we are far from the horizon on skills on any layoffs. Countries are actually accelerating either the development of global captive centers or global service companies like IBM, Accenture or of course , and . We have to start acknowledging that India has the switching cost scale in technology that China has in manufacturing. It is very hard to pull a factory out of China because of switching costs. I think there was no great layoffs in the US, the great layoffs in the US may actually accelerate offshoring and offshoring becomes meaningless in a work from home environment because even now in the US, 40% of tech workers are working from home. If you are working for a tech job in San Francisco from Denver, you can do it from Bangalore or Hyderabad. The other impact which one should be careful about is that we are trying to pull people out of poverty. They are trying to prevent people from falling into poverty. So let us be a little careful with extrapolating. We are very far from the productivity horizon in our labor markets; 40% of our labor force is close to the villa (almost jobless). So, while in the short run. the voting versus weighing machine dilemma is there, for us, the US problems which are leading to layoffs are really leading to a re-arbitrage in pricing which has always been good for India. What is the outlook in terms of the big hiring trend for 2023? It is pretty ironic as well that while we are seeing a lot of layoffs, hiring is still a problem. Would that be due to the shrinking talent pool of promising recruits as well as those dizzyingly high packages that were doled out? Yes, we did misprice or companies sort of lost focus that shareholders do not pay salaries, customers do and when you were getting $73 billion of private equity venture capital, which we got in the year before last, that led to skyrocketing salaries. But on average, my view is I do not think we have a scarred generation of managers who do not care about costs. I think there is a repricing of talent but it is also leading to innovation. We are expanding hiring beyond the 10 cities, we are going into non-traditional areas and hiring non engineers a lot more than we used to. The women labor force participation is moving up much faster. It is still embarrassingly low at 25%, but it has gone down to 19%. Hopefully, we will get back to the 90-91 peak of 31%. My sense is that domestic consumption is right now and it is the two engines. So sales, customer service and logistics are where we see the fastest hiring and where the most open positions are. The interesting part is it is not just in 50 cities, we probably have employees in 4,000 cities but our 400 cities are now starting to look like places where demand is. So is this the second tier, the third tier are they just saving less and consuming more or is there more income? It is still too early to say but clearly companies are recognizing that their footprint of sales, logistics and customer service cannot be restricted to the 52 cities with more than a million people that India has but it has to go to 400 cities and hopefully that will go to the 800 in the next phase.