Strongly defending job cuts, the state's former information technology secretary Vivek Kulkarni said it is natural in times of recession to stay afloat.
"When there is no business, companies have to react; otherwise nobody will survive. Either you have to reduce everybody's salary, or you have to let some people go and move on with that," Kulkarni told PTI in Bangalore.
"Because, if you do not have labour flexibility, you can't do business well," Kulkarni, who is currently the chairman and CEO of knowledge process outsourcing firm Brickwork India, added.
He admitted that IT companies have resorted to various ways to lay off their staff.
Some companies are forcing their managers to give a 'lower-rate' to their employees so that they can be removed, citing 'non-performance'.
Kulkarni said he knows a company that lost an account of 6,000 people (staff working on an outsourcing contract). "What will you do (when that happens)? So, there will be temporary dislocation; no permanent harm," he said.
In times of recession, layoffs are quite natural. He said companies, which have lost big accounts and are operating from huge facilities after signing multi-year lease contract, are reducing and rationalising staff.
Kulkarni said the year 2009 is going to be challenging for freshers in the IT sector and it would be tough for them to get jobs, but exuded confidence that hiring would restart in the first quarter of financial year 2010-2011.
On the impact of US recession on the Indian IT firms, he said while large players such as Citibank and Goldman Sachs 'who have received government money (bailout package) will behave based on government directions', there are other US companies, which would be keen to outsource to India for the first time.
"For what I am finding is that for the rest of the companies (US companies who have not received government aid) to survive, they have to do business (they would benefit if they outsource to India)," he said.
According to him, Indian IT companies are increasingly looking at the domestic market.
"Because our economy is big. Our companies can, instead of doing it for Citibank, they can do it for SBI. So, we can do work for our companies and that's picking up. I see that Indian IT companies now focus on domestic sector a lot," he said, adding, "We are a country...we are big enough. We may not need help from foreign countries (outsourcing) all the time to grow."
Kulkarni said: "If we have the right government, if they are able to come up with some policies, we should be okay by September or October of this year."