The depreciation of the rupee, which had hit a historic low of 61.21 on July 8, is bound to eat into the bottom lines of various companies cutting across the spectrum, but it will also have a tangible impact in the area of human capital. A falling rupee makes imports costlier and will push up input and lending costs. Indian companies that took large dollar loans when they were cheaper will face the added burden. This trend clubbed with the slowing global economy will make hiring decisions challenging for companies.

Aditya Narayan Mishra, President-Staffing, Randstad India, said, “We expect budget constraints and cut in discretionary spending. With thinning bottom line, we could expect organisations to give moderate salary hikes. In some companies, management and employees have even taken a pay cut to keep the costs low.”

Margins will continue to fall for companies. Subeer Bakshi, Director, Talent & Rewards, Towers Watson India, said companies will work to steady human capital costs and restrict salary increases. Most companies consider HR spends to be discretionary and may consider mothballing some programmes in the present climate. The employer-employee balance will shift back to employers, he said.

Any cost or expense function like salaries will be impacted directly as the bottom lines of organisations is expected to take a hit, said Vijay Sivaram, Director, Recruitment Services, IKYA Human Capital Solutions. Before we get into the specifics, here is the larger picture.

The Indian rupee has been on a downward spiral for the most part of 2013. Until now, foreign investors flocked to the country in droves as they sought to cash in on the growing Indian economy. They invested millions of dollars in Indian stocks and bonds as the emerging markets story had them hooked.

On May 22, US Federal Reserve Chairman Ben Bernanke indicated to the US Congress that the central bank is ready to taper its monthly $85 million purchase of bonds, which is the lifeline for emerging markets like India. On June 20, Bernanke unveiled his plan and said he expected the stimulus to end by the middle of 2014. And that signaled the exodus of the foreign investors back to the US as the economy there picked up.

The exodus of the foreign capital sent the rupee, which was already pretty volatile, into a downward slide. The rupee is among the worst performing currencies in the region, plunging 10.49 per cent since April. India’s foreign exchange reserves have fallen $8.6 billion since May 22 to $284 billion.

The slowing rupee has put a shadow on the executive education scene. “Indians make up a significant chunk of admissions in western universities. In the short term, foreign MBAs may have suddenly gone out of reach for a lot of hopefuls. It will become more costly to repay dollar-denominated education loans if people intend to come back to India and that may discourage a lot of people,” said Bakshi.

Sivaram said, “There will be a direct impact on executive as well as management education as students get loans in dollar amounts. The country will witness a brain drain as students are likely to stay back because of their huge loan amounts.” Executives with high aspirations to move up the corporate ladder will utilize this volatile business environment to qualify themselves further by pursuing higher education in top Indian schools, Mishra said. The rupee’s fall may open other doors to students, especially in countries that offer them the opportunity to work before completing their course. Though MNCs and large Indian corporates offer sponsorships for executive education to their employees, it is unlikely that the currency’s fluctuation will be a cause for concern since their programmes are more likely to be locally sourced.

Recruitment experts agree that most companies will be very cautious while hiring. “The hiring outlook for the second half of 2013 is expected to be moderate when compared to the previous years. The hiring of workforce through campus placements is expected to be muted as companies are in ‘wait and watch’ mode,” said Randstad’s Mishra. It will also be interesting to observe any changes to the revenue and the hiring guidance of the IT majors for the upcoming quarters, he added.

“Campus hiring should slow down but as companies are still growing, this could be need driven. As wage costs are lower for campus hires, in some business compelling instances, companies may actually hire from campus to keep costs low. The volatile rupee would create uncertainty leading to companies adopting a cautious approach to recruitment,” Bakshi said.

IKYA’s Sivaram said it would be a mixed bag for Indian companies. A lot of clients in the US will renegotiate contracts with Indian companies to take advantage of the rupee’s slide, but outsourcing companies will benefit in the short term.

Many global companies are looking at India as a market for growth and talent. So the rupee depreciation will come as a boon to companies who are looking to expand and invest in India. This will push offshore companies to prefer local hiring at a lower cost. “Companies looking to hire for onshore and offshore projects will be impacted by the rupee’s slide,” Sivaram said.

Another segment that is going to get affected is the hiring of expat talent. Times of India reported that low-cost carrier SpiceJet has brought down its number of expat pilots, all of whom are commanders, from over 100 a year ago to just 25 now. With an expat commander getting almost three times more than the average Indian commander’s monthly pay of Rs 5 lakh, the airline is looking at saving Rs 90 crore per annum. Even the remaining 25 expat commanders are set to be eased out by the end of this calendar year.

But, experts said it is too early to predict a trend and don’t expect many changes in the short-to-medium term.

Simran Oberoi, Knowledge Advisor, SHRM, said, “The depreciating value of the rupee should ideally

not have any major repercussions for the hiring trends or patterns in India apart from possibly impacting expatriate movement into India since their compensation is the only element where the exchange rate has a significant role to play. This in turn, could mean that hiring local talent for the roles being performed by expats can be on the rise, but it is too soon to state that a trend or prevalent hiring strategy.”

On the other hand, Sivaram said large technology firms and the aviation industry, which have a large population of expats, will be more cautious in hiring. “Decisions to use expatriates are carefully considered, while costs are a factor, deeper organizational compulsions guide these decisions. So we don’t expect this to change in the short to medium term. However, more expatriate packages will now be hedged and designed to the extent possible to be forex neutral,” said Bakshi of Towers Watson India.

Bakshi said outbound M&A deals may decline. “Companies that would have raised capital outside India to finance M&A deals will find it harder to service their debt and outbound M&A may decline. Small and medium sized ‘Inbound M&A’ may pick up as Indian targets become more affordable.”

IKYA’s Sivaram said it henceforth, organisations in India would ensure that their dependency on the volatile rupee is reduced and they hedge better, he said.