India, a hot destination for outsourcing and booming market for IT segment is making global imprints.
With its distinguished workforce and talented human power it is spearheading to global expansion. Undoubtedly, India is riding on the back of considerable growth of IT and ITeS segment which is the major reason for high GDP growth from past few years. But, the so far well doing sector seems badly influenced by the US economic crunch.
US is in slumping stage as concluded last year, but initially it was expected that it will not hit Indian IT at high node as Indian companies are more dependant on domestic market. Considering last year's scenario, our 13% goods were sold in overseas market thus increasing the FDI. This indicates that our dependancy on foreign markets is increasing. Nevertheless, it is coming true as of now factually Indian economy is also facing the blues. US is the major market for Indian outsourcers and around 60% of software industry is based on the project being outsourced from that end.
With US, facing high economic downturn, Indian software industry is on the reality check; what is stored for them in this economic slump. Barring some top shots, it seems whole IT industry is crippling with projects ended and future deals in abeyance. The companies are facing the billing pressure indicating that meltdown is cracking the backbone of strong Indian GDP growth and aim of being reckoned as global power in coming few years.
What was considered as the golden period for Indian BPOs to prove their worth seemingly is haunting them the worst. At initial stage, many well known personalities like Narayana Murthy and P. Chidambram stated that India will not get highly disturbed from this downturn of market, yet will not be able to meet the targets of 10% annual GDP growth.
Accounting the current wretched scenario of market, all those words prove to be a condolence speech. Registering annual growth rate of more than even 50%, suddenly Indian IT has come to a halt and crisis which was never thought and considered. But to some, Nandan Nilekani of Infosys, the phase is temporary and challenging for short term but is positive for future outlook in long term consideration.
Getting on to some practical instances will throw a much clear light on the current Indian IT situation. Just a month ago, Satyam Computers decided to lay off as much as 4500 software engineers in wake of restructuring and cutting down the IT costs (lay-offs were India oriented).
Moving further, HP, the largest PC maker, to go well with its EDS integration (which it acquired few months back) announced to lay off substantial jobs numbering to around 26,000. Maximum of these pink slips are decided to get distributed in Indian centers.
Further, Indian biggies like TCS, Infosys, and Wipro which were considered immune to this retrenchment have deferred promotions, cut off hiring fresher and even have shown pink slips to many who are one or two year experienced.
These all instances are enough to judge the immediate position of Indian IT segment and the direction in which it is heading to.
The KPO and BPO sector, considered flourishing segment is also going through rough phase with add-ons facilities like meals, cabs being offered to employees being truncated or ended. The recent happenings in US financial sector like bankruptcy of Lehman Brothers and acquisition of Merrill Lynch by Bank of America to let former sustain the bankrupt condition, has forced Indian IT industry to face the heat of US economic downturn. BPO and KPO segment will face the heat for forthcoming two or three quarters, indicated NASSCOM study.
Also, the GDP growth has been lowered to 7% coampred to 8%+ last year and the anticipated 9% this year.The GDP forecast for the next year has also been reduced to 7%. A recent syudy indicated that overall economic growth will be around 3% globally for all economies accumulated.
Optimism still persists but the fact is all six top guns of Indian IT and constituents of Finextra 50 Financial Technology Index have fallen through 10% in this market turmoil. The retrenchment is claiming many biggies like Lehman Brothers and imparting lessons to others to revise policies thus insulating themselves. Even the software developers are no more kingpins of the industry, they are striving with their best efforts wholly aimed to offer the best to company as to resist a lay off.
To fight with this financial crunch, RBI has introduced many schemes like reduction in CRR by 1%.
At crux, Indian IT is facing the credit crunch and need stronger policies and better grip on costs to deal slump in a better manner. The country will be affected but impacts will be short term creating opportunities for sector to boom thereafter.
At last,” Every cloud has a silver lining.”