Major business process outsourcing (BPO) and information technology (IT) companies, mostly from the IT hub Bangalore and the NCR are jittery amidst fears of another economic slump in the United States (US) and a debt crisis in Europe, according to a survey by the apex industry body the Associated Chambers of Commerce and Industry of India (ASSOCHAM).
“US and Europe account for over 80 per cent of India’s 60 billion dollar IT industry and macro economic uncertainty in these parts of the world are bound to make the market gloomy,” said D.S. Rawat, secretary general, ASSOCHAM survey.
ASSOCHAM interacted with about 140 representatives, directors, CEOs, CFOs, Chairmen, MDs of leading companies offering IT/ITes and BPO, BTO, KPO services in various domains like pharma, (Banking, Financial Services and Insurance), auto, FMCG and manufacturing to ascertain the mood of the industry in wake of recent trouble in the US economy and gauge their extent of preparedness to deal with the crisis.
During the survey, ASSOCHASM covered prominent IT destination in India including Ahmedabad, Bangalore, Chandigarh, Chennai, National Capital Region (Gurgaon and Noida), Hyderabad and Pune.
About 55 percent IT representatives from these hubs believed that currently the domestic sector is unfazed from S&P’s downgrade of the US’ credit rating and stated that the slowdown is temporary but will surely hamper the hiring activity across the sector.
On the other hand, about 25 per cent said that current round of global economic crisis won’t have much of an impact on India considering the strong domestic demand of goods and services together with their exposure to other avenues like Asia-Pacific and other parts of the world.
According to 20 percent of representatives, Indian firms may report sluggish business during the course of next few months due to the slowdown besides, the industry is already reeling under high interest costs, high inflation and the stock market is also in a sombre mood.
Over half of the respondents predicted that US economy will plunge into another recession and majority of these said that Indian companies are cautious and well prepared to deal with an economic slowdown in US, according to the ASSOCHAM survey.
“Downgrade of US debt rating and debt crisis in Euro zone will impact recruitments in the Indian IT sector and hiring is expected to go down by about 30 per cent during the course of next few months. Apart from slowdown in foreign direct investment (FDI) growth in exports and domestic private consumption might also slump,” said Rawat.