Indian IT-BPO sector to be impacted in the short-term by US financial market turmoil-Nasscom

22 September 2008: The US financial market has been in unprecedented turmoil in the past few days witnessing bankruptcy, mega-take over and US government bail-out of an insurance company. This turmoil has directly impacted spending in the US financial sector and is likely to create a downstream impact on other sectors of the US economy and worldwide markets. According to Nasscom, it is however too early to estimate the extent of impact and this will depend on how the Governments and regulatory bodies step in to rebuild market sentiments.

The Indian IT-BPO sector is an integral part of the global ecosystem and is likely to be impacted in the short-term (2-3 quarters), as clients become cautious in their discretionary spending and decision making cycles get extended. Over the next few weeks/months we will get a better assessment of the impact on sectors other than financial and also their influence in geographies other than US where Indian IT sector services’ clients. As in the past NASSCOM will do an in-depth review of all segments in December and quantify the impact of the present developments.

The mitigating factor is that ever since the sub-prime crisis began, last year, the industry has focused extensively on improved utilization, enhanced productivity and business transformation. The industry will tread the period ahead with caution and take measured steps. In the past as well, this industry has shown resilience and has been able to overcome disturbances in demand, and come out successfully.

The next phase of economic recovery, according to Nasscom, will focus on enhancing competitiveness, and use of technology will be critical to this phase. The India value proposition is today well established and Indian companies will look to partner with their customers as the global financial sector realigns itself.

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