Indian IT-BPO sector to be impacted for at best 3-4 quarters by US financial turmoil-Nasscom

The developments of the last week with respect to the US financial markets have been are very eventful, and Nasscom see these having a direct impact on IT industry and likely to create a downstream impact on other sectors of the US economy and worldwide markets.

Earlier this year when NASSCOM announced its revenue projections, the growth rates had been moderated for this year to 21-24%, as compared to an average growth of 30 % plus we have seen over the past few years. This was a direct factor of the subprime crisis which began last year; however, these recent developments were not factored to this extent.

30-40% of the work that happens in the Indian IT-BPO industry is from the BFSI sector. Nasscom preliminary analysis of the current landscape indicates that the industry would see an impact of discretionary spend on IT due to the uncertainty and customer decisions being postponed. Though the industry has, over the years diversified both in terms of verticals as well as geographies, which provide some cushion, the uncertainty of whether the financial crisis would spread in the same extent to other geographies, and what its impact would be on other sectors like retail, manufacturing, healthcare etc. cannot be determined exactly.

Nasscom also believe that the intervention by the Federal Governments would be aimed at limiting the larger economic impact. We are watching the situation, as things are unraveling fast and should have a clearer picture over the next 6-8 weeks. As in the past NASSCOM will do an in-depth review of all segments in December and quantify any impact of the present developments.

India’s value proposition continues to be strong. Given the widespread impact on corporations, they would be looking at business transformation and new business models, all of which would mean increased opportunity for the Indian IT-BPO sector. We will also see revamping of existing financial systems in the BFSI segment needing fresh IT inputs. With this we estimate that the impacts on the Indian IT industry could be for at best 3-4 quarters; Indian companies will look to partner with their customers as the global financial sector realigns itself.

(This is Nasscom Statement dated October 1, 2008)

Nasscom Statement dated 22nd Sept, 2008

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