By Sreekumar Raghavan
Any guess what impact the downturn may have on India’s most valued commodity worldwide? Sorry, I am not talking of steel, iron ore or spices. It’s about the human resources spread over the globe—may be over 20 million spread across 110 countries. Not to speak of those working offshore in the IT, biotechnology and BPO domains in Bangalore, Pune or Hyderabad? These are the people who help enlarge our forex kitty and how are they going to fare?
Unlike the dotcom bubble which only impacted the technology sectors, the impact of the present economic downturn would be felt across a wide range of sectors including commodities, agriculture, banking and financial services, equity markets and Futures markets.
The National Association of Software and Service Companies (NASSCOM) has been very guarded in their response to the global economic downturn. It has said in a recently released statement that “we don’t see these having a direct impact on our industry and likely to create a downstream on other sectors of the US economy and world wide markets”. However it had revised the average growth rate of India’s IT industry in 2008 to 21-24 percent as against 30 percent in the previous years.
“30-40% of the work that happens in the Indian IT-BPO industry is from the BFSI sector. Our 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 said recently in a release.
Perhaps, the developments in the global financial sector have been so swift in the past few days to be captured by the NASSCOM released issued in the beginning of this month.
Meanwhile, global IT major, Infosys has has guided revenue of US$4.72b-4.81b for FY09 v/s its earlier guidance of US$4.97b-5.05b. The downward revision is on account of weak demand environment and cross currency impact. Infosys has given a flat US$ revenue growth guidance for 3QFY09, with revenues at US$1,220m at the top end. With FY09 revenue guidance at US$4.8b, the implied 4QFY09 revenues are is US$1,219m, implying flat QoQ growth.
“We revise our FY09 dollar revenue growth estimate downwards from 20.6% to 15.1%, taking cognizance of the uncertain global environment,” according to Motilal Oswal Securities Ltd.
Much of India’s near term to medium term growth in retail, FMCG, real estate and construction sectors were the direct result of affluence created by above average growth in IT, BPO, Biotechnology sectors. Now that even IT giant Infosys has revised downwards their earnings for 2009, several medium and small enterprises would be worse hit by the global scenario although TCS, Wipro, Infosys with much better resources are likely to survive the downturn and come out with reasonable growth figures, according to analysts. This is evident from the fact that Motilal Oswal has given a BUY rating to Infosys.
ASSOCHAM has already indicated that India Inc’s capacity expansion budgets have fallen by 29%in the first quarter of 2008-09 although big ticket investments have not been affected to that extent.
In his latest statement, Union Finance Minister P Chidambaram has reassured the investors that there is nothing to panic. However, the government thinks the root cause of the crisis is the insufficient liquidity in the system. In a globalised environment, when countries are dependent on external markets and trade flows, it may take longer for the effect of shocks to subside.
Perhaps, it is too early to predict on what cumulative impact the global economic slowdown will have on employment in India. Atleast the industry bodies and analysts are not sure on that count.
Tailpiece: Tata Consultancy Services has bagged Rs 1000 crore project for the Passport Seva Project of Ministry of External Affairs that aims to provide passports within 3-days of application and tatkal passports on the same day through a high-end technology platform to be provided by TCS. TCS describes it as the largest mission-critical e-governance project. The innovation has not come a day late as the country’s much valued human resources needs to go more global to sell its services.
