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IT Companies Nervous About Sluggish Growth in U.S.

ST Team
Thursday, October 6, 2011
ST Team
Major IT and BPO companies in the country are nervous due to the fears of another economic crash in the U.S. and a debt crisis in Europe, according to The Associated Chambers of Commerce and Industry of India (ASSOCHAM). About 55 percent respondents said that while the sector is unfazed from Standard & Poor's downgrade of the U.S. credit rating and that the slowdown is temporary, it would surely hamper the hiring activity across the sector.

“Downgrade of U.S. 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 percent during the course of next few months,” says D S Rawat, Secretary General, ASSOCHAM. The downgrade by Standard & Poor's in August had triggered concerns that the $ 60 billion software services industry, which gets more than 60 percent revenues from the U.S. market, would be hit. “The U.S. and Europe account for over 80 percent of India's $ 60 billion IT industry and macro-economic uncertainty in these parts of the world is bound to make the market gloomy,” added Rawat. However, the IT industry body NASSCOM, along with top players, had exuded confidence that the sector will “sail through” the crisis.

The study was carried out across Ahmadabad, Bangalore, Chandigarh, Chennai, National Capital Region (Gurgaon and Noida), Hyderabad and Pune. ASSOCHAM interacted with about 140 representatives, Directors, CEOs, CFOs, Chairmen and MDs of companies offering IT/ITes and BPO, BTO, KPO services in various domains like pharmaceuticals, banking, financial services and insurance, auto, FMCG and manufacturing.

About 25 percent of respondents said the current round of global economic crisis will not 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. Nearly 20 percent of the respondents said Indian firms may report sluggish business during the course of next few months due to the slowdown. According to ASSOCHAM, apart from slowdown in foreign direct investment (FDI), growth in exports and domestic private consumption might also slump.

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