Question

The impact of global recession on information technology sector in india

Answer 1

The current global economic slowdown has its epicenter in the United States (US) but thecontagion is being witnessed in all major economies of the world. Several countries areexperiencing rapid contraction in their Global Domestic Product, rising unemployment levelsand an overall slowdown in the pace of investment activity.India’s economy has been fuelled by the growth in the technology sector in the recent past. Alarge part of this growth is dependent on the “outsourcing” or “off shoring” of key businessprocesses and software development activity (and related services) by large global corporationsand other organizations. Hence, the global slowdown has also affected the business climatewithin India and the growth rate of the Information Technology (IT) and Information TechnologyEnabled Services (ITES) sector is also experiencing the tremors of the global recession. TheIndian IT software and services industry which has seen a Compounded Annual Growth Rate(CAGR) of around 30% over the last three or four years is now projected to grow at 20%. IndianIT sector’s derives approximately 61% revenues from the US based clients.Since this sector has been affected most severely in the current climate, the impact on Indiancompanies catering to this sector has been more acute. The indications are also that the nextdecade will be very different from the last one, with structural shifts in demographics that willreflect more prominently in international trade and economics.

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