Friday, October 31, 2008

India High Industry But Also Presents An Opportunity - Oct 31, 2008

The near recession in the U.S. and the global meltdown will, of course, have an impact on India''s high-tech industry. But it also presents an opportunity for Indian services vendors to improve their market share, while forcing them to diversify across sectors and geography. Lehman Brothers went bankrupt Sept. 15. A day earlier, Merrill Lynch announced it was being acquired by Bank of America. And U.S. mortgage giants Freddie Mac and Fannie Mae went into federal receivership. With each news flash, the Indian Sensex went downward, partly in sympathy, partly as foreign funds pulled out.

And the jitters echoed in the hallways of a host of tech services companies, who were servicing any of these firms or their U.S.-based suppliers. This was bad news. The Indian tech and business process outsourcing (BPO) services industry is strongly dependent on North America, and specifically on the sector that we call "BSFI" - banking, financial services, and insurance.

The U.S. financial services slump has come as a wake-up call for Indian exporters of technology and BPO services. But for them, this is no sudden crash. They have been through a longer crisis, though arguably, one that wasn''t as severe, as the result of the weakening dollar in 2007. So, they have had some time to prepare. In 2006-07, the currency averaged Rs.45.05 to a dollar.

In 2007-08, it averaged Rs.40.4, which meant a 10 per cent decline in rupee earnings for the same dollar billings. Accordingly, many of the Indian tech/BPO services exporters looked beyond North America, which used to account for most of our services exports three years ago. They went to Europe, and Asia, and an adventurous few Indian companies even "came" to the India market.

No comments: