India outsourcers hope for boost from US rating woes

NEW DELHI—India’s main outsourcing trade body on Monday said the US rating downgrade could boost the South Asian country’s flagship information technology sector by pushing overseas clients to seek more savings.

At the same time, the National Association of Software and Service Companies (Nasscom) added in a statement it was “also counseling the Indian IT sector to maintain a cautious outlook going forward.”

The $60-billion sector, which employs around two million people, earns 70 percent of its revenues from the United States and accounts for five percent of India’s gross domestic product.

The Standard & Poor’s downgrade of the US credit rating last Friday has sparked fears about a return to the global financial crisis of 2008-2009 when India’s software industry was hit by lower technology spending by customers.

The Nasscom statement came as shares of Indian outsourcing firms slumped on the Bombay Stock Exchange, weakening more sharply than the overall falling market.

Leading outsourcer TCS shed around 4.49 percent to 1,009.25 rupees while India’s second-largest outsourcer, Infosys, dropped 4.73 percent to 2,468 rupees.

Nasscom said it was optimistic that the industry could ride out the renewed global economic turmoil.

The United States “will continue to be one of the largest markets for us,” the group said.

In fact, Nasscom said it believed the US economic woes could spur clients to increase the work they farm out to cheaper Indian companies.

“In the case of an economic slump, we see the Indian IT industry strengthening its partnership with the US customers to build-in greater business efficiencies,” it added.

While the industry is closely intertwined with the global economy, it also has “a burgeoning domestic market which is equipped to sustain growth,” Nasscom added.

US and other foreign firms, drawn by India’s English-speaking workforce and lower costs than in the West, have farmed out a wide range of jobs from answering bank client calls to processing insurance claims and equity analysis.

Outsourcing work to India is estimated to save a company up to 80 percent in costs.

The major Indian information technology companies have recently reported a jump in business volumes as they emerge from the 2008-2009 credit crisis.