The Indian Scenario after the Financial Crisis in USA and Europe

The outsourcing industry is one of fastest growing business in India and it is not only generating billions of revenue but also providing employment opportunities to millions of people. But incidents of economic slowdown and financial crisis in the global market may pose a threat to the outsourcing industry in India. The cost-effective rates in India have kept this business steadily rising and it is way ahead of its competitors due to the same reason.

The present economic turmoil in the global market has send rippling effects to the Indian economic market as well. May be the magnitude of the turmoil is not as severe as in the markets of USA and UK but the after effects are touching the outsourcing industry and may be felt gradually.

Besides the KPOs and BPOs of India, even the small and medium sized companies will be affected by the financial situation outside the country. As most of the business comes from the financial institutions and banks of US, these firms will not be spared from the effects.

When the Indian IT companies are partly dependent on the European market to boost their growth, the fiscal condition of the major financial institutions in UK has enhanced their concern. A gradual slowdown in the European market was anticipated when government decided to aid some of the financial institutions of Europe. This slowdown will evidently affect revenue generation of the major IT companies of India.

The slowdown of economy in the global market has also affected the Indian share market. It witnessed its steepest ever fall. The Sensex of the Indian share market fell by 1,070 points on October 24, 2008.

But on a greater level the economic crisis that has badly hit the American and the European market, is already taking its price on the developing countries like India. The BPO and the KPO of the Indian subcontinent may witness a gradual fall in the demand of manpower. The results will be evident not in a moment but it will crop out in the coming months.

Many linked the downsizing of companies and decline in the workforce in the IT companies as a result of the recession in US. The economic turmoil resulted in a recession in the IT companies. They are taking measures to cut down cost and also reducing their workforce. The annual hike in salaries and the amount of pay package offered have dropped in the IT companies in an average basis. Very recently companies like TCS, IBM and Yahoo! have asked many of their employees to leave the organization. IBM lay off 700 employees while Yahoo! And TCS terminated 45 and 500 employees respectively. Airlines companies like Kingfisher and Jet Airways adopted similar decisions, which were altered later on.

The anticipation and the anxiety of the outsourcing industry in India are not absolutely baseless. The National Association of Software and Service Companies (Nasscom) have also confirmed the forthcoming negative effects of the financial crisis. The IT BPOs in India will suffer from the crisis for about 2 or 3 quarters. The clients who invest in US market will be henceforth cautious and this will affect the decision-making cycles and amount invested.

A slow down on the overall BPO industry will be observed. As the Nasscom report says, in the year 2007 – 08 the BPO industry offered job to about 7 lakh people. An amount of Rs 1,160 Crore was generated as revenue from this industry. Notably the share of the US in the Indian BPOs and KPOs was 61%. (Source: timesofindia.indiatimes.com)

But people with more affirmative view have figured out some positive points. As outsourcing and offshore works are always a cost down from the contemporary rates, the demand for outsourcing will be there according to some. Others are hopeful that nationalization of banks will not mean a complete stop to business since some capitalization can be expected.