US Economic Slowdown and its Challenges To the Indian Outsourcing Industry

Financial distress due to the global credit bubble and the accelerated growth of the Indian economy has led to Indian Rupee appreciation. Ultimately, the Indian Outsourcing Industry is under significant challenge. This Avasant article discusses the challenges and possible strategies that the Indian IT/ITES industry may adopt to overcome or mitigate these challenges.

February is that time of the year when National Association of Software and Service Companies (NASSCOM), India’s top outsourcing body holds its annual meeting, where top industry honchos gather to show-case their past achievements as well as deliberate on the future of the IT services industry. This year, the mood of the meeting was a bit somber as it was held under the gathering cloud of a possible US economic slowdown and a progressively unfavorable foreign exchange situation.

After 5 years of sustained growth, when the industry witnessed revenue growth in excess of 30% Year-On-Year, the IT firms were the cynosure of the stock market. But in 2007, shares of Indian IT firms fell to become among the worst performers in a booming local market, hurt by concerns over the impact of a slowdown in the US, rising local wages and an appreciating currency.

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