The US Federal Reserve has slashed economic growth projections for 2011, but Indian IT industry says the move has not raised any fresh concerns on demand outlook for tech services.
“If you analyse the corporate results of US companies, you will see that the firms are doing reasonably well… So if the corporate results are good, they will continue to be in a growth phase and will continue to come to us for new service offerings. Also, to be innovative and to optimise costs, they will continue to look for capabilities and skill-sets that India offers,” Mr C.P. Gurnani, CEO of Mahindra Satyam, said.
US currency
Mr Gurnani said a bigger worry was around whether the US currency will come under pressure. “That is one of the scenarios we need to plan for,” he pointed out.
The Fed Chairman, Mr Ben Bernanke, on Wednesday announced a downward revision to the projections for US GDP growth. The US economy is now expected to grow between 2.7 per cent and 2.9 per cent this year, down from April's projection of a 3.1-3.3 per cent growth. It has further pegged the 2012 growth in 3.3-3.7 per cent range.
When contacted, Mr N.V. Tyagarajan, CEO of Genpact, said the Fed's stance was not entirely unexpected, and “corroborated the macro economic data that has been coming out over the past few months.”
“Also it is about moving from slow growth to slower growth, but not from slow growth into a recession. So at a macro level, it is not as if something has suddenly changed,” he said.
Outsourcing
Mr Tyagarajan further opined that given the uncertainty, US businesses - which have already been tightening their belts over the last two years - may now look at outsourcing. “The variability of cost is higher in an outsourcing model. But overall, the jury is still out and different companies and industries will react differently,” he said.
A sectoral analyst that Business Line spoke to, said that Fed's move will not have any impact on 2011 IT spends by US companies.
“The Budgets for this year were finalised at the start of the year…If the US economy continues to see negative news, the impact will be visible only in calendar 2012 onwards,” Mr Sanjeev Hota, a senior research analyst at Mumbai-based brokerage Sharekhan said.