Indian outsourcing companies are likely to be affected
by the economic downturn in the US, an Indian trade body has
The National Association of Software and
Service Companies (Nasscom) said last week that the continuing
"turmoil" in the US financial markets would be likely to have a
negative effect on Indian business process outsourcing (BPO)
contracts, in the short term.
"The Indian IT-BPO sector is an integral part of the global
ecosystem and is likely to be impacted in the short-term (two to
three quarters), as clients become cautious in their discretionary
spending and decision-making cycles get extended," said Nasscom in
The trade body added that events such as the bailout of AIG by the Federal Reserve Bank had already had an
impact on spending in the US financial services industry.
"The US financial market has been in unprecedented turmoil in
the past few days witnessing bankruptcy, mega-takeover and US
government bailout of an insurance company," said Nasscom. "This
turmoil has directly impacted spending in the US financial sector
and is likely to create a downstream impact on other sectors of the
US economy and worldwide markets."
Nasscom did not comment on what it was expecting from the UK and
Europe, apart from saying that the effects on Indian BPO clients in
the rest of the world remained to be seen.
"Over the next few weeks/months we will get a better assessment
of the impact on sectors other than financial and also their
influence in geographies other than [the] US," the trade body
However, there are mitigating factors to the situation, Nasscom
said. The sub-prime lending debacle has forced the financial
services industry to put measures in place to try to limit economic
damage, said the trade body.
"Since the sub-prime crisis began,
last year, the industry has focused extensively on improved
utilisation, enhanced productivity and business transformation,"
said Nasscom, which predicted that the Indian BPO industry would
"tread the period ahead with caution and take measured