India's flagship outsourcing sector hits tough times

These are tough times for India's flagship outsourcing industry whose skilled, low-cost workforce helped plant the country on the global business map.

With the world in the grip of the worst economic slump since the 1930s, revenue growth from outsourcing - subcontracting work to a third-party company - is slowing sharply after years of posting scorching double-digit increases.

"IT budgets are still being cut and consumers will need a lot more persuading before they can feel confident enough to loosen purse strings," Richard Gordon, head of global forecasting at Gartner consultancy, said. "The full impact of the global recession on the IT services and telecommunications sectors is still emerging," he added in a recent outlook.

Now, the National Association of Software and Service Companies, or Nasscom, India's top outsourcing body, projects the sector's export revenue will rise by just four to seven percent this year to at most 50 billion dollars.

That's down sharply from the 16 percent logged in the last financial year to March and the 30 percent rise the industry clocked annually for most of the decade as the country became a back office to the world.

Nasscom says global companies are showing reluctance to authorise new spending - even cash that reduce costs by taking advantage of India's cheaper English-speaking educated labour force. "Worldwide information technology spending growth is expected to come down further in 2009 and 2010," Som Mittal, head of Nasscom, said. The outsourcing sector has been particularly hard hit by the recession in the United States, which accounts for 60 percent of the Indian industry's revenue.

The industry has made India a top business destination by offering software development and information technology, engineering and design, and business process outsourcing (BPO).

ut with the global slump hitting spending, there are fewer credit card transactions and airline tickets to process and lower demand for software design, sales calls, help desks, accounting and legal services. NEW DELHI, (AFP)