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Acknowledgement
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CONTENTS
CHAPTER 1
INTRODUCTION OF RECESSION……………………………………………………………….7
CHAPTER 2
DEFINITION OF RECESSION…………………………………………………………………….9
CHAPTER 3
IDENTIFYING………………………………………………………………………………………11
CHAPTER 4
CHAPTER 5
CHAPTER 6
HISTORY OF RECESSIONS……………………………………………………………………..15
CHAPTER 7
CHAPTER 8
CHAPTER 9
CHAPTER 10
CHAPTER 11
RECESSION……………………………………………………………………………………….42
CONCLUSION…………………………………………………………………………………….46
BIBLIOGRAPHY………………………………………………………………………………….47
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CHAPTER 1
INTRODUCTION OF RECESSION
Recession in the West, especially the United States, is a very bad news for our
country. Our companies in India have most outsourcing deals from the US. Even our
exports to US have increased over the years. Exports for January have declined by
22 per cent. There is a decline in the employment market due to the recession in the
West. There has been a significant drop in the new hiring which is a cause of great
concern for us. Some companies have laid off their employees and there have been
cut in promotions, compensation and perks of the employees. Companies in the
private sector and government sector are hesitant to take up new projects. And they
are working on existing projects only. Projections indicate that up to one crore
persons could lose their jobs in the correct fiscal ending March. The one crore figure
has been compiled by Federation of Indian Export Organizations (FIEO), which says
that it has carried out an intensive survey. The textile, garment and handicraft
industry are worse affected. Together, they are going to lose four million jobs by
April 2009, according to the FIEO survey. There has also been a decline in the
tourist inflow lately. The real estate has also a problem of tight liquidity situations,
where the developers are finding it hard to raise finances.
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IT industries, financial sectors, real estate owners, car industry, investment
banking and other industries as well are confronting heavy loss due to the fall down
of global economy. Federation of Indian chambers of Commerce and Industry
(FICCI) found that faced with the global recession, inventories industries like
garment, gems, textiles, chemicals and jewellery had cut production by 10 per cent
to 50 per cent.
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CHAPTER 2
DEFINITION OF RECESSION
Overall economy is bullish; it is not only the stock exchanges that tell riches
to rags stories but even small businesses. It all adds to the national exchequer. An
economist is likely to give a detailed, comprehensive definition of recession. But for
the layman who has been affected knows it only one way-when he loses his job and
has no money to pay his credit and loans. Recession is when the consumer faces
foreclosure and the banker comes knocking for his pound (or dollar) of flesh. Many
companies and whole countries go bankrupt for want of liquid funds and cash flow
for even daily requirements.
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This revival makes the recession a mild phase that large companies tolerate. As the
fiscal position rises, there is no reason to worry. Recession can last up to a year.
When it happens year after year then it is serious.
Are we facing a recession or not? Yes, for the simple reason that not only our
neighbors but our friends are unemployed. There is less of business talk and more
billing worries. Transitory recessions are good for the economy, as it tends to
stabilize the prices. It allows run away bullish companies to slow down and take
stock. There is a saying, ‘when it’s tough the tough get going’. The weaker
companies will not survive the brief recession also. Stronger companies will pull
through its resources. So when is it time to worry? When you are facing a
foreclosure, when the chips are down and out and creditors file cases for recovery.
Firms face closures when they go through recession and are not able to
recover from losses. If, at this time, they are not able to sustain their prices and
stocks then there is more trouble. Even when the recession period gets over, they
will not be able to do well. If a business survives a recession period they should be
able to survive a depression. But how many recession proof businesses are there?
Who will eventually survive the recession?
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CHAPTER 3
IDENTIFYING
In the United States the Business Cycle Dating Committee of the National
Bureau of Economic Research (NBER) is generally seen as the authority for dating
US recessions. The NBER defines an economic recession as: "a significant decline
in [the] economic activity spread across the country, lasting more than a few months,
normally visible in real GDP growth, real personal income, employment (non-farm
payrolls), industrial production, and wholesale-retail sales." Almost universally,
academic economists, policy makers, and businesses defer to the determination by
the NBER for the precise dating of a recession's onset and end.
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Attributes
A recession has many attributes that can occur simultaneously and can include
declines in coincident measures of activity such as employment, investment, and
corporate profits.
Causes of recessions
• Currency crisis
• Energy crisis
• War
• Under consumption
• Overproduction
• Financial crisis
• Price of Fuels
Effects of recessions
• Bankruptcies
• Credit crunches
• Deflation (or disinflation)
• Foreclosures
• Unemployment
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CHAPTER 4
Some recessions have been anticipated by stock market declines. In Stocks for
the Long Run, Siegel mentions that since 1948, ten recessions were preceded by a
stock market decline, by a lead time of 0 to 13 months (average 5.7 months), while
ten stock market declines of greater than 10% in the DJIA were not followed by a
recession.
The real-estate market also usually weakens before a recession. However real-
estate declines can last much longer than recessions.
Since the business cycle is very hard to predict, Siegel argues that it is not possible
to take advantage of economic cycles for timing investments. Even the National
Bureau of Economic Research (NBER) takes a few months to determine if a peak or
trough has occurred in the US.
During an economic decline, high yield stocks such as fast moving consumer
goods, pharmaceuticals, and tobacco tend to hold up better. However when the
economy starts to recover and the bottom of the market has passed (sometimes
identified on charts as a MACD), growth stocks tend to recover faster. There is
significant disagreement about how health care and utilities tend to recover.
Diversifying one's portfolio into international stocks may provide some safety;
however, economies that are closely correlated with that of the U.S. may also be
affected by a recession in the U.S.
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CHAPTER 5
The 1981 recession is thought to have been caused by the tight-money policy
adopted by Paul Volcker, chairman of the Federal Reserve Board, before Ronald
Reagan took office. Reagan supported that policy. Economist Walter Heller,
chairman of the Council of Economic Advisers in the 1960s, said that "I call it a
Reagan-Volcker-Carter recession. The resulting taming of inflation did, however, set
the stage for a robust growth period during Reagan's administration.
It is generally assumed that government activity has some influence over the
presence or degree of a recession. Economists usually teach that to some degree
recession is unavoidable, and its causes are not well understood. Consequently,
modern government administrations attempt to take steps, also not agreed upon, to
soften a recession. They are often unsuccessful, at least at preventing a recession,
and it is difficult to establish whether they actually made it less severe or longer
lasting.
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CHAPTER 6
HISTORY OF RECESSIONS
Global recessions
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For the past three recessions, the NBER decision has approximately
conformed to the definition involving two consecutive quarters of decline. However
the 2001 recession did not involve two consecutive quarters of decline, it was
preceded by two quarters of alternating decline and weak growth.
The 2008/2009 recession is seeing private consumption fall for the first time
in nearly 20 years. This indicates the depth and severity of the current recession.
With consumer confidence so low, recovery will take a long time. Consumers in the
U.S. have been hard hit by the current recession, with the value of their houses
dropping and their pension savings decimated on the stock market. Not only have
consumers watched their wealth being eroded – they are now fearing for their jobs
as unemployment rises.
U.S. employers shed 63,000 jobs in February 2008, the most in five years.
Former Federal Reserve chairman Alan Greenspan said on April 6, 2008 that "There
is more than a 50 percent chance the United States could go into recession.". On
October 1, the Bureau of Economic Analysis reported that an additional 156,000
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jobs had been lost in September. On April 29, 2008, nine US states were declared by
Moody's to be in a recession. In November 2008 Employers eliminated 533,000
jobs, the largest single month loss in 34 years. For 2008, an estimated 2.6 million
U.S. jobs were eliminated.
Although the US Economy grew in the first quarter by 1%, by June 2008
some analysts stated that due to a protracted credit crisis and "rampant inflation in
commodities such as oil, food and steel", the country was nonetheless in a recession.
The third quarter of 2008 brought on a GDP retraction of 0.5% the biggest decline
since 2001. The 6.4% decline in spending during Q3 on non-durable goods, like
clothing and food, was the largest since 1950. A Nov 17, 2008 report from the
Federal Reserve Bank of Philadelphia based on the survey of 51 forecasters
suggested that the recession started in April 2008 and will last 14 months. They
project real GDP declining at an annual rate of 2.9% in the fourth quarter and 1.1%
in the first quarter of 2009. These forecasts represent significant downward revisions
from the forecasts of three months ago.
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Other countries
A few other countries have seen the rate of growth of GDP decrease,
generally attributed to reduced liquidity, sector price inflation in food and energy,
and the U.S. slowdown. These include the United Kingdom, Canada, Japan,
Australia, China, India, New Zealand and the Euro zone. In some, the recession has
already been confirmed by experts, while others are still waiting for the fourth
quarter GDP growth data to show two consecutive quarters of negative growth. India
along with China is experiencing an economic slowdown but not a recession.
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CHAPTER 7
CURRENT CRISIS IN US
The defaults on sub-prime mortgages (home loan defaults) have led to a major
crisis in the US. Sub-prime is a high risk debt offered to people with poor credit
worthiness or unstable incomes. Major Banks have landed in trouble after people
could not pay back loans.
The housing market soared on the back of easy availability of loans. The
realty sector boomed but could not sustain the momentum for long, and it collapsed
under the gargantuan weight of crippling loan defaults. Foreclosures spread like
wildfire putting the US economy on shaky ground. This, coupled with rising oil
prices at $100 a barrel, slowed down the growth of the economy.
The US economy has suffered 10 recessions since the end of World War II.
The Great Depression in the United was an economic slowdown, from 1930 to 1939.
It was a decade of high unemployment, low profits, low prices of goods, and high
poverty.
The trade market was brought to a standstill, which consequently affected the
world markets in the 1930s. Industries that suffered the most included agriculture,
mining, and logging.
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In 1937, the American economy unexpectedly fell, lasting through most of
1938. Production declined sharply, as did profits and employment. Unemployment
jumped from 14.3 per cent in 1937 to 19.0 per cent in 1938.
The early 1990s saw a collapse of junk bonds and a financial crisis.
The US saw one of its biggest recessions in 2001, ending ten years of growth,
the longest expansion on record.
The dot-com burst hit the US economy and many developing countries as
well. The economy also suffered after the 9/11 attacks. In 2001, investors' wealth
dwindled as technology stock prices crashed.
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Impact of an American Recession on India
Indian companies have major outsourcing deals from the US. India's exports
to the US have also grown substantially over the years. The India economy is likely
to lose between 1 to 2 percentage points in GDP growth in the next fiscal year.
Indian companies with big tickets deals in the US would see their profit margins
shrinking.
The worries for exporters will grow as rupee strengthens further against the
dollar. But experts note that the long-term prospects for India are stable. A weak
dollar could bring more foreign money to Indian markets. Oil may get cheaper
brining down inflation. A recession could bring down oil prices to $70.
Says Sudip Bandyopadhyay, director and CEO, Reliance Money: "In the
globalised world, complete decoupling is impossible. But India may remain
relatively less affected by adverse global events." In fact, many small and medium
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companies have already started developing trade ties with China and European
countries to ward off big losses.
The only silver lining is that the recession will happen slowly, probably in six
months or so. As of now, IT and IT-enabled services, textiles, jewellery, handicrafts
and leather segments will suffer losses because of their trade link. Certain sections
of commodities could face sharp impact due to the volatile nature of these sectors.
C.J. George, managing director, Geojit Financial Services, says profits of lots of re-
export firms may be affected. Countries like China import commodities from India
do some value-addition and then export them to the US.
The IT sector will be the worst hit as 75 per cent of its revenues come from
the US. Low demand for services may force most Indian Fortune 500 companies to
slash their IT budgets. Zinnov Consulting, a research and offshore advisory, says
that besides companies from ITeS and BPO, automotive components will be
affected.
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Lokendra Tomar, senior vice-president, Integreon, a BPO firm, says the US
recession is likely to have a dual impact on the outsourcing industry. Appreciating
rupee along with poor performance of US companies (law firms, investment banks
and media houses) will affect the bottom line of the outsourcing industry. Small
BPOs, which are operating at a net margin of 7-8 per cent, will find it difficult to
survive.
Apart from this India's travel, tourism and power industry is going to grow at
a better rate. This is again a good sign. India has a huge population so a huge
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consumer base so we don’t have to always depend on US for our growth. India's
GDP is expected to grow at the rate of 8.5-8.9 % which is again way above the
growth rate of US and only second highest in the world after China.
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CHAPTER 8
1. Food
No one can survive without basic food material like milk, vegetables and
drinking water. Food processing companies will not be affected much and rather will
earn profits by increasing the prices. These are the basic needs which we as a
common man can not produce by our self.
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2. Railway
As the aviation sector has been affect much badly and resulting in sharp rise
in the air ticket rates the frequent travelers’ will prefer railways to cut the cost of
traveling and this will result in increased traffic in railways and long queues at
railway booking counters. The freight traffic of Indian Railways has continued to
grow in the last few months, albeit at slow pace, indicating only marginal impact of
the global recession on the Indian economy.
3. PSU Banks
As seen in the private sector much of the job cuts due to global slowdown, it’s
the public sector undertaking (PSU) banks which gained much confidence due to job
safety and security. More and more people are likely to turn towards government
institutions, particularly banks in the quest for safety and security.
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4. Education
5. Telecom
People will not stop to communicate with each other due to global crises
rather it has been seen that it will increase much particularly with mobile
communication. With cheap cell phones available in the Indian market and cheaper
call rates, the sector has become the necessity and primary need of everyday life.
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6. IT
Recent news shown that Indian IT sector will grow 30 to 40 per cent next
year. And on the other side to survive in current slowdown, industries have to
decrease the cost and for that they will resort to customised IT solutions which will
further boost up the software solution demand.
7. Health care
India in case of health care facilities still lakes the adequate supply. In health
care sector also there is huge gap between demand and supply at all the levels of
society. Still there are so many urban areas were you could hardly find any multi
specialty hospital. And in case of metros the market sentiments itself created a need
of psychological consultation.
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8. Luxury products
The high and affluent class of society will not be affected much by this global
crises even if their worth is reduced significantly. They will not change their
lifestyle and will not stop spending on luxurious goods. So luxurious product market
will not be affected and in fact to maintain the lifestyle those affluent will spend
more for it. Luxury car makers are pouring in to woo the nouveau riche (Audi,
BMW are the most recent entrants).
As in the current business slow down survival will be the main focus, the
marketing and management consultants will be called for to reduce the costs and to
show the ways to survive and stay in market. Others may join hands to fight with
this situation together will call for the Marketing & M&A consultants. In a booming
market there are growth strategies and M&A opportunities to advise on. When
businesses are cutting back, consultancies will be right there to help clients decide
where to wield the axe.
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In current bad times, where people are losing jobs and getting enough time to
watch TV, they will seek entertainment at home and hence advertising revenues will
increase for the commercial channels. Also businesses like production of religious
texts and religious materials, religious channels will do well. The TRP of religious
channels will increase compare to the other entertaining/commercial channels.
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CHAPTER 9
The current global economic slowdown has its epicenter in the United States
(US) but the contagion is being witnessed in all major economies of the world.
Several countries are experiencing rapid contraction in their Global Domestic
Product, rising unemployment levels and an overall slowdown in the pace of
investment activity. What started as a shock in the financial markets has spread to all
sectors of the world economy and the exact depth and breadth of the impact is still
unclear.
India’s economy has been fuelled by the growth in the technology sector in
the recent past. A large part of this growth is dependent on the “outsourcing” or “off
shoring” of key business processes and software development activity (and related
services) by large global corporations and other organizations. Hence, the global
slowdown has also affected the business climate within India and the growth rate of
the Information Technology (IT) and Information Technology Enabled Services
(ITES) sector is also experiencing the tremors of the global recession. The Indian IT
software and services industry which has seen a Compounded Annual Growth Rate
(CAGR) of around 30% over the last three or four years is now projected to grow at
20%. Indian IT sector’s derives approximately 61% revenues from the US based
clients. The revenue contribution from US clients to the top five Indian IT
companies (who account for 46% of the IT industry’s revenues) is approximately
58%. Hence, the impact of the slowdown in the US is likely to have a deep impact
on the prospects of the Indian IT sector.
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Moreover, about 41% of the IT industry revenues in India are estimated to be from
financial services. Since this sector has been affected most severely in the current
climate, the impact on Indian companies catering to this sector has been (and will
continue to be) more acute. The margins are prone to be challenged on account of
the slowing growth in the US and European Banking and Financial Services
Industry (BFSI) sectors.
Interestingly, the Indian IT / ITES sector has so far been resilient in spite of
the global slowdown. Part of this is due to the segmentation in the Indian IT / ITES
sector whereby some of the firms are the back office support service centers of
large global multinationals while the other is the indigenous IT service companies
of Indian origin. While the current slowdown has impacted the indigenous IT
companies business in India, a part of this has been offset by a greater amount of
business flowing to the captive units of foreign companies operating in India owing
to the pricing and margin pressure in their local markets.
The indications are also that the next decade will be very different from the
last one, with structural shifts in demographics that will reflect more prominently in
international trade and economics. Technology evolution and adoption is expected to
witness some disruptive changes as the Internet generation takes over the
workforce. Experts suggest that the performance of the Indian IT software and
services and ITES industry, while impacted by US economic slowdown, will be
catalyzed by a revival in technology spending during the first half of 2009. There
are some offsetting factors softening the revenue slowdown - favorable Rupee-
Dollar exchange rate expected to lead to higher INR revenue growth figures during
the year, growth de-risking through other emerging markets, growth in non-
financial verticals, and growth through countercyclical new business initiatives.
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CHAPTER 10
The global IT industry has matured over the years and has emerged to be a
chief contributor to the global economic growth. The global IT sector, constituted by
the software and services, Information Technology Enabled Services (ITES) and the
hardware segments, has been on a gradual growth trajectory with a steady rise in
revenues as witnessed in the past few years. 2008 was a strong year as the number of
contracts; the total value and the annualized contract values exceeded that of the
preceding year. Among all users above average growth was witnessed in the
government, healthcare and the manufacturing segments.
The global software and services industry touched USD 967 billion, recording
an above average growth of 6.3% over the past year. Worldwide ITES grew by 12%,
the highest among all technology related segments.
Hardware spend is estimated to have grown by 4% from USD 570 billion to nearly
USD 594 billion in 2008. Currently, the global IT industry is experiencing a slump
with the recessions in the US and many industrial
countries with the level of impact varying by country / market and industry.
Forrester in its recent report has predicted that the US IT market will dip to
1.6% in 2009, down from 4.1% growth in 2008 (see figure below). The Asia Pacific
region, using a weighted average1 of local currencies, will do a bit better in 2009,
with 3.1% growth.
16.0%
14.0%
12.0%
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10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
The Western and Central Europe markets will have growth in local currency
that is closer to 1%. By 2010, the US market will shift to 7.3% growth, not far
behind the 9.5% growth in the other Americas, well ahead of the 5.5% growth in
Asia Pacific and 5.3% growth in Western and Central Europe.
8.0%
5.3%
4.8%
7.3%
5.5%
5.3%
2005
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Structure of Indian IT industry
The IT-ITES industry in India has today become a growth engine for the
economy, contributing substantially to in the GDP, urban employment and exports,
to achieve the vision of a powerful and resilient India. While the Indian economy
has been impacted by the global slowdown, the IT-ITES industry has displayed
resilience and tenacity in countering the unpredictable conditions and reiterating the
viability of India’s fundamental value proposition.
Value proposition
• Cost advantage
Given the labor market conditions in India, there exists substantial scope of
cost arbitrage for performing services from India. This, along with a large pool of
talented and English people labor force, was the genesis of the IT sector’s
dominance in the world IT services industry
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• Quality / maturity of process
Having made its mark as a center of low-cost and wide range of service
offerings, the Indian IT / ITES sector has also proved its mettle in the quality of the
service offerings, as demonstrated by the fact that it hosts more than 55% of SEI
CMM level five firms and the highest number of ISO certified companies
• Ease of scalability
The vast and trained labor pool of technically competent, English speaking
people has made it easy for the Indian companies to enter and exit this industry.
Moreover, the ease with which a company can scale its operations (up or down) has
been a great value driver for the success of the Indian IT / ITES service sectors
growth story
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Global IT and Indian IT offshore
The Indian IT / ITES sector can be viewed from two - Indian global IT and
Indian IT offshorer. globally IT companies are increasingly looking inwards and
focusing on process benchmarking, enhanced utilisation of infrastructure and talent,
increasing productivity and greater customer engagement. global companies with
roots in India are increasingly ‘offshoring’ work in order to cut cost, as a result of
which India is witnessing a revenue growth.
On the other hand, as the offshore market is getting tighter, the Indian IT offshorers
are facing hard times in getting contracts or replenishing their orders. The crisis in
the U.S. financial services sector will have an impact
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in the short term on Indian outsourcers, as new projects may get delayed. This has
impacted the revenue flows and would need a substantial increase in SG&A to ramp
up their volumes. In spite of the negative effect of the outsourcing business, there
has been relatively lesser impact on the Indian IT growth due to the offsetting effect
of the favorable revenues on account of the global IT offshorers.
India has become a target destination for multinationals to back end their IT
operations in India owing to its strong value proposition
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Impact of the recession on IT sector in the Indian economy
The current global economic slowdown has made it a roller coaster ride for
the world economies. Asia / Pacific is experiencing a deferred impact due to the
“domino effect” of the current crisis. With the expectations of a sluggish GDP
growth and consequent reduction in IT spending, countries / markets which have a
higher dependency on the export markets are expected to be affected more than
other countries / markets with stronger domestic demand.
India being one of the world’s fastest-growing tech markets, thriving mainly
on exports is also experiencing the tremors of the global economic crisis. IT
spending as a percentage of revenue normally varies from 3.5% in manufacturing
companies, 5-6% in global retail chains to about 9.5% in the banking industry.
These could see marginal decline as companies will tend to hold spends on new IT
deployments.
Future outlook
Fogged out
40
presence of global IT offshorers has partially offset this fall, resulting in net overall
momentum. The slowdown is expected persist, as lead indicators of US economic
health (the US accounts for 40% of global IT spend) continue to be extremely
negative. That being said, India may be better positioned for a quick recovery and
for future growth than many of the other developing economies. There is a sense that
the international institutions will be remade to reflect the current balance of power,
and that India may be able to turn this crisis into “a permanent place at a new high
table”.
The current situation however looks fogged out, with no clear visibility. Some
hitches faced by the IT industry are;
• Uncertainties high: Churn in client base, elongated sales cycles and headwinds
from a harsh currency environment render high uncertainties for IT companies
• Signs of revival in the US appear bleak, at least in the near future: Conference
board’s 10 Leading Economic Indicators (LEI) continue to be negative,
showing no signs of near term revival
• Price cuts to hit margins: With volumes drying up,companies are expected to
cut pricing in favour of volumes
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• Uncertainties weigh on valuations: Current valuations factor in the rapidly
deteriorating environment and the same is expected to remain depressed until
companies improve revenue and
• The current economic condition spares no vendor. Even the growth of the
once highflying Indian providers has moderated considerably, driving many to
further their efforts and focus on the European market
• The boundary between software and IT services business models are blurring,
leading to each encroaching on the other’s space
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CHAPTER 11
RECESSION
• India is also fast becoming a hot destination for outsourced e-publishing work.
As per a Confederation of Indian Industry (CII) report, the industry is growing
at an annual rate of 35% and India’s outsourcing opportunities will help make
the publishing ITES industry worth US$ 1.46 billion by 2010
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Expansion into tier 2 / 3 cities can reduce pressure. Currently there are seven
centres that account for over 95% of exports. By 2018, it is forecasted that 40% of
IT / ITES exports will originate from non-leader locations. The potential of near
shoring needs to be tapped fully, as customers are on the lookout for the
geographically close and culturally similar centres.
Key global sourcing drivers will continue to be cost, access to talent, business
improvements, increasing speed-to-market and access to emerging markets. The
Future outlook for all these drivers is positive, leading to
increased momentum for global sourcing.
• The sector is also eyeing remote infrastructure management services “as the
next big opportunity” after the success of ITES. India is “well positioned to
capture a disproportionate share of this growth by 2013 that is about $ 13 to $
15 billion out of the total potential annual revenue of $ 524 billion, from the
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current share of $ 6 to $ 7 billion”, a report by Nasscom and McKinsey said
India’s exports have been hit due to the global financial crisis. India has a
large domestic market that can help to offset the export business. Gartner
expects some impact on IT services providers that rely on offshore discrete
projects coming in from the U.S. and Western Europe where projects are
being scaled back or cut. To counterbalance the offshore work, these IT
services providers will most likely focus on India.
While the 2009 outlook for global technology related spending is affected by
the recessionary environment, a rebound is expected from 2010 onwards. The
opportunity for India is tremendous since currently it accounts for just over 4 % of
worldwide technology related spend. Additionally, growth in global sourcing is
estimated to be almost four times that of technology related spend. India currently
generates the bulk of its IT-ITES revenues from the US, and the BFSI sector, while
accounting for a miniscule part of technology spend in other geographies and
verticals.
The BFSI sector one of the largest spenders on IT and one of the worst hit in
the current economic slump. With the trouble brewing in the BFSI sector, the
45
industry focus is likely to shift to areas such as manufacturing, healthcare, retail and
utilities.
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Conclusion
Over the past couple of months, fears of a slowdown in the United States of
America have increased. The impact of the sub prime crisis along with a slowdown
in mortgages has led to a significant lowering of growth estimates. Since the United
States dominates the global economy, any slowdown there would have an impact on
most of the global economic variables.
For India, it could mean a further appreciation in the rupee Vis--Vis the US
dollar and a darkening of business outlook for sectors dependent on US companies.
The overall impact of a US slowdown on India would, however, be minimal as the
factors driving growth here are more local in nature. Unlike the rest of Asia, India is
a strong domestic demand story, so any slowing in the US is likely to have a more
muted impact on India. Strong growth in domestic consumption and significant
spending on infrastructure are the two pillars of India’s growth story. No sector has a
dominant influence on earnings growth and risks to our estimate are limited.
Corporate India is also learning to master the art of efficient capital management,
reduction in costs and delivery of value-added services to sustain profit margins.
Further, interest rates are expected to be stable primarily due to control over
inflation and proactive measures undertaken by the RBI.
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Bibliography
1. www.google.com
2. www.harvard.org
3. Wikipedia
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