WALL STREET WOES PUT INDIA OUTSOURCING ON EDGE

Bangalore, October 19, 2008
The Economic Times

Bangalore, the capital of Indian outsourcing, is perhaps the closest India comes to Wall Street. In some offices, you can get a US dial tone. Clocks tell you what time it is in New York. Cappuccinos — as well as Subway sandwiches and Carolina Herrera "212" perfume — are easy to come by.

Now that proximity, which has fuelled years of growth and transformed the city into one of India's most cosmopolitan, has put Bangalore on edge.

"The main market for us is still the United States. If companies are not doing good there, our job prospects are low," said Nilesh Raut, 29, a software engineer at Oracle, which has an office here.

Bangalore is full of young migrants like Raut, who snapped up tech jobs that paid more than their parents could dream of, and who, unlike their parents, made unabashed use of their credit cards. But now, as India's biggest shopping season, Diwali, kicks off, many say that until they have a better sense of how far and how deep the current crisis will cut, they'll stick to window shopping.

"We're just here for the ambiance," said Raut, strolling through Bangalore's oldest mall, Forum, foreswearing the iPods, Lee jeans, Reebok shoes and Arrow shirts on offer.

Since it opened four years ago, Forum has seen annual sales growth average 25 percent a year, according to Merveil Varghese, the mall's marketing manager. This year, she expects sales growth at the mall's 72 shops to slow to 17 to 18 percent. Rents, which quadrupled during that time, have stabilized, she said.

"Fifty percent of our customers are from the IT crowd," she said. But these days, "everybody is taking it a little cool. You can't afford to raise prices."

The mall was packed, but few people had shopping bags in their hands. Consumers have also been singed by stock market losses.

"It's not just Wall Street. It's Dalal Street," said Mansi Aneja, 30, referring to the Bombay Stock Exchange, which has lost about half its value this year. She said she's putting off buying a new car.

Dubbed the Silicon Valley of India, Bangalore and its environs account for a third of India's software services exports, according to Som Mittal, chairman of Nasscom, an industry group.