WHY THE GLOBAL RECESSION IS AN OPPORTUNITY FOR INDIA

DNA

The near recession in the US and the global meltdown will, of course, have its impact on India's high-tech industry, as it is one of the greatest financial crises of our globalised times. But it also presents an opportunity for Indian services vendors to improve their market share, while forcing them to diversify and de-risk across sectors and geography.

Lehman Brothers went bankrupt Sep 15. A day earlier, Merrill Lynch had announced that Bank of America was acquiring it. A week earlier, US mortgage giants Freddie Mac and Fannie Mae went into federal receivership.

And with each news flash, the Indian Sensex swung wildly downward, partly in sympathy, partly with foreign funds pulling out because they needed the cash. And the jitters echoed in the hallways of a host of tech services companies - who were servicing any of these firms, or their US-based suppliers.

This was bad news. The Indian tech and business process outsourcing (BPO) services industry is strongly dependent on North America, and specifically on the sector that we call "BSFI" - banking, financial services, and insurance.

Yes, the US financial services slump has come as a wake-up call for Indian exporters of technology and BPO services. But for them, this is no sudden crash. They have been through a longer crisis, though arguably, one that wasn't as severe, as the result of the weakening dollar in 2007. So, that have had some time to prepare. In 2006-07, the dollar averaged Rs.45.05 to a dollar. In 2007-08, it averaged Rs.40.4, which meant a 10 percent decline in rupee earnings for the same dollar billings.

Accordingly, many of the Indian tech/BPO services exporters looked harder beyond North America, which used to account for most of our services exports three years ago. They went to Europe, and Asia, and an adventurous few Indian companies even "came" to the India market.