A Recession is a contraction phase of the business cycle.
National Bureau of Economic Research (NBER) is
the official agency in charge of declaring that the
economy is in a state of recession.
The financial press often uses the recessionary
definition of two or more consecutive
quarters of declining Gross Domestic Product
(GDP). GDP is defined as the total
market value of all final goods and services
produced within the country in a given
period of time.
A slowdown in the US economy is bad news for India.
• Indian companies have major outsourcing deals from the US.
• India's exports to the US have also grown substantially over the years.
• Indian IT companies with big tickets deals in the US would see
their profit margins shrinking.
The whole of Asia would be hit by a recession as it depends on the US
Asia is yet to totally decouple itself (or be independent) from the
rest of the world, say experts.
Outsourcing market is suffering from the recession in whole world and India IT sector is
highly dependent on outsourcing mainly 60% on US.
• Peoples are thinking that recession is becoming a disaster
for the Indian economy but in my believe recession is
actually a great time to start a new venture.
• Great time to take advantage of the lack, when talent is
available, resources are cheaper.
• Fact whenever there is a lack people outsource more.
• Western companies started viewing India as good place to
outsource big research work, website development,
designing work etc.
• Long-term market then they can say when the recession
in the US financial market come down, Indian IT and BPO/
KPO companies will be in good position to get more
outsource projects from the US companies.
• Recently Indian outsourcing software and web
development industry have started a new strategy to
compete with recession by keeping their expenses as such
and higher the working time of the staff, higher the quality
of out put and reduce the out put time.
•Eg:- Apex Decisions (Pilot Project Strategy)
IT industries are confronting heavy loss due to the fall down of global economy.
One danger meanwhile is of a dip in the employment market. There is already anecdotal
evidence of this in the IT and financial sectors, and reports of quiet downsizing in many
other fields as companies cut costs.
Eg:- BPO Sector $11 Billion Sector -> Projected to cut 2.5 lakhs starting first quarter
IT Companies are predicted a drop of 15% in growth from 30% last year in BPO Sector
More than the downsizing itself, which
may not involve large numbers, what
this implies is a significant drop in new
hiring -- and that will change the
complexion of the job market.
Many companies has laid off their
staffs, the number of tourists inflow to
india has come down, companies have
cut down compensations and perks etc,
government and other private
companies are reluctant in starting new
ventures and starting new projects etc.
IT Projects that are halfway to
completion, or companies that are
stuck with cash flow issues on
businesses that are yet to reach
break even, will run out of cash.
Opportunities for Indian IT due to US recession
US recession may be a boon for Indian offshore software
The impact of recession is higher to small and medium sized
(SMEs) enterprises whose bottom lines get squeezed
due to lack of spending by consumers
SMEs in the US are under severe pressure to increase
profitability and business margins to survive. This will
force them to outsource and even have M&A
arrangements with Indian firms.
India is going to be a great beneficiary of this trend which
will minimize the impact of the US recession on Indian
By March 2008, India had received SME outsourcing deals
worth $7 billion from the US as against $6.2 billion in
the previous year.
Eg. (Satyam got 15 new Outsourcing Projects)
In the IT sector, there should be correction in salary offerings rather than job cutting.
Taxes including excise duty and custom duty should be reduced to lighten the adverse
effect of economic crunch on various industries.
IT Industry has been largely hit by Recession , resulting in Lay-Offs. But people with skill
set are required in the Industry.
Layoffs in Technical Sector need not be a doom and gloom. They could actually boost
innovation as laid-off engineers , scientists and other skilled individuals decide to
pursue their own ideas. Calling it “ forced” entrepreneurship.
Come out with Innovative Strategies for CRM
Here’s wishing you a safe voyage as we ride the waves of this