India Inc. is starting to reflect Europe’s 2012 sovereign debt crisis

India Inc. is starting to reflect Europe’s 2012 sovereign debt crisis
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Outsourcing is one of India Inc.’s biggest industries. Its IT giants flourished mainly because of the support of their foreign clients.

So it is only natural for people and analysts to be wary of a possible global recession. 

The epicenter of pessimism is Europe, said analysts. And given the downward trajectory of the sector, people can’t help but draw comparisons between what is happening now in India and the sovereign debt crisis in Europe back in 2012. 

Just looking at its top firm’s revenue is enough for the anxiety to grow. 

Tata Consultancy Services (TCS) — one of the country’s pioneer IT outsourcing firms — clocked a net income of US$1.3 billion last December quarter. A value that is “virtually unchanged” from a year earlier. 

TCS CEO Rajesh Gopinathan said that they entered December with everybody being cautious. “But our view is that this caution has a different color across markets.”

Because of this supposed cautiousness, the Mumbai-based software firm started shrinking its headcount by a little more than 2,000.

Aside from fears of a global recession, analysts also believe that the “pandemic-era staffing” companies have grown addicted to may lead to complications. 

Sunil Chemmankotil, CEO of temp staffing firm Teamlease Digital, told the Economic Times recently that the recruitment market is dipping.

IT outsourcing firms originate 70% of Indian code-writing jobs. The other major employer is the local startup industry, which is laying off people in large numbers because of a funding crunch. 

But even as profitability steadies for Indian software exporters, aided by a firmer lid on staff costs and a 10% slide in the rupee against the dollar over the past year, analysts are still on edge as European clients may put a pause on their IT orders. 

Read more here.

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